Lattice Semiconductor Corporation (LSCC) Q1 2018 Earnings Report, Transcript and Summary

Good afternoon. My name is Araceli, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2018 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. [Operator Instructions] Please note, that today's call is being recorded. The recording will be made available by dialing (404) 537-3406 and entering ID number 6887938 to listen. Mr. David Pasquale of Global IR Partners, you may begin your conference.

Thank you, operator. Welcome everyone to Lattice Semiconductor's First Quarter 2018 Results Conference Call. Joining us from the Company today are Mr. Glen Hawk, Lattice's Interim CEO; and Mr. Max Downing, Lattice's Chief Financial Officer. Both executives will be available for Q&A after the prepared comments. If you have not yet received a copy of today's results release, please e-mail Global IR Partners using Iscc@globalirpartners.com or you can get a copy of the release off of the Investor Relations section of Lattice Semiconductor's website. Before we begin the formal remarks, I'll review the safe harbor statement. It is our intention that this call will comply with the requirements of SEC Regulation FD. This call includes and constitutes the Company's official guidance for the fiscal second quarter of 2018. If at any time after this call, we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly announced conference call. The matters that we discuss today, other than historical information, include forward-looking statements relating to our future financial performance and other performance expectations. Investors are cautioned that forward-looking statements are neither promises nor guarantees. They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended December 31, 2017, and in our quarterly reports on Form 10-Q. The Company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call. Our prepared remarks also will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles or GAAP. Some financial information presented by us during the call will be provided on both a GAAP and a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the Company's performance for results and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. If we use any non-GAAP financial measures during the call, you will find the required presentation of and reconciliation to the most directly comparable GAAP financial measure in the Company's earnings press release. At this time, I would like to now turn the call over to Mr. Glen Hawk. Please go ahead, sir.

Thank you, David, and thank you to everyone for joining us on our call today. This was another busy quarter for Lattice with many notable achievements and changes. Before jumping into our results, I would like to touch on two significant organizational changes. First, in early March, we announced the retirement of Darin Billerbeck as President and CEO. Darin had served as Lattice's CEO for over seven years and is credited with, among other things, doubling down on Lattice's core value proposition of small, energy-efficient, production-priced, programmable FPGAs. He drove Lattice's successful foray into the mobile handset market, which prior to our entry was not a target area for FPGAs. This is proving foundational for Lattice going forward, as customers and other consumer, industrial and even automotive markets adopt mobile-influenced architectures as well. Darin was a great colleague and leader. We will miss his insight and presence and wish him and his family the best. To the outside, CEO transition announcements can seem unexpected. In Lattice's case, this is a transition we were prepared for, my hiring back in 2015 being part of the plan. I appreciate the Board's confidence in naming me interim CEO. I take this opportunity very seriously. Since joining Lattice a few years back, I have had the opportunity to work with our analysts and to meet many of our investors at conferences, Non-Deal Roadshows and one-on-one meetings. For those on today's call that I have not met, I joined Lattice just after the Silicon Image acquisition, with 30 years of semiconductor industry experience. I was Vice President and General Manager of the NAND Solutions Group at Micron Technology, Vice President and General Manager of the Embedded Business Group at Numonyx and General Manager of the Flash Products Groups at Intel. I was originally attracted to Lattice because the Company has a unique opportunity to contribute to the expansion of intelligence beyond the cloud and into the Edge devices network to it. Having worked with the team for three years now, I am more confident today than ever in our ability to do that. We also have an equally compelling opportunity to further reduce our cost structure and drive higher efficiencies throughout our organization. In line with my last point is the second change I would like to mention. Lattice announced in March the addition of three new highly qualified independent directors. The additions were part of an agreement Lattice's Board of Directors reached with Lion Point Capital, which at that time owned approximately 62% of Lattice's shares. Our Chairman noted his confidence that the three new directors would help further strengthen and diversify Lattice's board as the Company continues to execute on its strategy to return to growth, accelerate operating expense reductions and increase capital efficiencies in order to build value for the Company and our shareholders. Our board and management team continue to be fully aligned in this mission. Our focus is on extracting higher value for our company by leveraging our business, technology portfolio and impressive group of highly skilled and highly motivated team members. We are excited about Lattice's future, and thank you for your continued support. From a business strategy standpoint, the main points we outlined during our Analyst and Investor Day in New York City last October remain unchanged. Lattice benefits from decades of leadership in control and connectivity solutions, led by our programmable logic devices and imaging products. Our Edge computing solutions are laying the foundation for additional future growth. As a result, we have the stability and growth of a well-established semiconductor company, yet also the opportunities afforded to start-up companies focused on machine learning and artificial intelligence. As I noted a minute ago, we are also highly committed to further reducing our OpEx while increasing our free cash flow and paying down our debt. These are the keys to building value for Lattice and our shareholders. In terms of our results for the first quarter, we achieved both revenue and gross margin above the midpoint of our expectations. Revenue increased to $98.6 million compared to an expected range of $95 million to $100 million. Our gross margin increased to 57.3% as compared to an expected range of 54% to 58%. Max will provide color in a few minutes. The takeaway here is that we did what we said we would do. Our goal is to build credibility by being consistent and predictable. When someone ask you about Lattice, we want you to be able to respond that Lattice is executing its plan and the Company does what it says it will do. We are fully focused on execution and working hard to deliver greatness. For Q1, there were many bright spots with consumer, computing, industrial and licensing all up compared to the prior Q4. The underlying theme was a high level of customer activity across a wide range of product families. We have discussed our diversification in the past and remain on track in that effort, with no single customer comprising more than 5% of our Q1 revenue. As many of you know, our business was characterized a few years ago by revenue concentration in just a handful of large consumer companies. We have moved beyond that by carving out a bigger competitive position in the attractive industrial and automotive markets. These wins have longer multiyear tails and are adding to Lattice's foundation for sustained growth. Among the key drivers in Q1 was our FPGA revenue growth, which was up again sequentially over the prior Q4 and continues to help offset softness in wireless. In particular, the MachXO family demand growth was significant, coming from -- in applications such as servers for data centers, a traditional market for Lattice as well as mobile handset screen replacements, a new market for Lattice. Our iCE, XP and Power Manager families were also up modestly. Revenue from our image ASSP products was down slightly compared to Q4 as expected due to peak sales of digital TVs and other home theater products typical of Q4. In terms of specific expectations for the second quarter of 2018, revenue for the second quarter is expected to be between approximately $98 million and $102 million. For gross margin, we expect approximately 56%, plus or minus 2%, on both a GAAP and non-GAAP basis. Total operating expenses for the second quarter are expected to be between $50.5 million and $52.5 million on a GAAP basis and $43 million and $45 million on a non-GAAP basis. Let me now turn the call over to Max for details on our financial results. Max?

Thank you, Glen. As part of our press release today, we have provided detailed reconciliations of our GAAP to non-GAAP financial measures. For the first quarter of 2018, revenue was in line with our expectations at $98.6 million. Compared to the fourth quarter, revenue was up $3.3 million or 3.5%, primarily on increases in industrial and computing, which are consistent with the growth and drivers we saw in the fourth quarter as well. As you are aware and as we discussed on the last call, the revenue recognition rules have changed effective with the beginning of 2018. Because our distributor revenue is now recognized on a shipment basis, our first quarter revenue benefited as expected approximately $8.3 million, with an increase in distributor inventory during the quarter. This inventory growth is geared towards serving increasing demand for our products performing control applications in servers and broad market industrial as well as connectivity applications in our consumer market. In addition, because of the new revenue recognition rules, our licensing and services revenue benefited approximately $1.2 million as the result of our ability to recognize the 2018 HDMI royalty despite the fact that the royalty sharing agreement with the founders has not been finalized. For the full year, we expect the new revenue rules to positively impact our revenue by approximately 1%. Specifically, we expect the full year benefit to product revenue resulting from distributor inventory inclines to be in the $3 million to $6 million range. On the licensing and services side, we expect the benefits of being able to recognize the 2018 HDMI royalties to essentially offset the detriment of not being able to recognize the 2017 HDMI royalties despite the fact that we expect to collect those royalties in 2018. To that point, I am happy to say that the HDMI founders have reached a tentative agreement regarding the allocation of the escrowed royalties for the fiscal year 2017. We expect this to be finalized and to collect the cash in the second quarter. For the first quarter, our gross margin on a GAAP basis was near the high end of our expectations at 57.3%. This is a meaningful improvement from our fourth quarter gross margin of 53.8%, and reflects improved customer and product mix as well as the benefit from the inventory cost reductions we spoke of in the fourth quarter as that inventory sells through. First quarter GAAP operating expenses were $57.3 million compared to $51.9 million in the fourth quarter. The quarter-over-quarter increase in GAAP operating expenses is due to the non-recurrence of an impairment adjustment benefit we recorded in the fourth quarter and an increase in stock compensation related to the retirement of our CEO in the first quarter. On a GAAP -- on a non-GAAP basis, the operating expenses were $45.4 million in the first quarter compared to $44.1 million in the fourth quarter. This was about $2.4 million above the midpoint of our expectations, primarily due to the nonrecurring expenses related to unique events during the quarter such as the transitions of our CEO and Board of Directors. As Glen noted earlier, improving our profitability remains a priority focus for both our board and management team, and we remain committed to achieving the cost structure targets we previously outlined and continue to pursue those improvements as well as other operational efficiencies. We had income tax expense of $600,000 on a GAAP basis in the first quarter, flat with the fourth quarter. And looking forward, the enactment of the 2017 Tax Cuts and Jobs Act is not expected to result in a significant change in the U.S. cash tax paid or our effective tax rate, given the Company's net operating loss carryforward positions. Our GAAP net loss for the first quarter was approximately $6 million or $0.05 per basic and diluted share. On a non-GAAP basis, first quarter net income was $6.1 million or $0.05 per basic and diluted share, an improvement of approximately $5 million or $0.04 per basic and diluted share from the fourth quarter. We ended the quarter with cash and short-term investments of approximately $111.5 million compared to $111.8 million in the fourth quarter. Net cash provided by operating activities was $2.5 million in the quarter. Debt service payments were approximately $900,000 in Q1. We remain committed to our goal of reducing our debt by 20% over the next 12 months. Accounts receivable was $65.8 million in Q1 compared to 55.1 million at the end of the fourth quarter, due primarily to increased distributor inventory to meet the near-term demand and support of increasing server deployments in consumer applications. As a result of increased accounts receivable, our day sales outstanding increased to 61 days in the first quarter of 2018 from 53 days in the fourth quarter. Inventory at the end of the quarter was $77.9 million, down approximately 2.5% compared to 79.9 million at the end of the fourth quarter. Months of inventory came in at 5.6 months at the end of Q1 compared to 5.4 months at the end of Q4. We spent approximately $1.8 million on capital expenditures in the first quarter compared to $0.5 million in the fourth quarter. Depreciation and amortization expense was 12.4 million in Q1 compared to 12.3 million in the prior quarter. And interest expense for the quarter was $5.1 million. This concludes the financial review portion of the call. Operator, we can now open the call for questions.

[Operator Instructions] And our first question comes from Christopher Rolland with Susquehanna International.

This is David Haberle on behalf of Chris. Just a real quick one to start out. Can you talk about your exposure to ZTE and how this might expect your outlook for 2Q '18 and then the comms and end market for 2018? I think previously you guys have guided that you expected that end market to be up, but you were kind of banking a bit on ZTE and Huawei there. So any color there would be appreciated.

David, you bet. Remember that we've reached a nice point at Lattice in terms of customer and market diversification. And so currently, once again, we have no customers larger than actually 4%, I said 5% earlier. And ZTE is well under that. Yes, we do know that ZTE shipments that we had planned for Q2 will be down. There's no doubt about that. However, the overall situation still remains very dynamic, and it's not obvious to us how this might impact Lattice's top line revenue overall. In these kind of situations, very often the end market for these products remains robust and is serviced by other communications companies, many of whom are also our customers. So the fact that they're low single-digit percentages should give you an idea to our maximum exposure there.

Got it. And then, Glen, on the press release in your commentary, you talked a bit about kind of artificial intelligence and launch of intelligence tools there. Maybe you can give us a little bit of color around the progress you're making in intelligence at the Edge. Any color on design wins that you guys have in place or how we should think about the ramp of these products in 2019 and beyond would be helpful there too.

Yes, you bet. And keep in mind that our pursuit of artificial intelligence is part of our larger initiative of pursuing compute in Edge devices, which is relatively new for Lattice. And this is not something that we expect to come on very quickly. A lot of companies that are pursuing artificial intelligence have realized that it takes quite a bit of effort to get something as innovative as this off the ground. Now that said, we are pleased with the progress that we're seeing. We are working with some early adopters to integrate AI into our current products. And this is pretty straightforward because when you look at what our products do with our customers today, especially those at the Edge, we're already implementing bridging and aggregation types of usages in those Edge devices, things like microphones, image sensors, radar sensors, etcetera, in products like smart speakers and the cameras and robots and drones, etcetera. So we're already in these small data streams, so to speak. And so we are working with customers right now to take the next step and actually integrate AI into our products and those data streams. In addition to working with some very large early adopters that are pursuing AI very aggressively, we're also working with a lot of smaller companies too. And in fact, one of the nice wins that we have right now is in a smart coffee machine camera, where we are doing neural computing-based object recognition. And you'll be hearing more from us in this in the upcoming Embedded Vision Summit in May in San Jose.

And if I could just sneak one more, I guess, for Max on the gross margin front here. I think a pretty impressive jump and good execution on a kind of 350 bps from Q4 to Q1 here. How should we think about that kind of 350 bps increase if we were to like kind of bifurcate it between inventory cost reductions versus mix versus other factors here? Can you help us -- can you provide any color there?

Yes. So the sizable majority of it is the cost reduction that we saw from Q4, and that's flowing through this period. We did have a nice improvement in the overall customer and product mix, but -- contributing a meaningful portion of that increase, but the sizable component of it is the cost reduction from the fourth quarter going through.

[Operator Instructions] Your next question comes from the line of Richard Shannon with Craig-Hallum.

Actually, the first question I'll ask is on the HDMI royalty agreement. Any details that you can give us about the tentative agreement there and how should we think about modeling that revenue stream going forward?

Yes. I would say that the tentative agreement that we reached with respect -- is exclusively regarding the 2017 royalties and the collection of cash and sharing allocation of those royalties. That will not be reflected in our revenue in 2018. As we talked about before, we've got -- the new accounting standards will not allow us to recognize the 2017 royalties in 2018. With respect to modeling that revenue, the licensing and services revenue going forward, we expect it to be in the 3%, 3.5% of total revenue range. And that includes our ability to recognize the 2018 HDMI royalties, even though that component of the agreement with the founders has not been finalized yet.

Okay. That is helpful. Let's talk a little bit about your industrial and automotive segment, clearly your best growing segments on a year-on-year basis, at least for the last couple of quarters. I know you addressed this to a good degree at your analyst event back in, I guess, October -- September/October. Wonder if you can give us a bit of an update there in terms of where you're seeing increased interest? I know it's a fairly diverse customer base. And if you can wrap that into -- if you see the kind of year-on-year growth rates you've been having in the last couple of quarters, or you think you can keep that up.

Yes, you bet, Richard. It is -- as you stated, the industrial segment it is very diverse, and there's a lot going on there. However, you can absolutely characterize where we're seeing some of the traction in the control and the connect usage model. On things like for -- the control usage model, we're seeing very nice traction in factory automation. As factories start to adopt advanced robotics, we're certainly benefiting from that. And from a connect usage model perspective, we're seeing tremendous action, thing -- involving things in and around video displays. And the macro trend that we're seeing is that video displays of all sizes from video walls all the way down to mobile handset screens have to be connected to a very large number of different processors and other electronic devices, and those protocols rarely match up nicely. And we found a very good market there with our FPGAs because they are programmable, and it allows our customers to address many of those combinations that are required for a single product. Another example, I would say is smart speakers, which I guess you could call more consumer home automation. But I guess, another example in the traditional industrial space is actually outside of our FPGA business. In our HDMI, ASSP business, we are seeing very good traction in products that are -- use the HDBaseT protocol to pass HDMI over very long Cat 5 or Cat 6 cables.

Okay, helpful. Maybe...

Sorry, to answer the last part of your question. And from -- we absolutely expect the growth rates in industrial that we've seen over the last several quarters to continue. It continues to look very strong for us, and we're very pleased with that segment.

Okay. If I can try to dig in just a little bit more, if you're willing to go along with me here and talk about factory automation and advanced robotics. Any way you can give us a sense or if you have a way of quantitatively answering the question, I'd love to know to what degree -- how big of a market that is for you right now?

Yes, you bet, and it all comes back to the very significant diversification we've achieved in both the customer and the market space right now. Not only are no customers larger than 4% actually this quarter, but from a market perspective, we are nicely diversified between industrial as well as comms & compute and consumer. So this -- even though factory automation is -- and industrial robotics are a big highlight for us, all of these types of examples that we're talking about are on the order of single-digit percentages of our revenue type of importance.

Okay. That's helpful. One last question for me, and I'll jump out of the line here. You talked about trying to grow revenues in double-digits. You pretty much hit your number the first quarter. And at least relative to my model, you're going to be pretty close to my numbers for the second quarter. How should we think about that double-digit kind of growth bogey? And if you could -- and Max, if you could specifically help us understand the puts and takes from the HDMI royalty as well as the revenue recognition rules in getting to that kind of a number, please?

Yes, I'll address the first part, which is the double-digit growth and let Max follow up with the HDMI royalty question. So last fall when we talked about double-digit growth, remember we were talking about a return to a long-term trend that Lattice had seen historically. If you looked at our website over the last couple of years, we had a very nice graphic in there that we would add to it each year from -- I think it was around 2010 or 2011 going forward that showed a nice double-digit growth trajectory. And as we went through last years, we did have a setback. And our main message was, "Hey, we are returning to a growth trajectory." So it was a long-term trend we are referring to, and we are very careful to not give annual guidance. We are giving quarterly guidance at this point in time. And I'll let Max handle the HDMI question.

Yes. So with respect to the HDMI discussion. And if you roll back the clock to the last earnings discussion that we had, you might remember Darin talking about the 2017 HDMI royalties and those not being able to be recognized as revenue in 2018 as we had expected them to previously. And we think that, that somewhere in the $6 million to $8 million range. So that won't be able to be recognized, but we will be able to recognize the 2018 HDMI royalties. As I said a little bit ago, we think the overall licensing and services revenue for the year will be somewhere around 3% to 3.5% of total revenue.

[Operator Instructions] Your next question comes from David Duley with Steelhead.

I was curious, could you talk about -- you've listed a bunch of new applications, and I kind of have an idea which are going to growing most rapidly. But if you could just rank your most exciting new applications, the top three of them for future growth, I'd appreciate it. And then along the same lines, you talked about having design wins in these applications. How long is the duration of the design win to start to hit revenue and ramp? And then how -- once they ramp, how long do they last for? What's the tail?

Okay, you bet. This is Glen, I'll answer those in reverse order. The time from design win until production ramp and the duration of that ramp it varies wildly among our segment. As you can imagine, consumer is very fast. It can -- you can basically get into production sometimes within months, and those product cycles typically are on the order of a year or two. Now that said, there are other elements of consumer that last much longer, the fast ones being things like mobile handsets, of course. But that's really just a minority of our business. The vast majority of our business is comprised of industrial and compute and communications customers, who would take several years to go from designing until production, and then they typically remain in production many years after that point in time. So that's a little bit of color on our design cycle and production durations. And the key takeaway there is that the majority of Lattice revenue is comprised of this very long-term, engagement-based revenue outside of consumer. Now within that, in terms of where are some of the revenue drivers, it does change versus time. What we're currently seeing is one of the major highlights we have for the area is data center servers. And we are different once again than other FPGA companies in that we don't provide the very large FPGAs that accelerate the actual computing that's happening in the cloud. Our FPGAs play more of a backplane control function and security and power-up management function within the servers. And we have spoken on these calls over the last several quarters about the position that we had in the new reference design formerly called Perlea. That ramp is going very well for us, and in fact, others in the industry are saying that it is well ahead of schedule. And we're benefiting from that. One other comment on the data center servers is that because our FPGAs are so flexible we don't only participate in those industry standards reference designs. There is also a large emerging portion of the market where very large social media companies, for example, or e-tail companies will deviate from those standards so that they can get a competitive advantage. They also use our FPGAs for similar functions, and we're benefiting from those build-outs as well. So data center servers are certainly one of the highlights. I mentioned factory automation already, mentioned video displays. Smart speakers continue to be a strength for us. Those are some of the examples, I would cite.

And as a follow-on, as far as the data center server design wins and ramp and whatnot, but there's a new generation that's already ramping. How long do you think that those wins last? Is that a two to four year kind of cycle? Or do you have to reinvent yourself after every two years or how long will the [indiscernible] last?

Yes, the time line that we've been on and continue to focus on it aligns with the major platform deployments that occur every -- optimistically, two years. I think we're seeing that a lot of them are closer to three, maybe not four. But we are engaged with those platforms from a roadmap perspective and have been, and we do have plans to continue this for the foreseeable future.

Okay. And on the data center servers, you mentioned you have control security applications and boot up. Is there a potential to expand footprint or content into other niche applications in these servers?

Well, that has happened already actually. For example, on this current generation of reference designs, there are between one and eight sockets available to Lattice FPGAs. That's up by 2x probably actually 4x from prior architectures. Now time will tell if that trend's going to continue, but having the potential for four or five FPGAs in one server, we're quite pleased with. So I think the way I would look at is the potential for growth in that area is really tied more to the end number of servers that need to be shipped and what those servers are doing. The more complex operations they're doing, the more of our kinds of FPGAs they are going to need. An important function for our products and servers is not just things like power management, but as you know, security is becoming a much bigger concern. And so with the products that we ship today as well as those that we have on the road map, we are certainly continuing to deliver more features that enable these authentication and other types of operations.

Okay. Now one final thing for me. Just on a revenue on an apples-to-apples basis between the March and the June quarter, there sounded like they were one-time events as far as inventory recognition or some of these new changes in accounting and whatnot. Can you just help me understand on an apples-to-apples basis how we should be looking at the numbers sequentially?

So are you referring to March and June quarters or are you referring to December and March quarter?

March to June.

Okay. So March to June, we expect the impact from the new revenue recognition to be substantially less than what we saw in the first quarter -- in the March quarter. We do expect that modest increase in distributor inventory build, which is a factor of what we see as solid growth in our backlog supporting the shipment forecast. And it's really the same fundamental drivers in servers and consumers as well as broad market industrial. And we are also seeing very strong in-customer pull and sell-through in those same markets. So March to June quarter, we expect very small apple -- difference in revenue -- as a result of the new revenue recognition rules. With respect to product revenue, we will continue to see that benefit on the licensing and services about the same amount that we saw in the first quarter.

So does that mean that the core business revenue is growing as you would have -- is the core business revenue growing sequentially between March and June when we x-out these impacts in distribution and revenue reg changes?

Yes.

And your final question comes from the line of Metech Discoski with Investco.

On the -- can you give us a sense of the delta of what was sold into the channel quarter-over-quarter? If I got it right early from the comments, it sounds about $8 million more was sold into the channel buying this quarter?

That's right. So between December and March quarter, we saw as expected a distributor inventory growth of a little over $8 million really to support increase in demand for control applications and servers and consumer connectivity as well as broad market industrial.

Got you. So it wasn't isolated to buyers in China, say, stocking up before ZTE or anything like that?

No. Not at all. It was -- some of it was in China and -- but that's largely designed and dedicated to support the server ramp that Glen has spoken about.

And there are no further questions at this time. I will now turn the call over to Lattice's management for any closing remarks.

Okay. Thank you, operator. And thank you again to everyone for joining us on today's call. We know how busy all of you are during the reporting season. In summary, the key takeaways from Lattice's Q1 call are that we're executing as planned and we're driving growth. We have a stable core business with our control and its connectivity applications. We are pursuing future growth initiatives, like we talked about with Edge computing. And we're driving improved financial results through resumed growth, the OpEx control and debt repayment. We appreciate your continued support and encourage you to reach out with any additional follow-up questions you may have. Operator that concludes today's call.