Frequency Electronics, Inc. (FEIM) Q4 2013 Earnings Report, Transcript and Summary

Greetings, and welcome to the Frequency Electronics Inc. Q4 2013 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Any statements made by the company during this conference call, regarding the future, constitute forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this conference call. It is now my pleasure to introduce your host, Mr. Martin Bloch, President and CEO for Frequency Electronics. Thank you, Mr. Bloch, you may now begin.

Good morning, everyone. Sorry to be a little bit of a rush, but I have to leave tonight, on a business trip to Europe, but we have the best team here for you. Without any further, please welcome to the FEI year-end conference and I'm going to turn you over to Alan Miller, and at the end I will summarize the future potential for FEI and have an open question-and-answer period. So, Alan, please proceed.

Thank you, Martin, and good afternoon everyone. For fiscal year 2013, Frequency Electronics generated $68.9 million in revenues as compared to last year's $63.6 million. Revenues from satellite payloads increased by approximately 11% over the prior year and accounted for half of consolidated revenues. Revenues from non-space U.S. government DoD programs, including sales by FEI-Elcom and FEI-Zyfer, accounted for about 1/4 of consolidated revenues. Year to date, total revenues for U.S. government DoD end use, both for space and non-space programs, account for approximately 60% of our Frequency's consolidated revenues. Network infrastructure revenues, recorded in FEI New York, FEI-Zyfer and Gillam-FEI, were about 17% of consolidated revenues compared to 20% in fiscal 2012. As noted in the press release, during the fourth quarter, FEI-Zyfer experienced delays in orders and lower-than-anticipated revenues for both U.S. government and commercial customers. We believe the U.S. government business for FEI-Zyfer was impacted by the current budget situation in Washington. Based on our current backlog and additional back satellite bookings expected in the near term, we are anticipating continued revenue growth in fiscal year 2014. Gross margin for fiscal 2013 was $25.1 million compared to last year's $24.6 million. Higher revenues resulted in increased gross margin dollars, but the gross margin rate was impacted both by product mix in our non-New York subsidiaries and by a $1.4 million fourth quarter charge to write-off certain assets on Gillam-FEI. to explain this onetime charge a little more, a few years ago, Gillam-FEI became engaged with a French electrical power utility, to provide upgraded versions of one of its products, remote terminal units or RTUs. These RTUs -- to monitor the power grid. This effort is tied in with the French government's plan to install smart meters throughout France and to create a smart grid. But the program has experienced delays and there is insufficient visibility for the timing of future orders for Gillam-FEI. However, Gillam-FEI believes that in the long run, this project could generate a multimillion euro product line that can be marketed not only in France, but in other European and North African countries. SG&A expenses for the year were $14.7 million or 21% of revenues compared to $14.1 million and 22% of revenues last year. The higher fiscal year 2013 spending is due to a full year of SG&A expenses at FEI-Elcom. This level of SG&A expense is in line with our expectations, and as revenues increase we would expect to see the ratio of expenses to revenues to decrease. Fiscal 2013 R&D spending was $5.7 million or about 8% of revenues compared to $3.9 million or 6% of fiscal 2012 revenues. This higher level of R&D reflects not only FEI-Elcom spending on its own product line, but also the additional FEI-Elcom resources that were applied to development of new satellite payload up/down converters and receivers. While fiscal 2013 revenues increased over fiscal year 2012, higher operating costs, the $900,000 first quarter operating loss at FEI-Elcom, the fourth quarter asset write-down at Gillam-FEI and unanticipated order delays at FEI-Zyfer resulted in fiscal '13 operating profit of $4.7 million or 7% of revenues as compared to $6.7 million and 10% of revenues last year. Other income, which consists of investment income offset by interest and other expenses, was a net income of $407,000 this year compared to income of $111,000 a year ago. So this yields pre-tax income, in fiscal 2013, of $5.1 million compared to last year's $6.8 million. Now, earlier this year tax legislation was passed such that the company will realize additional tax credits as well as take advantage of previously suspended state tax NOL carryforwards. These have the effect of reducing fiscal 2013's effective tax rate to about 28% or a provision of $1.4 million. Now, with respect to net income, last year, Frequency reversed $3.1 million of a previously established deferred tax valuation allowance. This resulted in a net tax benefit of $560,000 and increased net income by $3.1 million. That's equivalent to $0.36 per share. On an apples-to-apples basis, last year's net income would have been $4.3 million compared to this year's $3.7 million, effectively a $600,000 reduction from the prior year. For the year, we generated positive operating cash flow of $3.1 million, and cash and marketable securities are at $21.7 million. As we indicated in the press release, in June of this 2013, we closed on a five-year $25 million revolving credit facility with JPMorgan Chase, and that will be used for working capital and acquisitions. We used the initial proceeds to repay the $6 million outstanding balance under the previous line of credit and we reclassified short-term debt to long-term. Backlog at the end of April was $51 million compared to $57 million at the end of last year. Over 3/4 of this backlog is for long-term satellite programs. And, finally, Stockholders equity is now at $82.2 million, up from last year's $79.1 million, and this is after the December payment of a special cash dividend of $0.20 per share, which totaled approximately $1.7 million. I'll now turn the call back over to Martin and look forward to your questions later.

Good afternoon, everyone. I'd like to cover the business outlook for Frequency and their subsidiaries, and I just want to tell you that the highest shining star that Frequency's looking to get is the opportunities in Satellite business. We expect significant additional orders to receive shortly, based on legacy products that we have, that are flying in space and are basically a sole-source for FEI. In addition, the new products, which is the up/down converter, have been shown to all of our customers and it was well received, and we promise to have qualification units available by the end of this calendar year. And we already are proposing for new programs, this up/down converters, which is the beginning of the opportunity to significant increasing our take per satellite on this point. The new product suit very well the mission in the future, which is the demand for doing a lot more with less. What means is existing satellite platforms, they want to put a lot more channels in order to get more revenue for the commercial side and a lot more bandwidth for the military side. That means you need a smaller size, lighter weight unit. And that was our design objective, our units are considerably smaller than our competition in-house and out of house, and they are considerably lighter in weight. So it's a very exciting product and it's very well received. A lot of this work is done in conjunction with the engineering expertise at Elcom, and we are providing the space guidance and the control so the units can be manufactured immediately for space application on this. So this is not a new product for FEI because we have flown up/down converters on many programs, but they were ones and twosies, now we are attacking the market where there is going to be 40 to 140 per satellite. So the revenue opportunity is considerably higher. I want to also address that RTU opportunity on this. There is about 600,000 slots for this RTU, just in France, and this is to provide smart meter readings for the use and the government is supposedly committed to get that program installed as soon as possible. We made, in my opinion, the right decision to write-off the software and hardware investment since we expected the production to be by the end of this year and it's moving to the right. But the opportunities for us, we have qualified products in the system and they are about $2,000 a pop and there is 600,000 Windows just in France and there's also the same will be applicable to other European countries and North Africa. Obviously, we're going to get competition on that. But being first is a big advantage, and I think that will result in an additional brand new mission for Gillam. As I emphasized in the past, FEI's business has really mushroomed during this strenuous times because our technology is ideally suited for 2 major missions. One is the mantra that says you've got to do a lot more for less, which is our technology enables to get more bandwidth with the same existing platform. And the second, which is a mushrooming new area of opportunity, and this is secured communication timing. It's becoming very critical, and it's in a market that we are exploring right now because all the spoofing that is going on worldwide is jeopardizing our secure facilities, and much better timing will have to be installed in all of this in order to mitigate that threat. The third item, which is equally important and we have, we are really putting in a lot of effort to make it happen, is to reduce the cycle time. Many of the programs that are now under consideration, the cycle time is going down from 36 month, went to 28 and now we have quite a few programs that we need to deliver complete slide sets in 13 to 18 months. In order to accomplish that, we have installed automated assembly equipment and get it qualified for space. And we are now working on implementing an automatic test, computerized test, to be able to really test, 24/7, on the product and to take up the immediate demand that we're going to face at FEI New York, and we are setting up a night shift that will assist us in meeting our customer demands. I can see significant increase in revenue and profitability for FEI corporate, with of course, the largest portion happening in commercial and military space. I'd like, at this time, to turn over for questions and answers. I would very much appreciate if you would address the question to either Alan Miller or Martin Bloch. That way we'll be able to more responsive to you. Go ahead.

[Operator Instructions] Our first question comes from the line of Jim MacQuarrie [ph] with Chardon [ph].

Alan, a couple of questions for you. The $1.4 million charge was all in cost of sales, is that correct?

That is correct.

Okay. And then, did you release what backlog was for the year?

I indicated in my verbal comments that backlog as of April 30 was $51 million.

$51 million. Was there any de-booking or order cancellations that resulted in the backlog declining year-over-year?

Nothing out of the ordinary. We always get a few dollars worth but nothing substantial. And that's compared to $57 million last year's April 30.

This is Martin. I want to add to that. Like I said, we have significant sole-source opportunities for FEI and satellite, and we are confident that, that backlog will go up significantly within the very near future.

Right. So I was going to ask you next. When you're looking at the up and down converter products, when do you think that you would start booking orders for those products? Is that a this-calendar-year event or is that...

Yes. We're going to start this calendar year for sure, in a small way, and then really put a hard press in next calendar year. We already are -- and like I said, we're already flying up/down converters. So we have the legacy and we have the tickets to entry. So all we need to do is to do a delta qual that says -- because we have reduced the size, weight and power consumption of the new designs, and then we can compete. And most of competition will be against in-house, like the Boeing, the Northrop Grumman, the Lockheed, the SS/Loral, and we are offering a smaller unit, lighter weight, less cost and better performance. So we have a great opportunity in that product.

And, finally, I guess this is for either of you. The delays that you saw in fiscal Q4, has that continued into fiscal Q1?

We're talking mostly about Zyfer down in this case.

Well, I think you mentioned a few delays in a few different units, so I...

We are basically -- listen, Martin, most of the delay in the program was at FEI-Zyfer, and they are all government related -- most of them are government related and it's hard to predict on this point. If you want to listen to our customers, they said it's going to break soon, but it's very difficult for us to judge. So it isn't like the programs have gone away, they just moved to the right.

No, I understand, I understand.

But I want to indicate, you are a good guy to ask the good question. We, at FEI, see the exact opposite. Our technology has come of time with the objective for doing a lot more for less, precision timing and low phase noise is an ideal insertion because it enables to get a lot more performance on existing platforms at a much lower overall cost. So we have great opportunities.

Our next question comes from the line of George Merryman [ph], a private investor.

My question is for Martin. As someone new to your company, could you give a little more, maybe definition or clarity, to the timing and magnitude of your opportunities over the next like 6 to 18, 24 months?

Well, we have publicly indicated that our legacy business, this has a positive flow, and the introduction of a new product line has an opportunity of adding $40 to $60 million a year in the near future.

And you mentioned something about the windows, the $2,000 a pop. Could you give us a little more information on that?

On the RTUs that Gillam is developing? Yes, that's to make electric meters smarter so you don't have 2 people to come and read the meters, and France is the first one that signed up to get it installed. And this is basically a remote terminal unit that does the job and reports it automatically to the main office and you don't have the come up, and it also gives the user an instant type of data on how much he's using. So it's something that will be implemented and they estimate that there are 600,000 slots just in France alone. And we are on the ground floor. So, obviously, the market is still large it will attract competition, but we feel we will make a golden opportunity to get a good share of that market.

And in terms of acquisitions, what type of acquisition would be attractive to you, more of a vertical integration or a certain technological advantage? Or what sort of things are interesting to you?

What it is important for us and for our customers is acquisitions that help in the vertical integration of making a more complex higher-value product, and we can offer to the customers in that area. We are not interested in just acquisitions for increasing our revenue. That's not of any interest. We want to make sure that what we acquire will take 1 and 1 and make it 5.

Okay. On your incremental new business, as expected in the coming year or 2, will the gross margin profile of the company as a whole be about similar or go up or go down?

It's always going to be dependent on product mix. So it depends on which entity is going to be participating in some of that growth. So that's part of it. What comes into New York in particular, where we do a lot of longer-term programs, we would expect to see improved gross margins here, particularly on some of these satellite programs that we're bidding on currently.

Yes. This is Martin, I want to supplement this. The base of doing satellite businesses is in place and the delta business will significantly improve our margins, and in New York is where we expect the maximum growth, and therefore, it's great opportunity to significantly improve our margins.

Yes. Because I recall, from the last conference call, you kind of talked about how a lot of your costs are sort of fixed and you need a certain amount of cost to run a space business, but any incremental business would be highly leveraged, is that correct?

Absolutely correct. I couldn't have said it better.

Our next question comes from the line of Sam Rebotsky with SER Asset Management.

A little disappointment. Hopefully you could cure the problem. The night shift, how many people do we expect to have on the night shift and when will we be fully up and running?

We hope to have it running by the end of August. And this is because we're going to a partial shutdown since people have to take some vacation and they've been working their buns off, so to say. So we expect to have about 15 people at the night shift by the end of August and then build on that.

Okay. And as far as your $51 million backlog, how much does that relate to satellite?

About 3/4.

3/4, okay. And the extra business that we expect to get, could use the quantify? Is it that you expect -- assuming it's in the next 3 months, because you talked shortly, is it $25 million, is it $10 million, is it a range or...

Well, you put a limit. It's more than $10 million and probably less than $25 million, in the short term. And your timeframe is correct, it's going to be in the next -- well within the 90-day window.

Okay. And I think we spoke of getting -- objective was to get $25 million per satellite. Are we doing $10 million per satellite? And when do we expect to achieve the higher percentage per satellite?

Okay. When we can integrate our up/down converters, because that's where the business is mushrooming. The newer satellites, instead of having 40 transponders onboard, had as many as 140. And these transponders are about $100,000 per slice. So the opportunity is -- as soon as we can qualify our new design transponders and then convince our customers that we are the best deal.

So, at this point, we're doing how much per satellite?

Probably, about between $6 million and $10 million.

Okay. And the objective is to get $25 million to $50 million or what is the objective?

You got the right number. I have a question. Why are you disappointed in the performance? Frequency had a good year. We used smart business, we could have kept that inventory, we're just being smart. The program moved to the right, we made a decision to be on the conservative side.

Martin, I'm very happy that you're conservative and I'm very happy on your accomplishments. I'm disappointed that we had to take a write-down and that I always like to beat the numbers from before. Unfortunately, this was not in the cards. Hopefully, your conservative write-down will produce significant profits as you previously have done, and this is just a short-term little problem...

That's correct.

So that's why I'm a little disappointed. Because I always like to go up. The next thing appears, the integration of acquisitions, that fully-integrated everything-is-running-smooth and everything is -- or do got more to go as far as the integration?

Say that again?

Integration of the new product line?

The acquisition where you merged the companies?

Elcom is working out very well. They are accelerating our ability to finish the development and qualification of the up/down converters, on this point. And the rest of the product line is being reviewed for integration in future satellite applications, so it's working out great. And they're not losing money.

Okay, okay. And now, as far as the -- I mean, it's difficult to predict what the government is doing with the procurements and everything, hopefully you have some visibility so that sales per quarter will be increasing significantly, whether it's not going to be the July quarter, but say, hopefully in the October quarter. Do we have any visibility when we're able to sort of expect significant increases quarter-over-quarter of sales and then, hopefully, more proportion improvement in profits?

I'll answer like I've always answered for the past 50 years. We have visibility that will have increase in revenue and in profitability. No way can we predict on a quarter-to-quarter for 2 reasons. First is depending on when the orders placed, and second is when we can bill it and when it's fully funded. But for the year, I'm very confident that we'll have increase in revenue and profitability in fiscal 2014.

Okay. And one last question. Has there been any desire to tell more of the story, with either investor relations or appearing at more conferences, and what's your thought about when do you expect that to start happening?

It's on the table and we'll implement it as soon as we can. But it's...

And one other thing, the product in France, I know they do stuff similar to that in the United States. Is there competition between the smart meters in all that we were or is your product better than the United States? Are you able to bring this to the United States? Is there any new -- pending patent problems or anything else? Can it come in to the United States?

Well, this is one of my secondary reason on the trip to Europe. I will review it and take a look on the applicability. It was a product that was difficult to achieve because of the reliability and privacy requirements, a lot of software development on this. And there's no issue with any patents that we know of in Europe. I haven't looked at in the United States and one of it is to take a harder look and to get more definition on what we can do in Europe, and at the same time, to see if we can bring the product for possible use in the United States and Canada.

Our next question comes from the line of Michael Eisner [ph], a private investor.

Say, next April, where do you see the night shift, how many people?

We want to build-off this slowly because one of the key concerns of night shift is to make sure there is no deterioration in quality and performance. So we'll probably be some place around between 25 to 30 people. That's about the limit we want at the night shift. It's a very cost-effective since we use the same facility and same equipment, but you want to keep it at a reasonable size in order to make sure there's no deterioration in quality and performance.

And one final question. The RTU in France, you mentioned 600,000 units. Say, in a year, what percent of those units do you think your company can get?

Well, we'll shoot for the most on this point. As is typical for this type of our business, the electric company in France will want 2 or 3 suppliers as they are modus operandi on this. However, we are on the ground floor and the early part of the implementation, we are going to get a good percentage. As time go on, I'm sure there's going to be additional competition. That depends. Our unit is performing very well, our customer is happy with it, and this is one of the things that I will also ascertain on my trip, both from Gillam and from the customer community.

Is any of it being used at this time?

Yes. We have 60 units currently being field tested by the electric company. So that's a process that to go through to demonstrate that everything is working properly. And I should point out that there is also another competitor who also has 60 units in the field. So, as Martin was saying, we are not going to get 100% of that market, but we will get some good percentage at some point in time down the road.

We had previous experience, which are much simpler RTU, that we built for French telecom. It was $2, but we started with 60 and eventually ended supplying to them a couple of million.

Because even if you get 1/3 of the 600,000...

I know that.

You've got a couple of hundred million dollars.

We did the math, Michael.

Our next question comes from the line of Jonathan Brolin with Edenbrook Capital.

It's Jon Brolin from Edenbrook. I have a question about the comments you made about the competition that you're seeing from in-house, particularly as you're going through the process of doing the delta qual. How much of a factor is a shift from cost-plus to fixed-price contracting by U.S. government customers factor in your ability to perform better against in-house competition than it had been in the past?

Well, if I could find somebody in the audience with a better question I couldn't think of any better one. But it's a big factor in helping us. So as the program managers -- you have phone -- can you put your phone off speaker, have you got it off? Hello?

Yes, I'm not on speaker.

We're getting feedback.

We're getting feedback. You put a nail right on the head because of the switch from cost-plus to fixed-cost, the program managers, which are incentivized for delivery and cost, they don't really care if we build in-house our they buy out house. They want the lowest cost and the lowest predictable cost. When we take a job for $1 million, they know it's $1 million because it's a fixed price. If they contract in-house for $1 million, it could be $5 million. So there's a big incentive, right now, to really -- a good window of opportunity for us to break in, and if you -- we use the word, still, a lot of inside opportunity and help the cycle time. So we offer lower cost, smaller weight, lower size, fixed cost, which is a big factor, also considerable shorter cycle time.

And what do you think, on average, the relative cost difference is? And how much more likely are you to win business now, relative to what you have been a couple of years ago before that shift that occurred towards fixed cost?

Well, the opportunity is enormous, and the differential -- assuming that we have the same efficiency, which is never the case, because a large organization is considerably less efficient than a small company of our size. You take a Boeing that does $5 billion to $10 billion worth of satellite business versus us doing approximately between $70 million and $100 million. There's a significant efficiency. So the cost and decision time is much lower. We typically did some calibration and our cost is about 60% of theirs. But we are about better than 1/3 less in cost and we are fixed-price, which is very important for the new modus operandi. So of that, we have time.

Our next question comes from the line of Marcelo Herp [ph] with Erps Capital Management [ph].

You mentioned that you'll be ready to ship qualification units of your Ku and Ka band receiver down converters by the end of this calendar year. What does that mean in terms of timeline to initial design wins, and subsequently, to revenue ramp?

Well, after finishing qualification on this, then it's a matter of competing on a satellite-to-satellite basis. And there's going to be between 20 and 40 satellites a year that will be procured between commercial and military, and all we have to hit is 1 or 2 to get what we're looking for. So we'll be able to compete as soon as qualification is finished with our new unit. We are qualified to build up/down converters, but the units that we built were special-purpose and size and weight and power wasn't a consideration, only performance. This redesign, so it's not basically a new invention, it's basically repackaging with the newer technology in a smaller size, less power and less weight, so the delta qual is much easier.

Okay. Is there a typical time the qualification period takes? Is that like a 6-month period, or how do we think about that?

We are shooting to finish our qualification by the end of this calendar year.

Yes, that I understand. But then, of course -- so that means that, at that time, you would get design wins?

Yes. We finish the qualification, we issue qualification reports to all of our customers and then that's the beginning of the being able to compete on significant business opportunities.

And regarding the RTU opportunity. Once the rollout of these -- you mentioned 600,000 units -- happens, over how many years do you think this will take place?

Do you know the French? I wish I could give you an honest answer at this point. Their schedule was that they were going to start rolling it out in 2012. So they were going to be in full production by this year. So the reason why we took the conservative write-down is because it's moving to the right. But we know that's there. We know this is a government commitment to get it done, but the timeframe is very unpredictable. I'm going to try to get a better calibration on my European trip. I made arrangement to make a special stop in France to see if I can get a better personal calibration.

Yes. I guess what I'm asking is not so much when they start rolling out but more, what you call full production. Is this going to be 10% of those 600,000 units a year or how fast can this progress, over time, once they finally start rolling it out?

I don't know the exact answer, but if you look at previous programs of similar nature, it starts at 10% the first year, 20%, and then 20% to 30% a year.

Great, that's very helpful. A couple of housekeeping questions. What kind of a gross margin OpEx and tax do you anticipate for 2014, ballpark?

A good measure for effective tax rate is probably on the order of 30%. We did have some additional credits this year and our NOL carryforwards that were going to be absorbed. But that's usually a good frame of reference, is 30% effective tax rate.

And on you think do you will have a similar level of OpEx?

We would expect to see a better gross margin and expect better operating margins. We did about 7%, I think, this year. So we would target more like 10%.

Okay. And what was your book-to-bill this quarter?

For the quarter, I don't have it in front of me. It's probably less than 1 because I think we ended the previous quarter at $60-some-million.

This is Martin, I'd like to add on that. It's a very good question on this. This program, satellite programs especially, they don't come in on a predicted schedule. The come in, in large chunks on this. So the book-to-bill varies from under 1:1 to 2:1. So depending on the exact timing on when the satellites are procured because it's not a $500,000 chunk. They come in between $5 million and $15 million chunks.

Our next question comes from the line of Michael Amare [ph] with AmeriGo [ph].

Let me ask you, you were really becoming a very, very -- percentage-wise, most of your business is satellite. I was wondering, what percentage of that is military and what percentage of that is commercial?

On the satellite, it's about 50-50.

That's good, so you're getting some commercial work too.

Absolutely. Many of the commercial satellites -- the largest single-contract we now have in-house is Iridium NEXT, which is 30-plus-million, and that's a strictly commercial satellite from Thales Alenia Europe.

That's terrific. Now, I have another question. When I look at your ownership, major owners, I see some really new people there. CI Global Investments own more than 17% of your company. It's amazing.

We've been in this for a about a year, I think, or a year plus. But they're a mutual fund company basically.

Mutual fund, they're not looking for any -- they don't have any acquisition purposes or anything like that?

Not that we're aware of. I've never spoken to anyone over there. So I'm for sure that they're just a buy-at-numbers type company. And I looked, not recently, but I think they have it spread, over 5 or 6 different funds that they manage.

We don't mind the sponsorship, there's nothing wrong with that. You have pretty good people in Royce & Associates, and other people are joining to see the value of Frequency. We just hope, sooner or later, to see above $20 stock. So keep the good work and thank you for being around. So you're going to be in Europe soon and just hopefully that everything is going to work out.

It will.

There are no further questions at this time. I'd like to turn the floor back over to you, Mr. Bloch, for any closing comments you may have.

Okay. I just want to tell you were looking forward to a good prosperous year. I want to express my personal thanks to our stockholders, and most of all, our hard-working employees that are working very hard to support our progress, growth and the need of this nation in this critical time, and the hard work that we're building. Again, thank you very much. We'll see you in September, bye.

Ladies and gentlemen, this does conclude today's conference but you may disconnect your lines at this time and we thank you all for your participation.