Photronics, Inc. (PLAB) Q1 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Photronics' First Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, February 18, 2015. I would now like to turn the conference over to Pete Broadbent, Vice President, Investor Relations and Marketing. Please go ahead, Mr. Broadbent.

Thank you, and good morning, everyone. I want to thank you for joining our first quarter 2015 conference call. Before we begin, I would like to remind all participants about the Safe Harbor Provision under the Private Securities Litigation Reform Act of 1995; and thus any statement we make during this call, except for historical events maybe considered forward-looking, and maybe subject to certain risks and uncertainties that could cause actual events to differ materially from those projected, including uncertainties that may affect the company's operations, market, pricing, competition, procurement, manufacturing efficiencies, and other risks detailed from time to time in the company's SEC reports. These statements will contain words such as believe, anticipate, expect, or similar expressions. This call will be archived on our Web site until we report our second quarter 2015 results. Joining us on the call today are Constantine Deno Macricostas, Chairman and Chief Executive Officer; Dr. Peter Kirlin, President; Sean T. Smith, Senior Vice President and Chief Financial Officer; Dr. Christopher Progler, Vice President, Chief Technology Officer, and Strategic Planning. During our remarks this morning, we will be referring to slides posted on our Web site under the Investor Relations link. I have two additional notes before we begin. First, both Chris Progler and Peter Kirlin are conducting this call remotely, and second, two calendar items; Photronics' management will be attending the Morgan Stanley Technology, Media and Telecom conference on March 2, and we will be hosting an Analyst Investor Day on March 26 in New York City. And now, I would like to turn the call over to Deno Macricostas. Deno?

Thank you, Pete, and good morning, everyone. It was a solid first quarter and a good start to the year for the company. Our high-end IC business was up strongly, with [balanced demand] [ph] coming from our foundry, logic and memory customers. We will produce our first commercial [14] [ph] nanometer mask set. We'll work with two customers on [14] [ph] nanometer production. Next-generation DRAM began to tape-out during the quarter, and looks to continue to grow through the year. As we expected our 20 nanometer foundry and logic business [abounded] [ph] this quarter. While our FPD business was down, the high-end held steady. We'll soon benefit from new high-end equipment in Korea. This will give us higher capability and capacity to meet the increasing demand for ultra high-definition LCD and AMOLED masks. We'll be the first mask maker merchant or captive to have the latest high-end lithography equipment. Also, during the quarter, we agreed to a private exchange for 50% of our 2016 converts, which gives us added financial credibility. We have been able to invest in capital to support our customers, and will continue to strengthen our financial foundation. Overall, with the start-offs in Q1, I'm optimistic about the coming year. It will be the first full year of our joint venture in Taiwan. We have a leading-edge equipment supporting high-end activity in Korea, Boise, and Taiwan. We have the largest [14] [ph] nanometer [manufacturing] [ph] capacity, [which show] [ph] simultaneous production from three regions of the world. Our technology is now extendable to 10 nanometer. Photronics increasingly stands apart in leadership and commitment to serve our global customer base. We expect that translates into meaningful results for our customers, and shareholders in 2015. Now, I would like to turn the call over to Peter Kirlin. Peter? Peter? I guess we lost Peter.

It looks like Peter has disconnected.

Maybe Pete Broadbent may [begin] [ph] the script for Peter Kirlin.

So I will now read Peter Kirlin's prepared remarks. Thank you, Deno, and good morning, everyone. Please turn to Slide 3 in our slide presentation. In Q1, we achieved sales of $123.5 million, at the midpoint of our guidance. Semiconductor sales were $101.5 million, with high-end sales up 8% sequentially. Flat panel display sales were $22 million, down $2.9 million sequentially, with decreased demand for LCD masks. Increased revenue led to solid operating results, with operating margin of 9.4%, and non-GAAP EPS of $0.07 at the high end of our guidance.

Hey, Pete, I'm back.

Okay, Peter, welcome. I've just read right up till high-end IC sale.

I heard you. I heard you; thank you very much. High-end IC sales were up strongly as we experienced renewed foundry demand to 28 nanometers, and the [firm] [ph] memory orders for the next-generation DRAM resumes. Also, we were excited to see in the latter half of January the start of commercial production of the 14 nanometer photomask for two customers. We're the first merchant to qualify this node, and now believe we're the first out of the blocks in production. Given the complexity of 14 nanometer, we expect this business to be lumpy for the next few quarters as our customers ramp yield, and gain adoption. However, it's definitely a positive to see the onset of production of 14 nanometer. Our Mainstream IC business outperformed seasonal trends. Q1, which is seasonally soft due to holidays was only down 1% sequentially, and was up $5.5 million, or 9% on a year-over-year basis. Moving to FPD, our high-end revenues were steady through the quarter. The decrease in total sales was mainly due to soft LCD mask demand for smaller-than-G8 designs. As Deno mentioned, we're expanding capacity at the high-end to meet the increased demand. We took delivery last quarter of new high-end lithography and inspection tools. We're the first to have this equipment. It is now on site, and it's on schedule for certification late this quarter. We expect these tools to drive increased sales in the second half of this fiscal year. On the financial side during the quarter, we agreed to a private exchange for 50% of our $115 million convertible bonds due April 16. As Sean will speak to, essentially moving half of the 2016 convert to 2019 gives us excellent financial flexibility going forward. In Q1, we were profitable in generating cash. Non-GAAP EBITDA was $34 million, and our net cash position was $29 million at the end of the quarter. Looking forward, the trends in the business point to continued growth at the high-end. As a result, 2015 looks progressively stronger for us throughout the year. In logic, 28 nanometer foundry [demand] [ph] came back this quarter and should continue to build each quarter. In memory, the 20 nanometer DRAM ramp has now begun. We expect commercial volumes for this conversion to be steady and increasing as the year unfolds. We continue to expect [net] [ph] node migration to follow in the second half of this year. Also, we're now seeing initiation of the 14 nanometer logic business. While we expect them to be choppy, it's clearly now in front of us. In order to support this increase in high-end business, we're in the process of increasing our capacity in both Boise and Taiwan. We expect this capacity to come online in the next two quarters, and we will also give it capability down to 10 nanometers. Shifting to the flat panel display market, we're seeing solid demand for large format high-definition LCDs, and we see increased high-end design activity driven by mobile displays. We expect our high-end FPD business to grow as we bring online new capacity, and we expect to see full production in Q4. All in, 2015 should be a solid growth year for us. Our customers are marching forward at the high-end, and we're qualified at all commercial nodes. As our customer's ramp, we win, and the end market trends are encouraging for all lines of our business. At this point, we're fully focused on execution and delivering against these opportunities for our customers and our shareholders. With that, I will turn the call over to Sean.

Thanks, Peter, and good morning, everyone. I'll provide a brief analysis of our financial results for the first quarter of fiscal year 2015, review our operating results, balance sheet, cash flows, and forecast. During the first quarter, as Deno and Peter stated, we agreed to a private exchange of $57.5 million of convertible notes, due on April 1, 2019, for existing convertible notes, due April 1, 2016. The 2019 notes retain the same interest rates of 3.25%, and strike price of $10.37 per share as the 2016 notes. In connection with the exchange, we incurred approximately 900k in transaction expenses. Please refer to Slide 4 for our GAAP to non-GAAP net income and EPS reconciliation as we review the first quarter. For purposes of our discussion, I will be comparing our non-GAAP operating results which exclude the convertible notes transaction expenses. Please turn to Slide 5, 6, and 7, which show us sequential quarterly IC and FPD revenue performance. First quarter revenue was approximately 123.5 million, which was within our guided range, 121 to 126. Revenues for IC photomask were a 101.5 million, up 2.1 million sequentially. Revenues for high-end IC photomask, which are 45 nanometers and below were up 8% sequentially to 36.4 million or 36% of total IC sales. Sequentially, high-end IC revenue increased 2.9 million primarily related to increased high-end tape outs in Taiwan. This was partially offset by a slight decrease in sequential mainstream revenue of 800k. Revenues for FPD photomask were 22 million down 11% sequentially at 2.9 million. The decrease was primarily related to reduced mainstream FPD orders that Peter alluded to. High-end FPD revenue for the quarter was 15.4 million up 200k or 1% sequentially. Now, breaking out sales geographically, 71% of Q1 sales were from Asia, 22% from North America, and 7% from Europe. Now, let's continue through the income statement. Gross margin for the first quarter was 22.8%, up a 140 basis point sequentially. The increase was related to reduced manufacturing costs and increased high-end revenue for the quarter. As a reminder, we were negatively impacted by certain increased manufacturing costs from the fourth quarter, and we had stated on our call that these costs were not expected to be recurring. SG&A expenses for the first quarter were 11.9 million. SG&A increased modestly by 400,000 sequentially. R&D expenses, which consist principally of continued development for our global advanced process technology, can cause, and advanced nodes were 4.7 million, down $1.1 million sequentially. And during the quarter, we generated operating income of 11.6 million or 9.4% of sales, up from 7.5% in Q4, despite the decreased sequential sales of 800,000. EBITDA as defined in our credit agreements for the quarter was $34 million or 136 million on an annualized basis. Other expense net exclusive of the convertible note transaction costs for the quarter, were down 200k sequentially to 400,000, principally driven by reduced interest costs. During the third quarter, we recorded tax provision of 3.1 million, higher than our guided range of 2 million to 2.5 million, due primarily to increased income generated at our taxable entity. Minority interest for the quarter was 3.3 million and primarily consisted of DNP share of PDMC's profits for the first quarter. Minority interest expense increased 900k during the quarter. GAAP net income was 3.8 million or $0.06 per diluted share. Non-GAAP net income was 4.7 million or $0.07 per diluted share, which was at the high end of our guided range. At the end of the first quarter, we had approximately 1500 full-time employees which equates to annualized revenue per employee of 329,000. Now, turning to the balance sheet; cash and cash equivalents at the end of the first quarter amounted to 169 million. Our net cash, which is cash less debt was 29 million at the end of the quarter, down 22 million sequentially principally due to previously planned CapEx payments. CapEx payments during the quarter amounted to $40 million. Working capital at the end of the quarter was $144 million as compared to a $197 million at the end of Q4. The decrease was due primarily to an increase in accrued CapEx of $35 million sequentially, coupled with CapEx payments. Accounts receivable at the end of the quarter increased $4.7 million sequentially to $99.3 million primarily as a result of timing as we had a stronger month in January than we did in October, the last month of Q4, 2014. Accounts payable and accrued current liabilities at quarter end amounted to $167 million, up 38 million sequentially, primarily as a result of previously mentioned accrued CapEx. At the end of the quarter, $67 million of CapEx was accrued for. Please turn to Slide 9 as we review our capitalization. Total debt at quarter end was a $140 million; a principal component of outstanding debt include a $115 million, 3.25 senior unsecured notes, 50% of which are due April, 2016 and 50% due April 1, 2019, and approximately 25 million in capital lease obligation. Our leverage ratio at the end of the quarter was 1.11 time. During the quarter and through today, we have not borrowed on our five-year $50 million credit agreements. Taking look at our cash flows; cash provided by operations for the first quarter was approximately $22 million. Depreciation and amortization was 20.8 million. Cash flow used in investing activities in Q1 2015 amounted to approximately 40.3 million, which is primarily all CapEx. And net cash used by financing activities amounted to approximately $2million. Please turn to Slide 10 as we take a look ahead. Taking look at CapEx, we expect our cash CapEx needs to be in the range of 100 million to 110 million for 2015. We do however have the flexibility to accelerate or decelerate our spend depending upon market conditions and opportunities. We expect to generate free cash flow in 2015. And our investments are principally geared towards high-end leading-edge products for IC and FDP applications. Our visibility, as always continues to be limited as our backlog is typically one to two weeks. For Q2 2015, we do expect to experience some modest impact related to Lunar New Year in Asia. We are projecting revenue for the second quarter of 2015 to be in the range of $121 million to $128 million. During 2015, our tax rate will be effective by the flow of income from jurisdictions for which we may have credit and upon our limited ability to recognize tax benefits in areas in which we are taxable. For the second quarter of 2015, this will equate to a range of 2.7 million to 3.7 million in whole dollar terms. For fiscal 2015, we estimate our total taxes in the range from 12 million to 15 million. We will continue to be impacted by minority interest expense related to PDMC, and we are estimating minority interest expense to be approximately $2.5 million to $3.5 million for the second quarter. As a result, based upon our current operating model, we estimate earnings per share for the second quarter of 2015 to be in the range of $0.04 to $0.09 per diluted share. In summary, on Slide 11, I'll leave you with a few key thoughts. First, we expect top and bottom line improvement in 2015. Second, we expect our EBITDA to grow in 2015. And third, we are confident about our business model and our ability to grow market share at the high end. We see continued opportunities in our customers' businesses and node migration plans and we have a strong financial position and excellent technology to capitalize in those plans. And finally, we expect to continue to build on the momentum that we have established over the last past few years as a leader in advanced photomask technology. Now, I would like to turn the call over to the operator for questions and answers.

Thank you [Operator Instructions]. One moment please, for our first question. And our first question comes from Edwin Mok with Needham & Company. Your line is open.

Great, thanks for taking my question. So first question on the guidance, you mentioned Chinese New Year, which will start tomorrow, and you mentioned that has an impact on the business. You said we can I think quantify, I think a lot of the seasonality as a result of that. Given all the opportunity you have on DRAM as well as foundry, we would thought that you might see a little bit better growth, and maybe between FPD and semi, can you give us some color in terms of directional, how these two are trending?

Maybe I'll start, and then pass it over to Peter. I mentioned in the prepared remarks that we may have some modest impact on Lunar New Year. You're right, it does start tomorrow. So it still remains to be seen. We guided to what we thought we would be able to attain. Obviously we'd like to exceed - have results exceed our guidance, but the opportunities are there, Edwin. It's just the question of timing. Peter, if you want to add in any other color?

I think that was well said. I think all the vectors in our business directionally are headed up into the right with the exception of the Chinese New Year. The question is how strongly those vectors go. So our guidance reflects -- I think reflects growth with some wisdom baked in regarding, not counting the chickens before they've all hatched.

All right, that's fair. And then on the DRAM side, I thought your partner is ramping 20 nanometers, but your [come through] [ph] suggest that business there can't be steady from this level. So have you already seen the benefit of the 20 nanometer ramp in your partner or how do you think along the DRAM business as we go through this year?

Edwin, we are just at the beginning of the ramp, and throughout the last few quarters we saw what I would describe or what we'd describe as ‘Choppy demand’ or it would be present one quarter and not the next. Without a doubt, as we move into this year we expect to see what amounts to be a steady building stream of orders for the 20 nanometer node, but we certainly haven't to any material extent yet enjoyed the benefit of that business. This quarter was the first quarter where we saw more than basically multiple sets, and we expect to see that more in the coming quarters.

Great, that's helpful. And then a question for you, Sean, I noticed OpEx actually came down quite a bit, especially if I back out the $900,000 of call, one-time expense related to the convert; actually down quite a bit, with R&D down more than, as you said, on your prepared remarks, right. How do you think about OpEx? Is that one-time just happened -- we have the holidays, and therefore OpEx lower, or should we expect OpEx to bounce back and stay -- go back to that $17 million range?

Patrick, I'm sorry, Edwin, just to clarify, the 900k is below the line, it's not in OpEx. So OpEx quarter-over-quarter was actually down 700k and that primarily relates to the completion, or we didn't have as many qualifications in Q1 as compared to Q4, but we do expect OpEx to remain pretty steady. As I recall, 2014 versus 2013, OpEx was within 500k of each other. So that's our target.

Okay, that's all I have. Thank you.

Our next question comes from the line of Patrick Ho with Stifel Nicolaus. Your line is open.

Thank you very much. First question on the logic foundry side, regarding your commentary on 14 nanometers; from your vantage point and given some of the yield challenges that are out there for the industry right now, you mentioned the timing could be somewhat lumpy. Is this something that could fall into, say, your fiscal year 2016 given the yield challenges that are out there for the industry as a whole?

Peter, why don't you answer that, and maybe Chris would have some follow-up after that.

Yes. It's a very difficult market to gauge as you -- I think Patrick, you correctly pointed out. We've qualified, we've done our job. The rate at which that business builds is largely out of our control. But having said that, we saw the first two orders from our customers that are for -- [from assets] [ph] build silicon that they are shipping to their customers. So the 14 nanometer demand that we have seen isn't for real commercial products. A lot depends on, as you very well know, how well these first orders go, how well the silicon delivers, and the speed at which our customers ramp yield. So it could slip into 2016, or the flipside of it is it could build in strong in the second half of the year, we just don't know. But what is indeed true is we're starting to see revenue.

Yes. Patrick, this is Chris, I think…

Well, maybe a bigger picture -- oh, go ahead.

Oh, yes, just a few other comments. One positive, of course, 28 nanometer looks to be quite strong. So that we think it's going to be a node that has not neared its peak yet. 14 nanometer is starting to see a little more activity, but still a lot of re-spin. That's how we gauge the maturity of the nodes. This means a lot of the process is still getting reworked. So that speaks to your comment on the big chipmakers still working on yields, still looking at tuning, particularly the back end layers, and that sort of thing. But it could turn on pretty quickly with one or two volume customers, and there's not a lot of capacity out there to service 14 nanometer masks. Fortunately, we're on a very good position for that. We have a lot of qualified capacity with the largest customers, and we are building those sets now working on our own yields. So we'll definitely be ready for the ramp when it arrives.

Great, that's helpful. Maybe a bigger picture question for one of you guys in terms of the increasing mask intensity, as you go from, say, 28 nanometers on the logic side to 14 nanometers. How much do you see intensity on the mask side increasing in terms of layers and how that impacts your ASPs?

The layer count goes up, I’d classify it as dramatically. Depending on the flow, it can go up 30% or even 50% more masks for up to 14 nanometer, and the number of critical layers goes up as well. So let's say as far as node transition this is the strongest increase we've seen from 28 to 14 for both mask counts and number of critical layers. [You know there some glossing over] [ph] 20 nanometer, we still consider that a fairly, I'd say light node, there is some use of it for one or two customers. We don't consider that right now a very strong node in the foundry space. As far as ASPs, because of the number of critical layers goes up significantly in the set therefore the overall set cost also will go up significantly. So I don't think we generally comment on percent ASP increase node-over-node, but complexity, mask counts, and number of critical layers would suggest ASP goes up dramatically as well from 28 to 14.

Great. A final question from me, maybe for Sean in terms of some of the capacity additions that you mentioned in your prepared remarks; how flexible is it where you can move it from, say, if the demand for 28 nanometers continues to increase? You use it for that versus, say, 14 nanometers somehow does ramp up faster than I'm anticipating. How flexible are you in terms of the capacity in adjusting to the demand that's out there?

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Yes, largely our 14 and 28 nanometer toolsets are interchangeable. So as the business mix shifts, we have the ability either to map or install capacity into the demand shifts. And that extends to we have overlap on the 20 nanometer memory node with the 14 nanometer and 28 nanometer logic. So there's a lot of interchangeability that's been built into the toolset. And every day we work to enhance that, but it's safe to say now that really regardless to where which customers, which technology nodes the demands coming from we have the ability to move it around our toolset.

Great. Thank you very much.

Patrick, there's one other thing I should add and that is where the difference comes in -- will come in at the 10 nanometer node. And as I mentioned in my prepared remarks, the next slog of capacity also has a 10 nanometer capability component of building to it, because it could be depending on what happen, the customers' view 14 as it pushes into 2016, the flipside of it is I would be surprised if we're not beginning 10 nanometer qualification at least in one customer in the 2016 timeframe. We need to be ready for that.

Thank you.

[Operator Instructions] Our next question comes from Tom Diffely with D.A. Davidson. Your line is open.

Yes, good morning. I can appreciate the conservativism being the pre-Chinese New Year and how visibility isn't great right now, but when you look at the bigger picture, we see four drivers; potentially this year you get the 28 nanometer gain share, if you will; the 14 nanometer adoption memory in Taiwan. So, of those four potential drivers, which one do you think we're going to be most impactful this year over 2015?

Chris, you want to start and maybe Peter can add some color.

Yes, I can make a good comment. The 20 nanometer memory has been characterized by sits and starts over the last year. We've been qualified through some time, but that ramp seems to be steady and committed. Now, I think we're fairly confident in the 20 nanometer ramp impacting our business strongly in 2015. Behind that, I would say 28 nanometer continues to grow. We are very good position with few of the founders of 28 substantial market share. We think we will ride at increased adoption of that node. And I think 14 nanometer again; it's going to take a lot before that really becomes the volume production technology, a little less material for 2015, but we expect at least a couple of sets, and they're reasonably higher ASPs sets as I mentioned. So I would classify them in that order, but maybe Peter would have additional comments.

Well, I think Chris that was very well said. I think the added piece of -- you added two good pieces of information. Unlike 14 nanometer logic, the yields on the 20 nanometer node very recently have been surprisingly on the upside not the down. So that speaks very well for what we should expect to see in that node in the coming fiscal year. And regarding impact, depending on how strongly it comes on, it could be between the 5% and 10% know revenue uplift impact on the entirety of the company. So it's very immaterial.

Okay. And then on then the Taiwan portion of IC, is as that embedded in your 28 nanometer comments then?

Sorry, can you repeat that, Tom?

Yes, the Taiwan, the joint venture, the growth there, UMC and others; is that mainly at the 28 nanometer node and that growth you talked about 28 encompasses that?

Yes. As you pointed out based upon the minority interest going up in Taiwan by 900,000, the JV had a very good quarter.

Okay, great. And then a similar question on the flat panel side, do you think the growth this year comes from the high-end increasing or is it the mainstream part just rebounding from a seasonally weak fourth calendar quarter?

We believe that the high-end…

I think it's…

I think, Tom, it will be a combination relative to the last quarter, rebounding in the mainstream business with respect to more or less back to where we were. But we are very closely mapped into both Samsung and LG. Samsung in particular has just installed a brand new line with new scanners with the newest resolution. And they need basically lead-generation of photomask to fully exploit that equipment. That's what's driven our estimate in the investment in the next generation of project inspection, and there maybe basically they're comping at the bid for us to have that capacity online. We expect that revenues will ring up quite quickly when the capacity is qualified.

Okay. So when you look at the extra, your $20 million, $30 million you're spending on CapEx this year. What type of a revenue source does that derive? Is that similar to like one year's worth of revenue or how do you look at CapEx spending on the flat panel side versus the revenue opportunity it derives?

Maybe I can start, and then Peter if wants to add any color. And if you remember, Tom, back in 2010-2011, we put in our latest litho tool because we were out of capacity. And I believe we probably stated; right now we probably stated we're able to modify that tool within nine months we'll recover the cost of that tool once we it's up and running. We hope to -- we're not going to predict how quick we will recover the cost to the tool, but it is the latest -- we're the only merchants with that tool. It was delivered in December, and we expect to monetize that some time in the latter part of this year.

Okay. So based on recent comments by Samsung about how they were huge; $3.6 billion investments over the next three years, you would expect these tools are in pretty much flat out at some point when they're up and running?

That will be our goal.

Okay. All right. Then I guess just finally one more question on the Chinese New Year, obviously it's couple of weeks later this year; does it impact the actual -- is it more just a timing issue of when it hits versus the actual size or length of Chinese New Year that's going to impact you this quarter?

You're right. It is a little bit later than normal. So we weren't entirely certain what the impact would be. That's why we said it would be a modest impact. Bear in mind, if you're talking about the high end of our revenue guidance, one or two sets could sway there quite significantly as Peter was talking about on the 14 nanometer side, so we got it to where we thought we would come in. Our objective is obviously to beat the guidance, but that's what we seek today.

Okay. And maybe a final question for Chris; obviously the DRAM business, a lot of investments going on today which helps you few quarters down the road, it sounds like the second half of the year there's going to be a lot of investments going into the NAND side of the business. I'm just curious if you think you're well positioned when that happens, the benefits from that the incremental growth.

Yes, we are well positioned on the NAND side. We're qualified for 3D NAND, again still north of 20 nanometer DRAM, we can qualify for some time and looking to the chipmakers we'll obviously transition to that technology. So we have capacity and qualifications ready for that, and we are seeing this one more round of the so-called, "Planar NAND," maybe a 16 nanometer, that's about it. And we think we're going to see a renewed commitment in the industry that switch over to 3D. I think a lot of the chipmakers were surprised with the amount of fabs space and other costs it would take to bring that into production, but I think everybody setting the table now expect that to come on pretty strong. And that was a positive vector for photomask. It has more masking layers, more amounts of critical layers, but there is additional value in the set costs. So we're looking forward to that, and later this year is probably a good characterization of when that will start.

Okay, thanks for your time today.

It sounds great.

Ladies and gentlemen, there are no further questions at this time. I will now turn the call back over to Deno Macricostas for closing remarks.

Thank you everyone for participating in this morning's call. Thank you.