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Mercury Systems, Inc. (MRCY)

Q4 2020 Earnings Call· Tue, Aug 4, 2020

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Transcript

Operator

Operator

Good day, everyone, and welcome to the Mercury Systems Fourth Quarter Fiscal 2020 Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to the company's Executive Vice President and Chief Financial Officer, Mike Ruppert. Please go ahead sir.

Mike Ruppert

Management

Good afternoon and thank you for joining us. With me today is our President and Chief Executive Officer, Mark Aslett. If you've not received a copy of the earnings press release we issued earlier this afternoon, you can find it on our website at mrcy.com. The slide presentation that Mark and I will be referring to is posted on the Investor Relations section of the website under Events and Presentations. Please turn to slide two in the presentation. Before we get started, I would like to remind you that today's presentation includes forward-looking statements, including information regarding Mercury's financial outlook, future plans, objectives, business prospects, and anticipated financial performance. These forward-looking statements are subject to future risks and uncertainties that could cause our actual results or performance to differ materially. All forward-looking statements should be considered in conjunction with the cautionary statements on slide two, in the earnings press release, and the risk factors included in Mercury's SEC filings, including the cautionary statement and risk factor related to COVID-19. I'd 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 income, adjusted earnings per share, adjusted EBITDA, free cash flow, organic revenue, and acquired revenue. A reconciliation of these non-GAAP metrics is included as an appendix to today's slide presentation and in the earnings press release. I'll now turn the call over to Mercury's President and CEO, Mark Aslett. Please turn to slide three.

Mark Aslett

Management

Thanks Mike. Good afternoon everyone and thanks for joining us. We hope that you and your family is staying safe and healthy. I'll begin today's call with the business update, Mike will review the financials and guidance, and then we'll open it up for your questions. Mercury finished a record year in fiscal 2020 by delivering strong Q4 results, against a very challenging backdrop. We're beginning the New Year in a great position strategically with strong topline momentum. The team is doing an outstanding job managing through a difficult period. And although the risks associated with COVID remain elevated, we're positive about the outlook for fiscal 2021. We continue to believe that Mercury is targeting the right parts of the market. Our bookings and design win activity continues to reflect the three fundamental trends that we've discussed in the past; supply chain delayering by the government and the primes; the primes' flight to quality suppliers; and the shift to outsourcing by our customers at the subsystem level. Potentially, a fourth trend is the government's increased focus on creating a domestic supply chain to secure and trusted advanced electronics capabilities designed and built in the U.S. For the fourth quarter, total bookings increased 15% year-over-year, establishing a new company record and leading to a record year-end backlog. Our 12-month forward revenue coverage is strong positioning us well for fiscal 2021. Our largest bookings in the quarter were F-35, SEWIP, LTAMDS, a classified radar program, and Filthy Buzzard. For the full fiscal year, total bookings increased 22% hitting a record as well. It was also a record year for new design wins which totaled more than $2 billion in potential lifetime value. We've increased Mercury's footprint over the past seven or eight years to more than 300 different programs and platforms. Our…

Mike Ruppert

Management

Thank you, Mark, and good afternoon, again everyone. I'll begin by extending my appreciation to our employees for the outstanding work they did this quarter and this year. We've made it our top priority to protect their health, safety and livelihoods, and they've worked extremely hard to deliver the results we've seen. Thanks to the efforts of our team, we were able to manage through the impact of COVID and conclude a record year in fiscal 2020 with record fourth quarter bookings, revenue, net income, adjusted EBITDA, EPS and adjusted EPS. Turning to the fourth quarter on slide 9. Our bookings and book-to-bill metrics continue to be strong. Bookings increased 15% year-over-year to a record $279 million, driving a 1.28 book-to-bill ratio. As a result, we're beginning fiscal 2021 with record backlog. We had record revenue in Q4 of $217 million, exceeding the top end of our Q4 guidance. Organic revenue was up 17% year-over-year. GAAP net income and GAAP EPS were up 113% and 96% respectively year-over-year. These increases were a result of strong operating performance, as well as a $1.5 million gain on investment net of tax or $0.03 per share, as well as $6.6 million in discrete tax benefits or $0.12 per share. Adjusted EBITDA for Q4 was up 31% year-over-year to a record $49.6 million above the top end of our guidance. In Q4, we had a $2.2 million adjustment for COVID-related expenses. These were primarily for payments from our employee relief fund, supplies and services required for workforce safety and other employee benefits. Approximately $1.3 million of these expenses were charged to cost of goods sold and approximately $900,000 were charged to operating expenses. We're continuing to invest in protecting the health, safety and livelihoods of our employees as well as in derisking the business…

Operator

Operator

Thank you. [Operator Instructions] Our first question comes from Jon Raviv with Citi. You may proceed with your question.

Jon Raviv

Analyst

Hey, thank you. Hey, guys. You're not going to love this question but, I'll try it anyway. The implied organic growth in FY 2021, Mike, you talked about it, obviously, a slight deceleration from 2020. There's a lot going on. You guys have the record investments and the wins on new designs and you're aligned with all this new stuff and microelectronics is super important, et cetera et cetera. I realize it's a bit of what have you done for me lately, but any perspective on the opportunity to accelerate organic growth, or should we be looking for some sort of inflection in the future when a lot of these big new wins start to really pick up? Thank you.

Mark Aslett

Management

Sure, John. So, we feel pretty good about the organic growth. We've kind of said high single digit low double digit is what we're aiming for over the long term. I think the guidance that we've given is in line with that. It is slightly lower than, obviously, what we delivered last year. But if you look at typically what happens is that, as the year progresses and kind of visibility continues to improve, the number tends to trend upwards. So we'll see what happens, but we feel good with the guidance for now.

Jon Raviv

Analyst

Thank you. And then as a follow-up, almost a similar question, Mark, on the margin. And I realize that the framework we're thinking about you guys is really the organic growth and the margins are strong, while you invest to support that growth, being we're heading in the third year of 22% adjusted EBITDA margins. Mike, you did mention the idea to expand margins at some point or over the next few years. Again, is there some sort of inflection which you're waiting for? Any sense of when those margins might start to expand? Thank you.

Mike Ruppert

Management

Yeah. I mean, John I'll take that one. I think that what we mentioned with the fiscal 2021 guidance is that, we expect it to look a lot like fiscal 2020. And in fiscal 2020, we were able to grow the business and we increased R&D by over 40%, I think 43% year-over-year and we increased R&D from 10.5% in fiscal 2019, where we also delivered 22% EBITDA margins. But we were able to increase R&D, as a percentage of sales to 12.4%. And still deliver 22% EBITDA margins. And that's really driven by -- the growth in R&D is really driven by the opportunities that we're seeing. And so, when we look, at the fiscal 2021 guidance, Mark talked about a lot of the new design wins that we're seeing, a lot of the opportunities that we have the markets where we're playing, we don't specifically guide R&D. But I think if you look at fiscal 2021, you're going to see R&D levels that are similar as a percentage of sales to what we had in fiscal 2020, but continue to have the 22% EBITDA margins. And as you referred to and as I mentioned in the prepared remarks, we do see EBITDA margin expansion over time. And I think we've got a clear path to do that that we've talked about in the past, in terms of programs transitioning from new program starts, into higher-margin full rate production as well as some of the operating leverage. So, we're investing in fiscal 2021 to take advantage of the opportunities, but we do see margin expansion after that.

Jon Raviv

Analyst

Thank you.

Operator

Operator

Thank you. Our next question comes from Greg Konrad with Jefferies. You may proceed with your question.

Greg Konrad

Analyst · Jefferies. You may proceed with your question.

Hi. Good evening. Just to follow-up on, kind of the last line of questioning. I mean you were talking about R&D. And I think customer-funded R&D came up a lot through this past year. I mean, how does mix kind of play into FY 2021 and maybe expectations around customer investments?

Mike Ruppert

Management

Yeah. Greg, so we don't specifically guide, customer-funded R&D. But what we do talk about is new program starts. And we do have a lot of new programs ramping up. At the same time, we've invested a lot in the operations team. We've seen a lot of operational improvements. So again, when you think about the gross margin again, we don't guide it but I think you're going to see fiscal 2021 looking a lot like, fiscal 2020 where we had new program starts picking up. But we also had some operational efficiency which led to in fiscal 2020 gross margins just under 45%. So again fiscal 2021, I think, it's going to look a lot like fiscal 2020.

Greg Konrad

Analyst · Jefferies. You may proceed with your question.

And then, in the prepared comments, you mentioned, the four trends around creating an advanced supply chain around microelectronics and trying to size some of the potential budget dollars that could be behind that. I mean, it seems like there has been good movement with that. How are you thinking about maybe the incremental opportunity, but also the timing and how much momentum this has in terms of moving forward? And when it could actually turn into revenues?

Mark Aslett

Management

Yeah, Greg, so it's hard to actually comment on the specific timing. I think the number -- there's kind of two trends going on in parallel. One is obviously I think we've seen with COVID, just the risk of having a non-domestic supply chain, for technologies and capabilities as well as other supplies. Longer term, as you know, we're investing in secure and trusted microelectronics capability which as I mentioned in my prepared remarks is the DoD's number one technology priority. And we're very well positioned there. So we're making the investments. We're seeing a fair amount of opportunity across the customer base, both in terms of directly to the government and also with our traditional customers for the microelectronics capability, because it really is an enabler of next-generation capabilities and applications. So, I think both the trusted domestic supply chain for existing capabilities. And then trusted microelectronics for next, are both pretty important trends that we're well positioned for.

Greg Konrad

Analyst · Jefferies. You may proceed with your question.

Thank you.

Operator

Operator

Thank you. Our next question comes from Seth Seifman with JPMorgan. You may proceed with your question.

Seth Seifman

Analyst · JPMorgan. You may proceed with your question.

Thanks very much. Good afternoon guys. I was wondering maybe not with a very precise number, but in kind of a round number or a qualitative way if there was a way to kind of split out the amount of organic growth that you thought about in 2020 and in 2021 as coming from increased outsourcing versus kind of more of the underlying market growth?

Mark Aslett

Management

Yes, it's hard to split it out specifically, Seth, but if you look in say Q4, we kind of use our growth in subsystems revenue has really been a proxy for outsourcing because today most of the outsourcing that we see is occurring at the subsystem level. Our subsystems revenue in the fourth quarter was up 44% year-over-year. And for fiscal 2020 as a whole it was up 27% to now 44% of total company revenue. So -- and as I look forward into fiscal 2021, we expect that growth from subsystems in terms of the revenue associated with that is actually going to probably be the highest of the growth associated with our product lines which are subsystems modules and subassemblies and components. So, we think that the subsystem growth trend which has been driven by outsourcing is absolutely alive and well.

Seth Seifman

Analyst · JPMorgan. You may proceed with your question.

Great, that's helpful. And then Mike you mentioned the opportunity to begin to see some margin expansion potentially beyond fiscal 2021. When you think about what drives that is there -- do the R&D dollars sort of start to plateau and so there's an opportunity to gain leverage on that, or is there something that's changing in the mix? And also how should we think about the scale of the opportunity there?

Mike Ruppert

Management

Yes. So, I think it's all the things you mentioned to a degree. So, starting with gross margins, I think we see two things and I always tend to think in five years. And as we look over the five-year plan gross margins between mix the mix between new program starts and full rate production should switch more towards production which is higher margin. At the same time, we talked about it the last couple of quarters; we've invested heavily in the operations team. We see opportunity for gross margin expansion there. So, gross margin expansion is area number one. Number two is R&D. We're going to continue to invest significantly in R&D. As you know it's a key part of our model. But we do see as we go forward over the next five years opportunity for leverage in R&D across multiple of our products. So, while R&D is going to continue to grow, there is an opportunity for that to come down as a percentage of sales over the next five years. Again that's going to be dictated by the opportunity set that we see, but we do think leverage there. And then finally is SG&A. We do think there's an opportunity for operating leverage as we grow revenues faster than we grow OpEx over the five-year period. So, it's really all three of those areas.

Seth Seifman

Analyst · JPMorgan. You may proceed with your question.

Great. Thanks very much.

Operator

Operator

Thank you. Our next question comes from Peter Arment with Baird. You may proceed with your question.

Peter Arment

Analyst · Baird. You may proceed with your question.

Good evening Mark, Mike. Mark on the M&A environment just having -- you've seen a few of these cycles before regarding the budget cycles I'm alluding to is just how you're thinking about any -- is there -- are you any more cautious going into what could be a little bit of a softer next 12 months if we start seeing some of that crowding out? Just what's your high level thoughts I guess on your M&A approach in that environment?

Mark Aslett

Management

Yes, I don't think it's changed Peter quite honestly. I mean we've been very focused on really acquiring in the core of the business which gives us the opportunity of generating both cost and revenue synergies. And we've been very successful doing that over time and that's really what has allowed us to create significant value. It also allows us to actually diligence those businesses far better than if we were stepping outside of our core markets. So we're going to continue to focus really acquiring in Sensor and Effector Mission Systems and C4I. We still think that there's a lot of runway there both in terms of organic as well as M&A-related growth. So I'm not too concerned with what's happening with the backdrop and our ability to continue to acquire.

Peter Arment

Analyst · Baird. You may proceed with your question.

Okay. And then just a follow-up just circling back to your comments on the Seth's question regarding the outsourcing. The subsystems as a kind of a proxy, is there -- are there other areas either services or platforms like thinking airborne versus naval other areas where they're ahead and where there's still an opportunity for you to kind of further penetrate?

Mark Aslett

Management

Yes. So yes we're doing pretty well. I mean I like the way in which kind of the mix of the business is positioned right now. If you look at our airborne business for fiscal '20 was up 31% revenue-wise year-over-year. Our naval business was up 15% and ground which is a smaller percentage of the total was up 24%. I think we're going to continue to see growth in those areas. We'll probably see a pickup in ground next fiscal year because we're going to begin to see revenues associated with LTAMDS which for us is classified as a ground platform. But I like the way in which we're positioned in terms of end markets and we think that we're going to continue to see growth not only in '21 but obviously over the next five years as well.

Peter Arment

Analyst · Baird. You may proceed with your question.

Thanks for the color.

Mark Aslett

Management

Thank you.

Operator

Operator

Thank you. Our next question comes from Michael Ciarmoli with Truist Securities. You may proceed with your question.

Michael Ciarmoli

Analyst · Truist Securities. You may proceed with your question.

Hi, good evening, guys. Thanks for taking my question. Maybe Mike on the just on the outlook for '21 and it's kind of been touched on, but what actually needs to improve from a visibility standpoint there? I mean I understand some of the conservatism but you've got 65% of your revenue in backlog. Are you looking for clarity? Is it around the budget environment? Is it just clarity around certain programs and when you get certain POs from customers? Just what -- I guess what specifically on the visibility? Is it some of the COVID-related disruptions? What drives that improved visibility? Because I think it's pretty compelling right now.

Mike Ruppert

Management

Yes. I mean I think that it's all those things Mike. And I think we'll -- as we progress through the year we'll get more visibility on a lot of that. So as we were thinking about our guidance, we're definitely entering fiscal '21 with a good 12-month backlog more than we did last year in terms of the midpoint of our guidance last year. We're about 65%. The midpoint of our guidance this year and 12-month backlog about 60% when we entered last year. But there is more uncertainty and that's related to the potential for a CR and especially an extended CR. We've got the elections coming up. We've got COVID out there. And so as we thought about the guidance what we wanted to do is make sure that we gave a range that we thought was reasonable. And hopefully as some of those uncertainties that we're facing now as we progress through the years those go away and we can give more visibility and hopefully be towards the higher end of the range.

Michael Ciarmoli

Analyst · Truist Securities. You may proceed with your question.

Got it. And you mentioned I think you called out $0.03 of COVID expenses in the first quarter. Do you have anything else baked in for the remainder of the year?

Mike Ruppert

Management

We don't. So you're right. We forecasted $2.2 million in Q1 for COVID expenses. That's the same level that we incurred in Q4. We think the makeup Mike will be different but the amount will be similar. And when I say different, we've started COVID testing at our major manufacturing facilities so we expect to fully in Q1. And there'd be some other employee-related benefits. But we only forecasted for Q1. It's hard to forecast for the rest of the year. So as we go through the year, we'll provide more guidance. But as a reminder last quarter we adjusted the definition of adjusted EBITDA and adjusted EPS to add back those COVID expenses. So it won't impact adjusted EBITDA or adjusted EPS but it'll obviously have an impact on GAAP net income and GAAP EPS. But as of now we've only guided for Q1.

Michael Ciarmoli

Analyst · Truist Securities. You may proceed with your question.

Got it. And then just the last one on the cash generation and maybe that conversion, I maybe would have thought that you guys would have seen some of that flow through from the accelerated progress payments from some of your customers. I mean are you seeing any of that benefit, or should we expect that in the coming quarters here?

Mike Ruppert

Management

Not really Mike. I mean when you think about the progress payments increasing from 80% to 90% that really has a minimal impact on us. Most of our programs are still commercial sales. And where we do have longer-term contracts which we're getting more and more of because of the subsystems work we tend to have performance-based milestone payments with our customers, so less exposure to progress payments. We do have it on a few contracts. And where we have, we've been able to see some increased cash from that. But it really hasn't been material for us.

Michael Ciarmoli

Analyst · Truist Securities. You may proceed with your question.

Got it. Thanks, I will hop back in the queue.

Operator

Operator

[Operator Instructions] Our next question comes from Ron Epstein with Bank of America. You may proceed with your question.

Mike Ruppert

Management

Good evening.

Ron Epstein

Analyst · Bank of America. You may proceed with your question.

So Mark is there an opportunity for you guys to get in on, if you're not already on DMEA's ATSP4 program. It seems like that's more important than ever now given the push on microelectronics and processors.

Mark Aslett

Management

So which program was that Ron?

Ron Epstein

Analyst · Bank of America. You may proceed with your question.

Yes the Advanced Tech Support Program IV, where they're funding a bunch of large contractors to do some microelectronics work. If you guys aren't in on it, I was just curious if that was a place where you guys could maybe find some additional things to do.

Mark Aslett

Management

Yes. I'm not aware specifically of that program, but the opportunity set around both secure and trusted microelectronics we think is pretty substantial. So there's a whole bunch of other programs that were actually either have already bid on or are bidding on. So open systems architectures at chip scale is one in the EW domain. There are other ones in the radar, as well as comms. And so we're seeing opportunities really across the board. And obviously the big one is going to be SHIPs Phase II, yes so we'll see what happens with that. So SHIPs Phase II is the big one around trusted microelectronics role is tried to bringing back potentially a foundry to the U.S., as well as strengthening the entire supply chain for both packaging and securing those devices. And we're really at the heart of that initiative with a number of different suppliers.

Ron Epstein

Analyst · Bank of America. You may proceed with your question.

Just maybe just a question on that front, DoD a big enough customer to justify having a foundry in the U.S. I mean doesn't have to somehow be DoD a piece of a broader commercial foundry, or can you really just do a DoD foundry? Is there enough business?

Mark Aslett

Management

No I think -- look it's a great question. And I think the answer to that is no. I don't think the DoD is large enough to create a trusted domestic foundry the way in which they did previously. I think we've gone down that path in the past with IBM Fishkill which is now GlobalFoundries. The market is simply not large enough and the technology is moving too quickly enough to stand up a fab and the infrastructure associated with it for purely DoD. So what we believe needs to happen is that, there needs to be a commercial foundry in the U.S. that is keeping up with the state-of-the-art and producing commercial silicon and the DoD needs to basically take that silicon and to leverage it in defense applications. And so -- and I think that's in essence where we come to participate that we can take that commercial silicon, we can combine it together with silicon from different suppliers, we can secure it and we can package it domestically. And because of the high mix low volume nature of defense and because of the fact that we actually are a horizontal player in the industry, we're ideally suited to make those technologies profoundly more accessible than what they would be in any other way. So we think that the answer for DoD is both having trusted -- or domestic manufacturing for commercial silicon coupled with the sort of capabilities that Mercury can bring to bear for use inside of the DoD. So, I think the answer is it's both Ron.

Ron Epstein

Analyst · Bank of America. You may proceed with your question.

Yeah. That makes a lot of sense. And then, Mike maybe just a quick accounting kind of question. Have you looked at or are you comfortable talking about what the impact could be for you guys in 2022 if the R&D tax credit doesn't -- that piece of law doesn't change? Because right now I mean the way you amortize your R&D for tax purposes would change pretty dramatically in 2022. So, what would be the impact on cash if you can say?

Mike Ruppert

Management

Yeah. So, it's obviously something that we are aware of and we have looked at it. First of all, if the rule is implemented as it's currently written it would have an impact on us starting in our fiscal 2023. So as you mentioned, it goes into effect calendar 2022. It would hit us in fiscal 2023. The other impact around it, as you know, the five-year amortization rather than expensing or deducted in the year that it's incurred for U.S. R&D just to highlight the obvious a vast majority of our R&D is in the U.S. So after five years, we'd be through the transition. In terms of the impact, we have begun to assess it. And there's still a lot of ambiguity Ron. But based on our current interpretation of the regulation and taking what we would view as a conservative estimate, we think in fiscal 2023, it could have a cash flow impact as high as $30 million to $40 million, which would, as you know, decline over the next five years until we're at run rate in year five. You mentioned accounting. Just to clarify that's the cash impact. There isn't a GAAP impact associated with it. And I know everyone is talking about it. I would add when we talk about our business model and what the DoD is looking for and the government is looking for, we don't believe the intent of the government was to penalize R&D and technological innovation. So, we do think there could be change before it's implemented but we'll see. And so as everything becomes clear, Ron, we'll give some more guidance. But again, it won't impact us until fiscal 2023.

Ron Epstein

Analyst · Bank of America. You may proceed with your question.

Yes. Got it. Thank you very much.

Mike Ruppert

Management

Okay.

Operator

Operator

Thank you. Our next question comes from Jonathan Ho with William Blair. You may proceed with your question.

Jonathan Ho

Analyst · William Blair. You may proceed with your question.

Hi. Good afternoon. I just wanted to understand, if you could give us a little bit of additional color in terms of what inning you're in, in terms of integrating some of the recent acquisitions that you've made? And where do you maybe expect to see some operating leverage as you continue to go through that process?

Mark Aslett

Management

Okay. So I don't answer the first part. And I think Mike maybe kind of revisits some of his comments on the operating leverage that you mentioned earlier. So we're pretty much done Jonathan. We've got a tiny little bit of work to do on the acquisition of APC. That really got disrupted a little bit with COVID, but it's nothing that's going to stop us basically from getting back into M&A going forward. So, we're pretty much done with the integration of the businesses that we've previously purchased. Mike?

Mike Ruppert

Management

Yeah. Jonathan, I would just say from an operating leverage perspective that the Themis and Germane acquisitions that we did, and those were the, I'd say, the most recent acquisitions where we expected to see meaningful cost synergies between the two. I think we've done a very good job there both in SG&A as well as gross margins and purchasing power. If you recall when we bought Germane, the gross margins of that business were pretty low and we've done a great job, and the team has done a great job getting those gross margins up. So, we've recognized a lot of those synergies; I think a little bit of room to go. APC was more of a platform acquisition in terms of the ability to integrate that with some of our other capabilities and technologies and sell more subsystems and bigger products. So, that's not really a cost synergy angle to that. So, I think for the specific acquisitions, we're in pretty good shape. I don't see a lot more margin expansion or synergies coming out of those. I think we've already run-rated most of those. I think as we do future acquisitions as Mark always talks about, I think our integration capability is solid. And I think we can keep doing what we've been doing over the last couple of years, which is buying companies, integrating them and recognizing operating leverage associated with them.

Jonathan Ho

Analyst · William Blair. You may proceed with your question.

Got it. And then just in terms of a similar line of questioning, you talked about your secure capabilities. I'm just wondering with some of the design wins that you have now, when do we maybe see those start to get injected a little bit more into new programs? And, I guess, delivering additional leverage given that, I would assume the margins on secure components are going to be a bit higher?

Mark Aslett

Management

Yes. So we've won a lot of new programs, Jonathan, over the last several years and some of them are beginning to transition into production beginning next fiscal year. However, we are still spending significantly on R&D just given the environment that we're in the opportunity set that we see. So, our capabilities in secure processing has clearly crossed the chasm. And it's probably the primary driver of growth right now that we see in both modernization on the sensor processing side of things as well as C4I. And so literally two of our largest bookings this year were both related to those capabilities and we're pretty excited about the opportunities there.

Jonathan Ho

Analyst · William Blair. You may proceed with your question.

Great. Thank you.

Operator

Operator

Thank you. Mr. Aslett, it appears there are no further questions. Therefore, I would like to turn the call back over to you for any closing remarks.

Mark Aslett

Management

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

Operator

Operator

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.