Enphase Energy, Inc. (ENPH) Q3 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Enphase Energy’s Third Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder today's conference is being recorded. I would now like to introduce your host for today's conference Christina Carrabino, ma'am you may begin.

Good afternoon and thank you for joining us on today’s conference call to discuss Enphase Energy’s third quarter 2016 results. On today’s call are Paul Nahi, Enphase Energy’s President and Chief Executive Officer; and Bert Garcia, Chief Financial Officer. After the market closed today, Enphase issued a press release announcing the results for its third quarter ended September 30, 2016. During the course of this conference call, Enphase management will make forward-looking statements, including, but not limited to, statements related to Enphase Energy’s financial performance, market demands for its current and future product, advantages of its technology and market trends. These forward-looking statements involve significant risks and uncertainties and Enphase Energy’s actual results and the timing of events could differ materially from these expectations. For a more complete discussion of the risks and uncertainties, please see the company's Annual Report on Form 10-K for the year ended December 31, 2015 and in Enphase Energy's quarterly report on Form 10-Q for the quarter ended September 30, 2016 which will be filed with the SEC in the fourth quarter of 2016. Enphase Energy cautions you not to place any undue reliance on forward-looking statements and undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in its expectations. Also, please note that certain financial measures used on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. The company has provided reconciliations of these non-GAAP financial measures to GAAP financial measures in its earnings release posted today, which can also be found in the Investor Relations section of its website. Now, I’d like to introduce Paul Nahi, President and Chief Executive Officer of Enphase Energy. Paul?

Good afternoon. And thanks for joining us today to discuss our third quarter 2016 financial results. We reported revenue of $88.7 million for the third quarter of 2016. We shipped 204 megawatts or 869,000 microinverters at 10% sequential increase and the second highest number of megawatts and units shipped in the history of the company and the second sequential quarter of market share gains. There are more than 540,000 Enphase systems deployed in over 100 countries. Since inception, we shipped approximately 13 million microinverters representing more than 3 gigawatts of installed generating capacity. Enphase systems have produced approximately 7 terawatt hours of clean renewable energy. Enphase is by far the largest microinverter company in the world. It's important to remember that there are two classes of rooftop inverters microinverters and string inverters. Some string inverters have optimizers others have rapid shutdown devices, but the core architecture for both is a string inverter. The many distinct advantages of a microinverter solution; simplicity, reliability, ease of maintenance, productivity and safety are widely acknowledged by both installers and consumers and are driving demand around the world. In terms of simplicity, microinveters have reduced design and insulation time and do not require any high voltage expertise in fact. The install time from microinverters can be one third of the time required to install a string inverter system. On reliability, Enphase consistently set the bar for quality and reliability and can confidently provide a 25 year warranty versus a typically shorter warranty with string inverters. As for easier maintenance, aside from eliminating any single point of failure, the key to the ease of maintaining an Enphase system rests with our smart remote monitoring. The Enphase solution is more productive, it has been repeatedly proven that microinverters produce more energy than string inverters. Safety is becoming increasingly important. Microinverters are by definition low voltage devices, utilizing the same voltage and wiring techniques used in any home, whereas string inverters are unique high voltage devices requiring up to 600 volt DC wiring running through a residence. In fact Enphase microinverters have already made critical rapid shutdown requirements with no additional equipment necessary. As part of our commitment to deliver new products and technologies that provide additional functionality, reduce cost and enhance the simplicity for our installers, we recently announced our Enphase Home Energy Solution with IQ, our next generation integrated solar storage and energy management solution. The offering features our sixth-generation Enphase micoinverter system which supports just about every 60 and 72 cell solar module and continues to simplify the design and installation process. The IQ system includes our new lightweight cable and additional accessories to speed insulation including the new aggregator that enable fast and simple branch connections on the roof. We expect the Enphase IQ microinverter system to be available in the US in the first quarter of 2017. Heralding the next generation of solar installations will be the AC module and our IQ line of microinverters is a perfect fit. Our sixth generation microinverters will be included in the AC modules from LG, SolarWorld and Jinko Solar among others. By integrating our microinverters onto the module directly. We're creating an even simpler more consolidated solution that will yet again reduce insulation time and effort. The AC module also enables a simpler warranty process, one-stop technical support and other asset management advantages such as remote monitoring for both the microinverter system and the module. We expect these modules to be available in the US and Canada in the second quarter of 2017. We continue to successfully execute on our key initiatives by introducing new products that meet our cost targets and deliver on our total energy solution. We've stated that we’re targeting approximately 50% product cost reduction over two years from the fourth quarter 2015 to the end of 17. With the launch of the Sixth Generation micro-inverter, we are solidly on track to meet this aggressive exciting target. Turning to our markets, third quarter revenue in the US rose 14% sequentially as we continue to grow our share with existing customers and expand our customer base. Our market share has increased with both the tier 1 and tier 2 installers, as well as with thousands of smaller installers across the country. We increased our presence in Europe during the third quarter by expanding existing partnerships and developing new ones. We continue to see interest in France and the Netherlands and in fact, we believe we have the number one market share in the French residential market. In the APAC region, revenue was up 21% sequentially. We started shipping our AC battery storage solution in Australia and New Zealand during the third quarter and the response for our solution has been extremely positive. The advantages of our AC battery solution are clearly resonating with customers. Our AC battery is fully integrated, simple to install and delivers superior reliability and safety. We believe we’re the only solution in the world that can be installed in under one hour. And unlike many competitive solutions, the Enphase AC battery is suitable for any home with or without an existing solar system, regardless of the brand of inverters or solar panels previously installed. This eliminates a potential costly upgrade of an existing solar system. The AC battery is therefore a uniquely competitive solution for homeowners looking to add storage to their existing PV solar systems. Demand for our AC battery storage solution in Australia and New Zealand remain strong. After a successful launch of our storage solution in the APAC region, we’re looking forward to launching it in the US and Europe during the fourth quarter of 2016. Turning to other markets, we continue to see growth in Latin America during the third quarter. Enphase is currently the leading choice for residential installers in Puerto Rico, where we have a very significant lead over our nearest competitors. We’re very excited about this market as the need for affordable energy there is acute. Mexico is a very competitive and exciting market. Leading installers there have a deep appreciation for our quality and reliability and value the simplicity of our solution. As a result, we believe we are currently the leader in the Mexican residential market. Just last week, I visited with current and potential customers and came away very impressed with the strong interest in our energy system in both the residential and the commercial markets. Our third quarter revenue results and new product introductions demonstrate our success in delivering on the strategy we outlined last year. To regain market share by offering competitive pricing enabled by aggressive cost reduction and providing a richer, more comprehensive energy solution for our customers. I'll close my comments by noting we’re excited about the future of the solar market and our vision to realize the global potential of solar energy through our technology innovation. We remain committed to providing our customers with the features, quality, ease and simplicity of an Enphase energy solution. We believe Enphase has a clear path to develop the world's only fully integrated solar storage and energy management solution. Now, I will turn it over to Bert for his review of our financial results.

Thanks, Paul. I'll provide some more details related to our third quarter 2016 financial results as well as our business outlook for the fourth quarter. Total revenue for the third quarter of 2016 was $88.7 million, in line with the outlook we provided last quarter and an increase of 12% sequentially. We shipped approximately 204 megawatts AC or 234 megawatts DC during the third quarter of 2016, an increase of 10% compared to the second quarter. The megawatts shipped represented 869,000 [ph] micro-inverters, all of which where our fourth and fifth generation micro inverter systems. GAAP gross margin for the third quarter of 2016 was 17.9%, non-GAAP gross margin was 18.2%, flat as compared to the second quarter. Non-GAAP gross margin excludes approximately $300,000 of stock-based compensation expense. GAAP operating expense during the third quarter of 2016 was $33.6 million, which includes approximately $2.7 million of restructuring charges. The restructuring charges are comprised of approximately $1.4 million of non-cash expense for asset impairments and approximately $1.3 million of cash-based severance and related benefits. Non-GAAP operating expense was $28.6 million [ph], which excludes the $2.7 million restructuring charges as well as $2.2 million of stock-based compensation expense. In order to strengthen our financial position, at the end of the third quarter we made the difficult decision to reduce our global workforce by approximately 11% and eliminate certain non-core projects. This restructuring initiative will be completed in the fourth quarter of 2016 and we expect to achieve the full benefit of these actions approximately $20 million of annualized operating expense savings beginning in the first quarter of 2017. It's important to note that the restructuring did not affect our efforts on product cost reduction, product quality, the AC battery or the AC module. During the third quarter of 2016, R&D expenses on a non-GAAP basis were $12.2 million, sales and marketing expenses were $10.4 million dollars and G&A expenses were $6 million. These expense levels do not reflect the impact of reduced headcount as our restructuring actions were taken at the end of the third quarter. On a GAAP basis, third quarter operating loss was $17.7 million dollars and net loss was $18.8 million dollars resulting in a loss of $0.40 per share. On a non-GAAP basis the operating loss was $12.4 million dollars and net loss was $13.4 million dollars resulting in a loss of $0.28 per share. Turning to the balance sheet. We held inventory levels flat in the second quarter ending with $39.1 million of inventory as of September 30. I’ll note that inventory on hand at the end of the third quarter included inventory for our AC battery solution. Excluding this, inventory levels would have decreased sequentially. We ended the third quarter with a total cash balance of $24.1 million. At the end of the third quarter we had $12.5 million drawn on our credit facility, which is unchanged from the end of the second quarter. As discussed on our last call, on July 8 we entered into a $25 million term loan agreement that was fully drawn upon closing. In addition, on September 28 we closed on a secondary offering of our common stock generating net proceeds of approximately $14 million. After quarter end and early October, we received an additional $2.2 million dollars in proceeds from the underwriters full exercise of the overall allotment related to the offering. Combined total net proceeds from the offering were approximately $16.2 million. We believe that the proceeds from our capital raised and term loan coupled with our restructuring initiative and product cost reduction plans will strengthen our financial position and enable us to continue to grow our business and chart a path to sustained profitability. Now let's discuss our outlook for the fourth quarter of 2016. We are reaffirming the guidance we provided on September 22 in connection with the offering. We expect our revenue for the fourth quarter of 2016 to be within a range of $90 million to $100 million and GAAP and non-GAAP gross margins to be within the range of 16% to 20%. Non-GAAP gross margin excludes $300,000 of stock based compensation expense. We expect our GAAP operating expense for fourth quarter to be within a range of $22.5 million to $27.5 million and non-GAAP operating expense be within the range of $20 million to $25 million excluding an estimated 2.5 million of stock-based compensation expense. Now, I’ll open the line for questions.

Thanks so much. Guys can you for just a little bit more color on the energy storage bookings to-date and what you've seen since the quarter end, you have another month to look at bookings and if you could go into kind of total numbers plus geographically location for those offerings?

So we continue to see very strong demand from Australia and New Zealand primarily from Australia. As you know that we started shipping last quarter but it was late in the quarter and we were severely supply constrained. As we look to Q4, demand looked very strong, we are - as we had talked about we are going to be entering both the US and Europe this quarter, so we don't have any data on that yet. But I'd say our expectations are well met in Australia and it looks like we should be a leading if not the leading supplier of residential storage solutions in 2017.

And then when do you think of [indiscernible] migrated away from the Gen 4 solution and finally on the just selling Gen five?

So with the advent of our IQ product line which is coming out in Q1. It's very likely that we’ll migrate from Gen 4 and Gen 5 very rapidly into Gen 6 which is the IQ line and that will happen over 2016, sorry 2017.

Okay. Perfect. And then the final one for me is just, up take on the AC module solution obviously that's still in kind of early days, but what are you seeing right now in terms of demand and sell through.

So the only thing I can give you there Colin is sort of anecdotal data, since we do not have -- we're not shipping a product yet. What I can say is that there is tremendous demand from installers frankly across the world, but we're very focused initially on the launch in the US. The recognition of the amount of time and labor it can save, basically it eliminates the entire effort and cost associated with the installation of an inverter. Takes it really effectively to zero. It's driving a tremendous amount of interest, but we’ll be shipping it in the first half and I'll be able to give you a better view on demand probably in the late Q1 timeframe.

All right. Perfect. Thanks so much guys.

Thank you. And our next question comes from the line of Philip Shen from Roth. Your line is now open.

Hey, guys. Thanks for the questions. We've heard that some of your extremely good competitors have recently cut pricing aggressively in the US to the tune of 25% from Q3 levels. Have you started to see this impact your sales and how do you expect to respond?

So we've seen a continual decrease in pricing from the beginning of the year. We have been responding and in fact we have taken -- we took some fairly dramatic moves early on really basically starting at the end of ‘15 through much of ’16. As a result, we felt like we caught up, if you will, to market prices and as a result, we've seen our market share grow considerably from Q1 of this year through Q3. While we fully expect there to be additional cost reductions, sorry, price reductions going forward, we've fully baked that into our plans and we believe that as a result of our cost reduction efforts, we should be able to see margin expansion through 2017 as a result of that. So I’d say that what we're seeing is not unexpected and we've been well poised and well prepared to support that.

Great, Paul. As a quick follow-up on that, do you expect any additional aggressive price actions that would be outside of the normal course of business, given how much pricing has fallen in just the recent weeks or months?

No, we don't expect. We don't see anything on the horizon that would cause us to do something that was vastly different than what we've been doing over the past number of quarters.

Okay, great. With California representing a third of your installation mix, the SDG&E region recently hit the NEM 1.0 cap, right and PG&E is set to hit their cap by year-end. SC will transition by mid-2017. How do you expect this to impact demand in California in general and how do you plan to address that potential slowdown in the state?

So what we've seen in SDG&E is a good example of it. It's basically the canary in the coal mine. They did the transition from NEM 1.0 to 2.0 and we certainly did see a slowdown for about 3 or 4 months. It was a period of time it took for installers to understand exactly what the new economics were to be able to vent and convey that to the consumer, but once they got into that rhythm, once they understood what the new numbers were and were able to create the appropriate sales material to support that, sales resumed. I think the difference in economics between NEM 1.0 and NEM 2.0 is not that dramatic. And it still would engender I think a significant growth in solar sales in the state, especially when it's accompanied with the dramatic cost reductions of the hardware component. So I think it's going to create perhaps a bumpy year where as the transitions are occurring, the installers have to adjust to that to the new numbers, but I don't think it represents a fundamental shift in demand.

Okay. One last question and I’ll jump back in the queue. What kind of operating cash flow do you see in Q4 and in Q1?

So we're obviously not providing cash flow guidance for Q4, but what I can say is *** Part7 *** Part8 Cash flow guidance for Q4 but what I can say is you won't see the kind of burden in Q4 that we saw in Q3 obviously. We do expect to burn a little bit of cash in the fourth quarter and then of course in the 2017 as we launch IQ 7 with the full benefit of the restructuring behind us that we expect to be cash flow positive in the back half of 2017.

Thank you. And our next question comes from the line of Michael Morosi from Avondale Partners. Your line is now open.

First off Bert, I guess could you talk a little bit as to what's going on at the AR line, it seems we are up pretty significantly quarter on quarter and if you could just talk about any one time items there and how you'd expect that to track on forward?

So as you probably know the back half of our years seasonally stronger than first half of the year and so the strain on working capital is kind of seen on the balance sheet with the buildup of AR. So it's really just tracking with the volume of business between Q2 and Q3, it’s about $10 million increase. As far as any one time charges, there aren't any one time items in the AR balance itself. We did have a little bit of bad debt expense that is netted out of - against that balance but nothing material.

And Paul Nahi, if you could talk to us a little bit about the competitive environment obviously, pricing has been very aggressive, but specifically there seems to be a lot of interest in the market around. Potentially very aggressive pricing from new Chinese entrants, you talked a lot about what the rapid shutoff could mean, so are you seeing any tangible signs of impact from Chinese competition just specifically, and as we look out into 2017, how would you expect market share figures to evolve going forward.

So we have seen the multiple Chinese vendors enter the market and this is not necessarily recent, we've seen them for years now and they have provided a lower price point but we haven't seen any significant migration to those inverters in the rooftop space. We have and I think what you're alluding to is we certainly have heard that there are other Chinese entrants that will come in with an optimizer solution in the Q1, Q2 timeframe of ‘17. It's certainly too early for that to be affecting our current pricing. So we're not seeing that affect, but once again I would reiterate what I had said before which is that we fully expect pricing to come down in ’17. How much of that is going be driven by Chinese inverters, how much of it is that is going to be driven by normal competition it's a little too early to say, but we expect that to happen and we've built our operating plan and have focused resources on cost reduction very specifically to be able to address that and to be able to grow share while we are reducing pricing and getting to sustainable profitability and positive cash flow.

Thank you. And our next question comes from the line of Edwin Mok from Needham & Company. Your line is now open.

First, Paul, just maybe a question on the overall market demand, you talk [indiscernible] gaining share but do you kind of see the marketing right now, there is lot of chatter, lot of slowdown [indiscernible] and what's your view of the market right now.

So in looking at market demand, especially out of ’17, I think it's very important to look at the specific segments. So in the segments that we really have focused on and I think that we resonate very, very, very dramatically with, which is the tier twos, tier threes and the long tail. I believe that there's a tremendous amount of optimism in that market for ‘17 and it gives us confidence that we are going to see growth in those areas and it's in part because lower hardware costs of providing better economics for the consumer. There is more and more financial products specifically loan product available to them that they're able to take advantage of. That combination I think has been a very positive influence on that market and I think it's going to result in growth in ‘17 and that again because we are very dominant in that space and because we address those customer needs very specifically, I think that should bode well for Enphase and our growth in ‘17.

On the core, I think you said US grew 14% which is greater than your company growth. So [indiscernible] national decline a little bit, where is that came from? Is that euro?

I'm sorry, Edwin. Can you say it again? I didn't catch all of that.

Sorry in the pricing, you said US grew 14%, but the overall growth on this quarter is 4%. So they imply international sales decline a little bit this quarter? Can you tell me where that came from?

So I don't believe that there was any sales decline. I think we’ve seen growth or flat market in all segments. We clearly saw growth in Australia as I had mentioned. Latin America saw a significant growth. Latin America being everything from Mexico, Puerto Rico, Central America. And even in Europe, we saw some growth. So in terms of megawatts, I think we saw growth across all segments.

Okay, great. And then on the Gen 6, now that you guys similarly have started production, given that you plan to add a little in the first quarter. Now that you have kind of started production and start to really at least ramp some inventory volume, how do you kind of think about a cost reduction of that product and it was -- your target was to cut 50% cost when you reach Gen 7, how much can you get with this Gen 6 now?

So remember that we've been reducing costs since 2015, since the end of 2015. Well, certainly, we've been reducing costs well before that. We've been reducing our costs year-on-year, every year since we've been around, but we started a very dramatic focus on cost reduction at the end of ’15 and what we said was, between the end of ’15 or early ’16 and the end of ’17, we would see a 50% reduction in cost. So we've been well on that path during 2016, which is why we've been able to reduce our prices so precipitously and yet keep gross margins flat. As we have discussed in the past, for other transitions, every time we see the introduction of a new product, we will see a step function down in costs and then over the lifetime of that product, we continue to reduce costs. So the target of getting to 50% by the end of ’17, which meant about 25% at the end of ’16 and another 25% in ’17 is well on track.

Okay, that's helpful. Last question I have, I think, last Friday, Tesla made some announcement on the new battery product, which looks pretty impressive on a cost perspective, if you just take the numbers and face value. How do you kind of see competition in the storage space, have you seen more competitor entering the market and how do you kind of think about your position in space?

So what we're seeing in Australia, I would say, that there was a period of time when we saw an increase in competition. I’d say that right now some of that competition is winnowing out and that we're seeing more and more focus on fewer solutions. Clearly, our solution has resonated very strongly with both installers and consumers in Australia, in large part because it's a complete integrated device. It is one of the safest storage devices you can buy. It is the only device that we know of that you can install with one person in one hour, an entire energy system. And because of that we believe that the total installed cost of our product offering is going to be very competitive with anything else that -- anything else that's out there. I think what we've seen is our competitors have certainly learned from our success and are trying to develop something that is also integrated and something that is also relatively simple, but we have to keep in mind that this is not a one-size-fits-all market that the modularity of the Enphase system is unique and is enabled only because of our micro-inverter. Every house, every resident is going to have a different demand for storage, a difference amount of storage. It’s going to be dependent on solar consumption and a whole host of other things. The modularity coupled with the safety and of course our entire energy management system, I think, set us apart.

It’s very helpful color. Thanks Paul.

Thank you. And our next question comes from the line of Jeff Osborne from Cowen and Company. Your line is open.

Yeah. Good afternoon. Most of my questions have been answered, but I just had two, one in follow-up to Philip’s question about the pricing. What is the kind of, I guess, pricing expectations baked into the guidance when you came up with that on September 22, I assume it’s not to the magnitude that Philip was referencing.

No, it was -- that was what we had said in the previous calls, our pricing was relatively stable and for ’17 and we still feel very comfortable with that assertion. And then of course we have built in a price reduction through ’17 as well. So again fully anticipating that prices will come down and have built both the operating plan and our cost reduction plan around that.

And I know you’re not giving formal guidance for ‘17 but just with the product cycle and assuming that by the back half of the year the product cycle kicks in is material is there a path in your eyes to kind of low 20s gross margin or do you see yourself kind of stuck here in the teens, I guess it’s sort of a million dollar question.

So what we have said is that we do believe we're going to see gross margin expansion and from where we are today that would certainly imply that we could be in the low to mid 20s by the end of the year. However, we're going to be very well aware of what the market does and be able to respond to it and regardless we expect to be sustainable cash flow and sustainable profitability levels by the second half.

And the last question I had was just to, Paul, if you could flesh out a little bit more on Australia on the storage market. Do you have a sense of A, how many units per household people are putting in and then B, there's various different economic drivers of people putting in storage, Tesla seems to be more focused on the back of market with the size of their system but can you just talk about what people are actually using the storage for and how they're looking at the economics pros and cons of moving that way.

Sure. So the primary driver and when I say primary 99% of the reason that people are putting in storage in Australia right now is effectively rate arbitrage, they want to minimize their utility bill and there is an existing feed in tariff which will expire in certain parts of Australia, it will go from what is today approximately $0.50 to around $0.06. Yet the cost of energy in many cases is north of $0.30. So, while the feed in tariff was $0.50, it made a lot of sense to continue to produce as much energy as possible and get paid for that. Once it to drop to $0.06 then instead of selling it for $0.06 and then buying it back for the mid-30sm it makes a lot more sense just to keep it and use it. That is the fundamental driver for storage in Australia. Now that requires a storage device that can cycle multiple times a day, it means that at any given time of the day you're either powering up or powering down your battery and because of that and because of the cost of storage, backup we feel doesn't make a lot of sense for our battery. There are very, very inexpensive well understood generators that can provide very inexpensive backup for as long as you have like that can power an entire home. Chemistry as a backup is still very, very expensive and it is fundamentally at odds with the used case that most people are buying it for, if you're buying it for rate optimization you're not really you don't actually have a full battery for very long. You basically fill it up and then drain it, fill it up and drain it multiple times a day which means that it's not necessarily going to be there for backup when you need it. So I understand it’s a clever marketing message to give but unfortunately is not a practical message for the consumer.

Makes sense, appreciate it.

Sure. By the way I will just answer the last part of your question as well. What we're seeing in Austria is on average two to four AC batteries for home and each AC battery is 1.2 kilowatt hours.

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In the Australian market, are there any policy drivers that are stimulating the demand tax credits or anything along those lines?

So in general, no, there is talk in some areas like South Australia of something potentially helping to simulate the storage market but for the most part there is nothing out there that is targeting storage.

And similar to what we've seen in you know places like Nevada and so forth, with utilities running up against net metering, is there any pushback that you're seeing for rooftop solar and more specifically storage integrated rooftop solar in any of the Australian jurisdictions?

So right now what we're hearing from areas like Nevada is more demand has been pushed back when as a result of some of the actions that were taken in Nevada, clearly, it does create a potential market for storage. Whether or not the utilities or the regulatory bodies push back, it’s still a little too early to make that determination, but you're very correct in noting that in areas like that, they are either intentionally or unintentionally definitely creating a market for storage.

Okay, yeah, I was actually referring to Australia specifically, if there are any regulatory pushbacks that you're encountering there.

No, nothing right now.

Nothing currently. Okay. Thank you.

Thank you. [Operator Instructions] And I'm showing no further questions at this time. I'd like to turn the call back over to Paul Nahi, President and CEO for closing remarks.

So thank you for joining us today. We look forward to speaking with you again next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.