Mercury Systems, Inc. (MRCY) Q1 2016 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and welcome to the Mercury Systems' First Quarter 2016 Earnings Conference Call. [Operator Instructions] I would now like to introduce your first speaker for today, Gerry Haines. You have the floor sir.

Thanks Andrew. Good afternoon everyone, and thank you for joining us. With me today is our President and Chief Executive Officer, Mark Aslett. If you have not received a copy of the earnings press release we issued earlier this afternoon, you can find it on our website at mrcy.com. We would like to remind you that remarks that we may make during this call about future expectations, trends, and plans for the company and its business constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. You can identify these statements by use of the words may, will, could, should, would, plans, expects, anticipates, continue, estimate, project, intend, likely, forecast, probable, potential, assumes and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to continued funding of defense programs; the timing of such funding, general economic and business conditions, including unforeseen weakness in the company’s markets; effects of geopolitical unrest and regional conflicts; competition; changes in technology and methods of marketing; delays in completing engineering and manufacturing programs; changes in customer order patterns; changes in product mix; continued success in technological advances and delivering technological innovations; changes in or in the U.S. government’s interpretation of federal procurement rules and regulations; market acceptance of the company’s products; shortages in components; production delays or unanticipated expenses due to performance quality issues with outsourced components; inability to fully realize the expected benefits from acquisitions and restructurings or delays in realizing such benefits; challenges in integrating acquired businesses and achieving anticipated synergies; changes to export regulations; increases in tax rates; changes to generally accepted accounting principles; difficulties in retaining key employees and customers; unanticipated costs under fixed price service or systems integration engagements and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as are discussed in the company’s filings with the U.S. Securities and Exchange Commission, including in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015. The company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which such statement is made. I would also like to mention that in addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, during our call, we will also discuss several non-GAAP financial measures, specifically adjusted EBITDA, adjusted income from continuing operations, adjusted earnings per share or EPS, and free cash flow. We are including adjusted income from continuing operations and adjusted EPS because Mercury now uses these non-GAAP metrics for decision making purposes and as a means to make period-to-period comparisons and evaluate the financial results in this core business. They believe adjusted EPS provides meaningful supplemental information regarding the performance of our core business. Adjusted EPS excludes amortization of intangible assets, restructuring and other charges, impairment of long-lived assets, acquisition and financing costs, fair value adjustments from purchase accounting, litigation and settlement expenses, and stock-based compensation expense, as well as the tax impacted those items from GAAP income from continuing operations. This yields adjusted income for continuing operations, which is then expressed on a per share amount base - as a per share amount based on weighted average diluted shares outstanding. In addition to the exclusions for adjusted income from continuing operations, adjusted EBITDA also excludes depreciation, interest income and expense and income taxes. Free cash flow excludes capital expenditures from cash flows from operating activities. A reconciliation of adjusted EBITDA and adjusted income from continuing operations to GAAP income from continuing operations and adjusted EPS to GAAP EPS from continuing operations and finally free cash flow to GAAP cash flows from operation is included in the earnings press release we issued this afternoon. With that, I'll turn the call over to Mercury's President and CEO, Mark Aslett.

Thanks Gerry. Good afternoon, everyone and thanks for joining us. I'll begin today’s call with a business update. Gerry will review the financials and guidance and then we will open it up to your questions. Last year's positive momentum carried into the first quarter Mercury is off to a great start in fiscal 2016. Operationally and financially we continued to do well as we executive our strategy and plan. Total revenue for Q1 was up 8% year-over-year and near the top end of our guidance driven by favorable mix and improved operating leverage in the business adjusted EBITDA exceeded our guidance growing by $3.8 million or 48% from Q1 last year on $4.3 million of incremental revenue. Mercury's GAAP profitability improved nearly 200% year-over-year and our cash flow from operations continue to strengthen as anticipated. Our results this quarter reflected strong position we have established on critical production programs in the right segments of the market. These programs appear to be well funded currently in or moving into production and a precisely aligned with the DoD's roles and missions. From a revenue perspective, our largest programs and defense this quarter were Patriot, Aegis, P8, SEWIP Block 2 and Radar. Our total book-to-bill this quarter was a strong 1.2. Total backlog exit in Q1 was up more than 6% year-over-year reaching record levels. This provides strong 12-month full revenue coverage and positions us well for the remainder of fiscal 2016. This quarter there were three major book programs from a bookings perspective. We received our first full rate production order to SEWIP Block 2. We also booked a major order on a new airborne program. This represents both the new design win and another great example of continued outsourcing by our customers. Finally, we received a large booking for [indiscernible] meaning in total we made substantial progress in securing large orders on three of the top programs in our bookings plans from the year. International defense bookings for Q1 including foreign military sales were 10% of total bookings compared with 30% last year. Leveraging our sales strategies, our technology investments, and our acquisitions over the past two years we’ve created a next generation business platform. This platform should enable us to continue to driving profitable growth going forward. From a sales perspective, we developed a strong go-to-market model focused on strategic account management and solution sales. This enables us to partner more closely with our customers as they navigate defense procurement reform and the challenging budget environment. These partnerships revolve around complex engineering services associate with long term production programs. This services we provide our customers ultimately generate high margin and deliver revenues for us tied to the sales procure and sensor processing subsystems. Most importantly as we said last quarter, we continue to expect our fiscal 2016 bookings and revenues to be driven by a broader set of key programs then in the past couple of years. From a technology perspective, we’d leverage guarantee investment in innovation and strategic acquisitions to build a best-in-class portfolio of products and capabilities. We're tolerating the right segments of the markets. Our overall growth is largely due to an optic and modernization activity related to our two core markets Radar and EW, as well as the flow down of DoD program protection security requirements. We believe that our secure and sensor processing technology and capabilities is significantly ahead of our traditional competition. With our next generation secured Intel server class product line together with the mandate from the government to secure electronic systems with domestic and foreign military sales, we are well positioned to capitalize on this opportunity set. We also have the potential to capitalize on demand to secure server class computing application beyond the sensor. These include other onboard mission critical computer applications where we haven't participated in, in the past. We’ve positioned Mercury to gain share in RF and microwave as well. Smaller companies in RF and microwave have hard time dealing with defense funding delays and the investments required to compete effectively. Meanwhile larger players are going through significant restructuring, these dynamics substantially enhance our competitive advantages. In addition, our RF, microwave and digital capabilities position us to pursue new opportunities in pre-integrated sensor processing subsystem sales. The industry needs more capable suppliers, our Advanced Microelectronics Centre or AMC in Hudson, New Hampshire is proving to be a valuable asset for Mercury in this regard. With this world-class scalable RF and microwave manufacturing and the subsystems integration capabilities, the AMC differentiates us from our competitors in terms of our ability to deliver industry leading outsource, end to end subsystem solutions. At the same time, the integrated business systems – at the AMC have been crucial to improving the operating leverage in our business model. In addition to great set of franchise programs and the right technology, sales strategies and business models Mercury has a pristine balance sheet. Our capital allocation strategy remains focused on growing most of this enterprise value and capabilities. We are targeting acquisitions that scale technology platform that we built focusing on the key pillars of the business, RF, microwave and embedded processing. We continue to be active as well as disciplined in our approach to M&A, focusing on opportunities of both revenue and cost synergies. Our goal is to assemble critical and differentiated capabilities across the entire sensor processing chain. This will allow us to provide our customers with more complete and more affordable solutions. We continue to develop a solid pipeline of opportunities focusing on deals that we believe will be accretive in the short term and drive long-term shareholder value. Now some thoughts on the industry conditions. The contracting environment remains challenging with new awards still experiencing proactive delays as well as increased competition. I have anticipated we began government fiscal year 2016 with another budget continuing resolution. With that said, last evening various new sources reported that senior White House officials and congressional leaders may have struck a multiyear budget deal. If approved by Congress over the next two years, the build could add $40 billion in total to base defense pending above the budget control spending tops in $16 billion for overseas contingency operations. Despite the industry challenges and ongoing budget uncertainty, we believe that Mercury is positioned to continue delivering above industry average revenue growth and improved profitability. With our record backlog, healthy bookings, broader mix of programs and the benefits of integrating our acquisitions, we remain on track for another strong performance in fiscal 2016. We continue to anticipate approximately 5% revenue growth and 10% growth in adjusted EBITDA versus fiscal 2015. Gerry will discuss these expectations in more detail. So with that, I would like to turn the call over to Gerry. Gerry?

Thank you Mark, and good afternoon again everyone. Before I go through the financial results, I would like to remind everyone unless otherwise noted, I will be discussing the company’s financial results in comparisons to prior periods and guidance on a continuing operations basis, which excludes Mercury Intelligence Systems or MIS, which was sold back in January of 2015. However, in accordance with GAAP, MIS is reflected in our statement of cash flows and balance sheet for periods in which it was on by us. Turning to Mercury's results, Q1 was a quarter of good execution and solid profitability with revenue and adjusted EBITDA both exceeding expectations. Total revenue grew $4.3 million or 8% from Q1 last year to $58.4 million near the top end of our guidance of $54 million to $59 million. International revenue including foreign military sales was 14% of total revenue compared with 19% in Q1 of last year. Revenue from radar and electronic warfare together accounted for 85% of total revenue versus 86% in Q1 a year ago. Radar revenue grew 17% year-over-year while electronic warfare revenue was down 13%. Net of $3 million of intercompany eliminations, revenue in our largest reporting segment Mercury Commercial Electronics or MCE increased $1.4 million or 3% from the first quarter last year to $50 million. In our Mercury Defense Systems or MDS reporting segment, revenue was up $2.6 million to a total of $8 million, an improvement of 48% year-over-year. These segment results exclude revenues of $0.4 million in Q1 of fiscal 2016 and $0.1 million in Q1 of fiscal 2015 that are included in our consolidated results for those quarters. This revenue differences attributable to development programs where the revenue was recognized in both segments under contract accounting and reflects the reconciliation to our consolidated results. Turning to bookings, Mercury’s total bookings for the first quarter was $68.5 million yielding up strong book-to-bill of approximately 1.2. We ended the quarter with record total backlog of $218 million, which was up $12.8 million or 6.2% from the $205.2 million in the year earlier, approximately $155.4 million or 71% of this total backlog is expected to ship within the next 12 months. Excluding intercompany eliminations of $2.3 million, net bookings for MCE in Q1 were $57.2 million bringing in total backlog to $191.9 million compared to $184.4 million a year ago. Net bookings for MDS in the first quarter were $11.3 million bringing its total backlog to $26.1 million as compared to $20.8 million a year earlier. This is also a solid quarter in terms of gross margin which was at the mid-point of our target business model in line with our guidance and at 47% was up three points from 44% in Q1 last year. This was driven by favorable program and product sales mix in the quarter. In addition to our strong gross margin, we continue to realize the benefits of improved operating leverage from our prior restructuring and integration efforts. Operating expenses for Q1 of fiscal 2016 were $24.4 million, this compares to $23.3 million of operating expenses in Q1 of last year, absent the $2.1 million of acquisition related expenses incurred in the most recent quarter, OpEx would have declined approximately $1 million year-over-year. Adjusted EBITDA for the first quarter of fiscal 2016 increased 48% to $11.8 million compared to $8 million reported for Q1 last year. This was well above the high end of our guidance range of $9 million to $10.8 million at 20% of revenue this was also at the mid-point of our target business model. Mercury also performed well on the bottom line in Q1. GAAP income from continuing operations was $2 million or $0.06 per share after the net impact of $0.04 per share of acquisition related expenses. This compares with our guidance of $0.05 to $0.08 per share. For the first quarter last year we reported GAAP income from continuing operations of $0.7 million or $0.02 a share. Adjusted EPS was $0.19 per share for Q1 in fiscal 2016 compared to $0.13 per share in Q1 of fiscal 2015. Again these numbers are fully reconciled to GAAP EPS from continuing operations in our earnings press release issued earlier today, which is also available on the investor relations page of our website at mrcy.com. Looking quickly at the balance sheet, Mercury ended the first quarter of fiscal 2016 with cash and cash equivalents of $79.1 million compared with $48.9 million a year earlier. The Company generated $3.7 million of free cash flow during the first quarter. Operating cash flow was $5.6 million driven by cash earnings partially offset by $1.9 million of capital expenditures. I'll turn now to our financial guidance for fiscal 2016. We believe that Mercury’s growth opportunities, robust book-to-bill, and historically strong total and 12 month backlog, position us to continue delivering solid revenue growth as the year progresses. With the operating leverage gained from our acquisition integration yielding it's full benefit this year, plus the Company's ongoing focus on operational efficiencies, we expect to continue translating this growth in the stronger operating and earnings performance and once again achieve our target business model for the full year. Turning to our guidance, for the second quarter of fiscal 2016, we're forecasting revenue to be in the range of $58 million to $61 million. We expect gross margin for the second quarter to be approximately 47% to 48%. Gross margins are anticipated to be stronger overall in H1 than in H2 based on the anticipated mix of program activities and product sales over the course of the full year. Operating expenses are expected to be approximately $23 million to $24 million in Q2 of 2016. Adjusted EPS for Q2 is expected to be in the range of $0.15 to $0.18. This forecast assumes approximately $1.6 million of amortization of intangible assets and approximately $2.6 million of stock based compensation expense in the quarter. It also assumes an effective tax rate of approximately 39% for the quarter. Adjusted EBITDA for the second quarter is estimated to be in the range of $10 million to $11.5 million representing approximately 17% to 19% of revenue for the forecasted revenue range. For the full fiscal year 2016, despite the defense budgetary uncertainties that Mark outlined, our expectations remain unchanged from what we discussed last quarter. We continue to anticipate approximately 5% revenue growth for the year and 10% growth in adjusted EBITDA versus fiscal 2015. In terms of the balance sheet, we expect to continue building our cash balance through positive cash flow in fiscal 2016, driven primarily by cash earnings and offset in part by a modest increase in capital expenditures. Finally, as Mark said, Mercury's balance sheet remains pristine with zero debt. In summary, we believe that Mercury's participation on important, high priority DoD programs positions us well to continue growing our bookings, backlog, revenue, adjusted EBITDA, and adjusted EPS in today's defense budget environment. We look forward to the prospect of another solid year of revenue growth, higher operating income, and stronger profitability overall in fiscal 2016. With that, we'll be happy to take your questions. Operator, you can proceed with the Q&A now.

[Operator Instructions] Our first question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is open.

Hi, good afternoon. Just given the announcement moments ago with Northrop winning at Bomber, I guess could you talk about whether you have opportunity on that and just in general how you look at the opportunities for fiscal 2016 and 2017?

Sure. So, thank you for telling us that Northrop won, so we can --

I figured you guys –

Yes, we had our funds switch off. So, I think it's great news. I mean we've got an extremely strong partnership with Northrop across several domains and in fact we are in many instances the Company is providing the processing for many of their radars. As it relates, the LRFD it's a little too early to tell what the opportunities set will be for Mercury. My understanding is that the program in the first space is more focused on the platform and the electronic support of that platform in the sense of suites will come in later days. But, it's great that they won and hopefully we're part of it long term. I did mention on the call and in terms of my prepared remarks, a new design win for the Company, it's another airborne application, it was actually our second largest booking in the quarter, and we believe that that is going to represent good opportunity for Mercury going forward largely because the program itself is in the LRFD stage and there appears to be some pretty significant interest for the platform both domestically as well as overseas. Another interesting opportunity is the LRDR, the long range discrimination radar. Lockheed was awarded that contract during lately last week and we were pleased to be a part of that particular ad with Lockheed as well. So, we've got some great programs, a mix of existing programs that are in production, as well as potentially some near wars that can drive growth in the out years.

Sure, thank you. And I guess that was actually my second question with regards to the new airborne application. You had mentioned the prime to outsource, I guess could you maybe talk about a decision behind that and what Mercury had to offer and how competitive it was?

So, basically what allowed us to win the business was the investments that we made in our very high performance Intel server class processing architecture. So, it's basically a refresh of the processing architecture for a radar or both the platform. It was a piece of business that was previously being done in-house by one of our customers and just given the investments that we've made, we were the natural choice. We believe that they did look at other companies, but Mercury I think clearly won through.

Thank you for the color. I'll jump back in.

Thank you. Our next question comes from the line of Michael Ciarmoli from KeyBanc Capital Markets. Your line is open.

Hi, good afternoon guys. Nice results. Maybe just to stay on that line of questioning around new opportunities, we also saw the JLTV get awarded. I mean is there ultimately as you guys see it, will there be opportunities for some of the sensor packages that might go on there, whether it's jamming technology or other sort of subsystems that you guys might be able to provide.

There could be, Mike, longer terms. Although as you probably know the majority of our revenues are tied more to the Air Force and the Navy, than they are to the Army. So, not to say that we're ruling it out but we're prioritizing our efforts more in the other two services right now.

Got it. And then just the other one I had, on the M&A front, obviously you've got the strong balance sheet. We've seen a couple of deals here over the past couple of months that seemingly were in your space, what sort of obstacles are you seeing out there or challenges in getting some transactions closed, maybe if you could just give us some general color on what's happening on the M&A front.

So, as Gerry said on the call, we did have slightly over $2 million of M&A related expenses in our number this quarter. So we were active, the expenses were associated with evaluating competitively pursuing a spin-out of a large publicly traded firm. Ultimately we weren't successful, it was acquired by a private equity sponsor and I think one of the reasons maybe is the fact that we're actually pretty disciplined in terms of our pricing and return expectations.

Got it. And then just a last one here, it seems like with this two year budget deal and even just where the defense budget is, there is a lot of optimism out there. Are you guys seeing any risk, you called out your international sales, have you guys seen any risk or heard anything from some of your top customers about FMS sales potentially being vulnerable to the overall energy environment and oil price pressure, is that kind of not on the radar screen?

Not specifically in relation to that, I think if you look at what's going on in the Middle East region, clearly there's a lot of turmoil and I think they are all looking at advanced weapon systems just given what's happening over there. As you know I think the charge with foreign military sales is potentially the timing of those transactions been notoriously difficult to actually forecast from the timing perspective. So, in general we think it's a significant opportunity largely because if you look at some of the investments that we've made in our secure processing capabilities, we really see ourselves has actually enabled for those foreign military sales to occur. So, I think we're actually in the sweet spot, but they are difficult to actually forecast from the timing, Mike.

Got it. Thanks a lot guys, I'll jump back in the queue.

Thank you. Our next question comes from the line of Jonathan Ho from William Blair. Your line is open.

Hi guys, I just wanted to start out with maybe understanding the server secure class opportunities a little bit better. I know you guys have talked about server opportunities outside of your traditional sensor chain channel. And I just wanted to understand, number one, how would those opportunities that's evolved over time and number two, is there any opportunity to replace vendors and existing contracts particularly their current supplier becomes disqualified over time?

Yes, so, if you look at the investments that we've made in our processing architecture. First of all, we're really the only Company that is truly taking Intel server class capabilities into the embedded systems world. And it sounds easy, it's actually really hard to do. What we've also done is basically invested in a different range of form factors that allows us to go after more opportunities. So, smaller form factors such as 3U, right up through Blade Centre architectures and we're also working on another one right now. This allows us to go after other onboard mission critical computer applications that really is computing that is beyond the sensor. We're seeing opportunities both in the naval domain for these types of applications or these computer architectures, and we're also seeing in the airborne domain. And we think this is potentially additive in terms of the soft new addressable market. And it's displacing more traditional compute vendors, companies such as IBM that obviously sold its Blade Centre business to Lenovo. So, we think that we're actually uniquely positioned, we're seeing the opportunities and we're pursuing them. In fact we've already won a couple, it just takes time to develop in terms of just the revenues just given the typical program lifecycle.

Got it. And then as we look at the AMC utilization, I think you guys highlighted a few sort of wins and increasing utilization from some of the large programs that are now moving into production. Just wanted to get maybe an update or a sense of progress along those lines and some of the customers that you've sort of shown the facility to - how much progress are we making on that side?

So, I think we're making great progress. We've got stronger relationships in the RF and microwave domain in the existing customers that came to us through the acquisition, and what we've been busily doing is basically taking those capabilities and selling them to Mercury's existing customers. Much of the growth is really being driven by two major things as we talked about in our prepared remarks, which is really the modernization activity that's occurring in both radar as well as electronic warfare. So, we've got stronger relationships, there's a lot of bidding activity going on, the technology that we've got is great, the facility is world class and we're pretty excited about our potential to continue to grow that line of our business.

Great, thank you.

Thank you. Our next question comes from the line of Michael French from Drexel Hamilton. Your line is open.

Thank you. Good evening, gentlemen. Congratulations on the strong performance.

Thanks, Michael.

I just had two questions going through much of the outstanding issues. The first one has to do with the bookings, and I don't know if this is a question you guys answer on these calls, but is it possible to go into more detail, you already touched on the segments but by RF microwave versus processing how - during the quarter for new business coming in?

Yes, we typically don't break out our bookings by our product line. What we typically have done Michael is discuss what the major programmatic bookings were for the quarter. And the two top bookings this quarter were the SEWIP Block 2, associated with the full rate production, as well that new airborne program that I mentioned.

Right. And I guess we can assume there is a mix of RF microwave and processing on both of those programs.

Yes, so if you look at the SEWIP Block 2 by far the majority of that actually are acquired as the product line which is basically digital as well as RF. And the bookings associated with the airborne program is predominantly processing.

Okay. Thank you, that's helpful. And then a question on the guidance side. Gerry, you mentioned on the adjusted EBITDA range represents a margin of 17% to 19% compared to the 20% you hit this quarter, I'm just wondering why the range seems, it's about 100 to 300 basis points, and I'm wondering if you could walk us through the various factors that could be resulting coming out of the high-end versus the low-end of the range?

Sure. I said there are two things going on, one is, we've taken some mix shifts into accounts as we see they have been slow in different elements of the business kind of running to your prior question about what's happening in the profile of all those elements isn't identical of course. The other thing is that in Q2, we see the impact of a number of actions within the Company that happen on annual basis and they hit us in Q2. So for example, we go through annual salary increases and we absorb that for the first time for the full quarter in Q2. A similar thing happens with annual stock based compensation awards, they happen right at the end of Q1, so you don't really see it much in Q1, and then you see some of the effect in Q2 and that impacts a few different areas. At the same time we're growing, so we continue to make some investment to support that growth. As we've said in the past we expect the increase in things like R&D and the sales of course moves with revenue, but G&A and things like that are, while they grow they are expected to grow at a lower overall rate than the revenue growth that we profile. So, we see a few moving parts but a lot of it seems concentrated into Q2, which is I think what's driving the effect you're talking about.

Okay, great. Thank you for answering my questions. I appreciate it.

No problem.

[Operator Instructions] Our next question comes from the line of Mark Jordan from Noble Financial. Your line is open.

Good afternoon, gentlemen. Relative to acquisition related expenses of the one deal you're working on, were there any spill over expenses that will be in the second quarter?

So, we don't forecast Mark, at that level of detail for those items for a few reasons, but what we attempted to do was give the guidance for adjusted EPS and then give some of the typical recurring items so that you can interpolate into some assessment of what you think the GAAP result might be.

All right. Second question, in the first quarter you had over 300,000 of restructuring activities, it was my belief that that you had completed your major programs in fiscal 2015, is there any outlook you can share for incremental restructuring activities that would be a separate line item through the balance of the year?

So again, for that type of item we don't make specific forecasts. There was a small amount, and you're correct in your recollection that all the activities of any major dimensions were completed. There is one item that relates to some of the restructure of the rented facility actually, is a part of what we assume complex here in Chelmsford, our headquarters location. That will recur at a minor level over the remainder of the lease period because you have to make certain assumptions about subletting, which is unlikely to happen given the duration of the remainder. So, we'll see little things like that have a minor effect but apart from that again, that's partly why we prefer to give you guidance at the adjusted EPS level which helps to eliminate the effect of some of those things that are not recurring and not sort of flat line over time.

So, just to be clear Mark, we don't anticipate any restructurings at this point in time. It was really a carryovers, as Gerry said related to the lease facility here that you're seeing floods in the P&L.

Okay. Thank you very much.

I am seeing no other questioners in the queue at this time. I'd like to turn the call back over to Mark Aslett, for closing remarks.

Okay. Well, thanks very much for joining the call. We look forward to speaking to you again next quarter. Take care.