Peraso Inc. (PRSO) Q3 2023 Earnings Report, Transcript and Summary

Good afternoon and welcome to Peraso Inc.'s Third Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded today, Monday, November 13, 2023. I would now like to turn the call over to the host for today's program, Mr. Jim Sullivan. Please go ahead.

Thank you, operator. Good afternoon and thank you all for joining today's conference call to discuss Peraso's third quarter 2023 financial results. I am Jim Sullivan, CFO of Peraso, and joining me today is Ron Glibbery, our CEO. Today, after the market closed, we issued a press release and related Form 8-K, which was filed with the SEC. The press release and Form 8-K are available on Peraso's website at www.perasoinc.com under the Investor Relations section. There is also a slide presentation that we will be using in conjunction with today's call that [Technical Difficulty] through the webcast link on the IR website. As a reminder, comments made during today's conference call may include forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. Peraso advises caution and reliance on forward-looking statements. These statements include, without limitation, any projections of revenue, margins, expenses, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA, non-GAAP net loss, cash flows or other financial items, including anticipated cost savings. Also, any statements concerning the expected development, performance and market share or competitive performance of our products or technologies. All forward-looking statements are based on information available to Peraso on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Peraso's actual results to differ materially from those implied by the forward-looking statements, including unexpected changes in the company's business. More detailed information about these risk factors and additional risk factors are set forth in Peraso's public filings with the SEC. Peraso expressly disclaims any obligation to alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in terms of GAAP and non-GAAP. With respect to remarks on today's call involving non-GAAP numbers, unless otherwise indicated, referenced amounts exclude stock-based compensation expense, amortization of reported intangible assets and the change in fair value of warrant liability. These non-GAAP financial measures, definitions and the reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related Form 8-K, which was filed today with the SEC, which provides additional details. For those of you who are unable to listen to the entire call at this time, a recording will be available on the Investor Relations section of our website. Now I would like to turn the call over to our CEO, Ron Glibbery, for his prepared remarks. Ron?

Thank you, Jim. Good afternoon and welcome. We appreciate you joining us on today's call. I'm pleased to report that our third quarter financial results marked a significant improvement over the prior quarter with total revenue increasing 87% sequentially and 36% year-over-year. Although our mmWave business continued to reflect lower customer demand due to the ongoing industry inventory correction, during the quarter, we commercially commenced initial shipments against the large order backlog associated with the end-of-life for our memory IC products. This increased revenue contribution from our higher-margin memory IC products, combined with the sequential increase in sales of our mmWave products drove solid gross profit expansion as well as improvement in our bottom-line results. Looking at Slide 4, I want to begin with an update on the end-of-life of our memory IC products given the significant positive contribution to our third quarter results. As a reminder, in May of this year, we notified our memory customers of the end-of-life after learning that our foundry partner would be discontinuing the manufacturing process used to fabricate wafers for these products. The response from customers thus far has been very strong. Today, we received purchase orders for last time buyers from multiple customers totaling $11.3 million. We commenced initial shipments in the third quarter resulting in revenue of $3.1 million, with the majority of these initial order shipments being fulfilled from existing inventory. Our remaining backlog of these end-of-life orders was approximately $8.2 million at quarter-end and we also have an additional $2.5 million of backlog associated with production orders. Based on current manufacturing schedules at our foundry partner, we expect to complete shipments in fulfillment of all outstanding backlog by second half of 2024. The deadline for customers to place final purchase orders for end-of-life products is late December of this year and we continue to expect total EOL orders to amount between $15 million to $20 million. Importantly, these collective end-of-life orders and shipments are anticipated to contribute meaningful revenue and cash flow over the next several quarters as we continue to focus on expanding the customer base for mmWave products. Turning to Slide 5 and an update on our mmWave business. With demand from our largest existing customers continue to be impacted by the ongoing industry inventory correction, a large portion of our team's energy and efforts have been centered around our engagement pipeline. Since August, we have increased the combined number of engagements from 80 to 87, primarily reflecting the series of additional new funnel opportunities. The number of active engagements as of October remained about the same. However, I want to highlight this is in part reflective of our recent decision to place a small number of previous engagements on hold and therefore, we exclude them from these metrics. As we continue to source and evaluate new potential opportunities, we are putting an even greater emphasis on prioritizing the highest quality engagements in terms of both projected economic value and anticipated time to market. We are also diligently allocating our design in engineering resources, coupled with enhancing workflow efficiencies in support of maximizing our expected near-term return on investment. As stated in the past, we view our overall pipeline as a leading indicator of progress toward a more diversified customer base and I continue to be encouraged by our expanding number of high-quality active engagements. Within our mmWave business, I'd like to highlight one of the new markets we are seeing activity in, which is aerospace and defense. mmWave provides some distinct advantages over traditional wireless technologies. mmWave delivers the standard benefits, including high data rates and low latency. However, as compared to traditional radio signals that radiate in all directions, Peraso is able to create very narrow-focused beams that are more difficult to detect. mmWave provides an inherently stealthy protocol, low probability of interception, low probability of detection and anti-jamming, all of which are quite desirable for military communications. To these ends, we recently secured our first commercial engagement for the use of our mmWave technology for millimeter-wave or military communications. We are in a customer-funded proof-of-concept stage now and we'd like to be shipping in volume in the second half of 2024. In the meantime, we engaged on other defense-oriented opportunities and we hope to be speaking to those on future conference calls. Moving to Slide 7. There continues to be strong evidence for accelerating market adoption of 60 gigahertz fixed wireless access. In the past two months, members of Peraso's team have participated in three wireless industry trade shows, all of which feature recognition of the growing momentum around 60 gigahertz and millimeter-wave solutions for fixed wireless access applications. In September, we had multiple business development and product executives attend Mobile World Congress in Las Vegas, where they showcased Peraso's latest and mmWave solutions for fixed wireless access and customer premise equipment. Also in September, Peraso's Senior Director of Product Marketing, Dr. Nadine Hatto, was invited to participate on a Q&A panel at Wi-Fi World Congress in North America. In addition to be joined on the panel by representatives from Airline and Cambium Networks, Dr. Hatto's participation served as a great opportunity to elevate awareness of the multi-gigabit performance of Peraso's mmWave solutions for 60 gigahertz fixed wireless access applications. More recently, our team hosted meetings with current and prospective customers and partners at WISPAPALOOZA Show in Las Vegas. Peraso also participated in a vendor spotlight session, which provided a unique opportunity to highlight the growing number of 60 gigahertz unlicensed wireless deployments, utilizing our solutions to enable multi-gigabit connectivity. Separately, also notable at WISPAPALOOZA was Ubiquiti significant presence given they are the leading fixed wireless access equipment vendor -- using a multi-gigabit connectivity. Separately, also notable that WISPAPALOOZA was Ubiquiti's significant presence given they are the leading fixed wireless access equipment vendor to the WISP market. In fact, Ubiquiti showcased seven different 60 gigahertz products at its booth, including its newest WavePro point-to-point 60 gigahertz radio that enables speeds of up to 3.2 gigabits per second. This increase in commercial availability of products that support multi-gigabit connectivity makes 60 gigahertz a reliable and lower cost competitive alternative to fiber. Turning to Slide 8. I want to briefly discuss another new emerging market opportunity that we're seeing and how mmWave solves the challenges faced by other technologies in dense urban environments. Take, for example, the densely concentrated centers is found in emerging markets such as India, Southeast Asia and parts of Africa. There is rapidly growing demand for internet connectivity in these areas. However, the population density presents a unique set of technology challenges. First, the cost associated with deploying and then also physically securing infrastructure make fiber uneconomical and unrealistic in many of these markets. Additionally, the sheer number and density of connections contribute to significant wireless congestion interference, exceeding the capable tolerances that are suitable for Wi-Fi. Lastly, these emerging geographies frequently have less reliable electricity service, making it important for deployed equipment to sustain operation on low power sources such as solar and battery power. Inherently, mmWave provides a solution to each of these challenges. Its beam-forming capability minimizes and overcomes the density of wireless connection points, enabling more reliable and high bandwidth service. mmWave solutions can also be implemented with much lower upfront cost, making deployments more economical for service providers. Additionally, the higher power efficiency of the mmWave solutions enables longer operation on temporary power sources resulting in reduced service interruptions. During the third quarter, we formally introduced the Peraso PRM2144X as the latest addition to our prospective series of mmWave modules. Utilizing our X720 60-gigahertz chipset, the new PRM2144X incorporates 128 element phased array antenna that provides high gain and narrow beam width, making it an ideal solution for delivering reliable connectivity in dense urban environments. Looking at Slide 9, I wanted to share this updated overview of the WISPs that are currently utilizing Peraso-enabled hardware today as part of the 60 gigahertz deployments. To date, we've identified over 25 WISPs spanning 14 states in the US and at least four WISPs in Canada. Additionally, we've recently confirmed more than one planned 60 gigahertz deployment utilizing our technology outside of North America. We view this growing list of WISP deployments as further validation of both the growing market traction for 60 gigahertz technology as well as Peraso's leading position in 60 gigahertz mmWave solutions for fixed wireless access. As demonstrated on the right side of the slide, the overall trend and outlook continue to be favorable for fixed wireless access market. In addition to third-party research forecasting sustained growth of WISP subscribers over the next several years, the US Federal Communications Commission, or FCC, recently published a notice of inquiry advocating for an increase to the standard minimum benchmark for fixed broadband. As a first step, the FCC has proposed an increase from an existing 25 3 megabits per second benchmark to 120 megabits per second. Moreover, they are also soliciting comment on a potential longer-term goal of 1 gigabit per second, 500 megabits per second in the future. We believe this and other going support for gigabit connectivity will serve as strong drivers for expanded adoption of mmWave fixed wireless access. As a reminder, Peraso's existing mmWave solutions already fully support and enable multi-gigabit connectivity. In closing, we continue to believe there is a substantial market opportunity for Peraso's mmWave technology, spanning both unlicensed 60 gigahertz and licensed 5G fixed wireless access. Although, we expect the recent headwinds in inventory correction in this area of business to extend into 2024, we remain encouraged by the continued expansion of our sales engagement pipeline. We are committed to advancing these engagements for mmWave solutions in support of building a more diversified customer base and achieving sustained future revenue growth. With that, I'll turn the call back to Jim to review third quarter financials and speak to the outlook.

Thank you, Ron. Turning to the results. Total revenue in the third quarter increased to $4.5 million, a significant increase from the $2.4 million in the prior quarter and $3.3 million during the same quarter a year ago. Product revenue from the sale of our memory integrated circuits and millimeter-wave integrated antenna solutions in the third quarter was $4.3 million compared with $2.2 million in the prior quarter and $3.1 million in the third quarter of 2022. The sequential and year-over-year increase in third quarter product revenue was driven by increased shipments of memory IC products, primarily reflecting the initial fulfillment of purchase orders for last-time buys. Royalty and other revenue for the third quarter of 2023 comprised $0.2 million of royalties from licensees of our memory technology and other revenues from performance of non-recurring engineering services for millimeter-wave customers. GAAP gross margin increased to 45.4% in the third quarter compared with 25.3% in the prior quarter and 39.3% in the year ago quarter. On non-GAAP basis, excluding amortization of acquired intangible assets, gross margin for the third quarter was 58% compared with 45.9% in the prior quarter and 50.2% in the third quarter of 2022. The higher gross margin for the third quarter was attributable to revenue mix, reflecting increased revenue contribution from memory IC products. GAAP operating expenses for the third quarter were $5.6 million, consistent with the $5.6 million in the prior quarter and compared with $5.3 million in the third quarter of 2022, which reflected a $2.6 million gain from the license and asset sale transaction. Total operating expenses for the third quarter of 2023 on a non-GAAP basis, which excludes stock-based compensation and amortization of reported intangible assets were $4 million compared with $4.1 million in the prior quarter and $3.7 million in the same quarter a year ago, which reflected a $2.6 million gain from the license and asset sale transaction. The decreases in operating expenses reflect the incremental benefits from the cost reduction initiatives and other previous actions we began implementing during the second half of 2022 to streamline operations, including the license and asset sale transaction for certain memory technology closed in the third quarter of 2022. In addition to these previous initiatives, earlier this week, we took further action to reduce operating expenses and implemented an employee layoff and terminated certain consulting positions to further reduce the company's operating expense and cash burn as the company continues to prioritize business activities and projects that I believe will have a higher return on investment. The reductions impacted 19 full-time equivalent positions or approximately 28% of the company's workforce. As part of the reductions, the company implemented a temporary layoff that impacted its Canadian subsidiary and the company will determine in 2024 whether the company's financial and business conditions will permit the recall of the impacted employees. The initial cost reduction benefits in these most recent actions will be realized beginning in the fourth quarter, with total annualized savings of up to approximately $2.2 million if the company does not recall the impacted employees. GAAP net loss for the third quarter of 2023 was $0.6 million or a loss of $0.02 per share compared with a net loss of $4.1 million or $0.17 per share in the prior quarter and a net loss of $4 million or $0.20 per share in the same quarter a year ago. On a non-GAAP basis, net loss for the third quarter of 2023 was $1.1 million or a loss of $0.04 per share, which excludes stock-based compensation, amortization of acquired intangibles and change in fair value of warrant liability. This compared with a non-GAAP net loss of $3 million or $0.12 per share in the prior quarter and a net loss of $2 million or a loss per share of $0.10 in the same quarter a year ago. The weighted average number of basic and diluted shares outstanding for purposes of calculating both GAAP and non-GAAP EPS for the third quarter of 2023 is approximately 28.6 million shares, which excludes 1.8 million shares of our common stock and exchangeable shares that are currently escrowed. Adjusted EBITDA, which we've defined as GAAP net income or loss as reported, excluding stock-based compensation, amortization of acquired intangibles, change in fair value of warrant liability, interest expense, depreciation and amortization and the provision for income taxes was negative $0.9 million in the third quarter compared with negative $2.8 million in the prior quarter and negative $1.8 million in the prior year period. From a balance sheet perspective, as of September 30, 2023, the company had cash and cash equivalents of approximately $0.7 million. Subsequent to September 30, 2023, we collected approximately $3.7 million of memory end-of-life proceeds, including $2.2 million included in accounts receivable at September 30, $0.4 million related to October shipments and approximately $1.1 million of customer deposits to fund inventory purchases. As discussed in my earlier remarks, we recently implemented steps to meaningfully reduce the company's near-term operating expenses and cash burn. However, due to our expectation of continued operating losses and cash burn, the company will need to raise additional capital through equity or debt arrangements as described in our quarterly report on Form 10-Q for the quarterly period ended September 30, 2023. With respect to our business outlook, our near-term visibility continues to be impacted by multiple factors that make it difficult to confidently forecast the full range of potential outcomes specific to the fourth quarter. These factors primarily include the general uncertainty associated with the broader macro environment and end market demand as well as the yet-to-be-determined duration of the ongoing inventory correction. As such, today, we are not in a position to provide specific guidance for the current quarter. To the extent that one or more of these factors become more certain, we will consider providing future potential updates relating to our near-term expectations. This concludes our prepared remarks and I'll now turn the call back over to the operator to assist us with the Q&A session. Operator?

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question comes from Kevin Liu with K. Liu & Company. Please proceed.

Hi. Good afternoon, guys, and congrats on the improved results this quarter. First question I had was just on the memory IC end-of-life. In terms of the backlog that you see currently and the purchase orders you anticipate, do you expect the shipments against those to be fairly consistent as you make your way through this year and next year? Or are there going to be periods where those shipments are more heavily concentrated?

Yeah. I would say at the current -- at September 30, we had $8 million of backlog, just over $8 million of backlog still sitting there. We expect that to ship through the third quarter of 2024. Obviously, we are projecting additional orders to be received there in late December, ideally prior to the holidays. Right now we currently see that shipping into kind of first half of 2025. It's really going to pick up. I would say there is definitely an increase in the -- starting in the second quarter of '24. Part of it was, obviously, for the first quarter of '24, we were awaiting orders so we didn't build the inventory. We basically shipped everything we could in this third quarter and we're in the process of building additional products, but we really don't ramp until the second quarter of '24. And that continues kind of second and -- right now second and third quarters to '24 are probably the heaviest and that starts to reduce, but not on an extreme slope.

Understood. That's helpful. And just on the inventory position, how much of the build sequentially was just tied to the memory business versus millimeter-wave? And then more generally, as you look forward and you start to build up the additional orders, should we expect that inventory to continue to build through kind of the middle of next year? Or do you think you're at a fairly healthy level now where you can kind of ship based on the orders coming in?

Right now we -- the majority of the inventory at September 30 was on millimeter-wave products. We did have an increase during the quarter ended September 30 as we had commitments for wafers, which were shipped to us by our foundry until we were able to cancel some of those orders or at least delay them starting in the third quarter. So the inventory increase was primarily there. On the memory side, we've -- based as I said, basically, we shipped what we could and it was obviously a work-in-process or for our Bandwidth Engine 3 product where we are awaiting orders, we expect to come from two customers there. We've had that inventory and frankly, don't need to build any more unless the orders really exceed our expectations. I think we'll see some increases in memory inventory in the fourth quarter as we're -- been placing regular wafer orders and in some cases, maybe some substrates, too. And hopefully, that will be offset by reductions in millimeter-wave. But we see our millimeter-wave customers beginning to get back on track, particularly in early '24.

Got it. And just turning to millimeter-wave for a second. You guys talked about some interesting kind of new markets for the aerospace and defense as well as the dense urban environment. Maybe give us a sense for how significant the initial customers you're talking to could be in terms of revenue next year? And then in general, how you're thinking about the overall market sizing relative to kind of the fixed wireless access market?

Sure, Kevin. Thanks for the question. Like -- on the -- so the dense urban environment is a new -- it's obviously a commercial environment, not a military environment. And it's actually -- the customer forecast equal anything we've seen so far in terms of the volume. So -- but we need to -- the proof is in the pudding, obviously. But the nice thing about the market is the TAM, like the opportunity is significant, right? I mean there's 1 billion people that live in dense urban environments around the world. And it's kind of interesting because over the last few months, we realized, I mean, millimeter-wave, the challenge and maybe we went through it quickly on the call, but the real advantage we bring here is there's a couple of really important advantages, just the ability to service dense environments, I mean, very, very dense environments and we're talking customers who are 10, 15 feet apart. But the other one that's actually quite interesting is our ability to transmit and this is in our deck, but I mean to transmit at full rates under 10 watts. So basically, these -- many of these places have run on battery -- like run -- have very poor electricity infrastructure. So they run out battery power. So it was vital that we were able to run out that batteries for probably half the time. So our ability to run at full performance with reduced battery, with reduced power consumption was critical. So we actually -- I think for '24, it's going to be a ramp year. But we should see it. We're hoping later this year into early Q1, but obviously, we'd like to explore other opportunities globally for this market. So it's something that we do really well. We are exposed to this opportunity over the last few months and it's something we're going to expand on.

That's great to hear.

Second part to your question, right?

The second part of it was just also on the AMD side of the equation and just kind of the opportunity there.

Yeah, that's more exploratory, let's say, I guess it's a proof-of-concept, like I think that, again, on the military side of things, I mean, whether the value proposition is one of the keys there is the stealth ability of millimeter-wave on the battlefield. We're still exploring that in terms of what the volumes look like. Dense urban is really more of an opportunity -- like a shorter-term higher-volume opportunity that we can get our arms around right now.

Sounds good. Well, good luck against those initiatives then. I'll turn it over. Thanks.

Thanks, Kevin.

Thanks, Kevin.

The next question comes from David Williams with Benchmark. David, please proceed.

Hey, good afternoon, gentlemen, and thanks for the -- letting me ask a question here. Just kind of wanted to touch on the funnel that you have in your presentation. And can you just kind of walk through that and help us understand, I mean you're getting some really nice growth here in terms of the funnel and things are moving through. Just hoping for maybe a little more color on how you're seeing the funnel, how things are developing. If there's anything that's moving there that's either in line or maybe out of line with what your expectations are? Thanks.

Well, for sure, Dave, the way the markets are shaping up is -- and again, I think the theme generally is congestion of Wi-Fi, right? And so basically, obviously, the market that we've talked about for several quarters is, let's call it, North American fixed wireless access, right? And that's more suburban rural and that's the WISP that we've been talking about. And so that constitutes a certain segment of the pipeline. We are now -- we are starting to see some consumer electronics. And the value -- against kind of the same value proposition is that high data rates, but again, in a congestive environment. And I think we obviously realized now that millimeter-wave does a great job in a congested environment. And so we're seeing -- and so some actually quite nice volume opportunities in consumer electronics. So that's constituting a certain portion of our pipeline. Other opportunities are in transportation. We're seeing some opportunities in transportation, mostly in Asia, I would say, specifically. So that's part of that pipeline. And then, of course, the aerospace and military. So I would say those are the kind of the main drivers for the pipeline right now if you will. We've also got -- I mean, this is public information. We also have a very good relationship with Richardson RFPD and that relationship is really paying off and really uncovering some terrific opportunities for us. So that helps with our pipeline as well, both in North America as well as around the world. So that's been a great relationship as well for our sales pipeline.

Great. Fantastic. Thanks. And then if you think about your millimeter-wave inventory that's either in-house or maybe sitting at your customers, what is it going to take do you think to get through this? How much is sitting out there? And you said that you think maybe first part of the year, is there anything that gives you hope maybe that we could see something kind of kick in at the end of this year? And I guess, just trying to understand the inventory impact and how long it's going to take to really digest that?

We were at Las Vegas WISPAPALOOZA three weeks ago. And I think that -- so the good news is that guys like Ubiquiti, who are the market leaders in fixed wireless, had seven or eight products on display. And so that was -- and I mean, the feedback we did get from WISPs was that those 60 gigahertz products are -- they call them bulletproof, right? I mean they worked really, really well and probably exceeded expectations. The problem is there's more of an education process that's going on in that market. And so Ubiquiti's done a fantastic job of starting to promote it. In fact, we've done some kind of videos with their distributors now. So I would say really more into Q1, Q2 is when we're going to start to see the new orders come online, right? Because they just -- it's taken a little longer for them to reach their volumes than they were hoping. And obviously, with the whole inventory correction where people were already ahead of the curve, we've got to bleed through that. So I'd say hard to imagine over the next eight weeks we're going to see a lot of orders, but hopefully into later Q1, early Q2, we'll start to see that shift. Does that make sense to you?

It does. Very helpful. And then maybe, Jim, just thinking about the balance sheet. Obviously, you're a little low on cash there, but you've got some nice buildup in inventory and the working capital. So it would be good to do that, get freed up. But I guess in the near-term, what do you think are the -- I guess how are you feeling about your liquidity here? And are there any puts and takes, things that we should be thinking about as we kind of parse through it?

Yeah, sure. No. I mean it's an important question here. Yeah, cash flow is low at the end of the quarter. But fortunately, as I highlighted in my script, about $3.7 million came in from EOL alone between the end of the quarter and I think up to the last week. So that's definitely given us a lot more breathing room and visibility and particularly the prepayment to fund wafer purchases, which we have been making, which I think speaks to our confidence in our business. We didn't -- we had held off on some back in the summer, but turn the faucet back on there. Right now it's a function of building inventory to ship to memory orders, both -- we kind of look at them internally as EOL. And then there's still regular production running as well. So like I said, we shipped what we could in the third quarter to fulfill orders. Our customers have been very supportive of taking inventory and in addition, accelerating payment terms to generally pay within 10 to 14 days, which is huge to improve our working capital. We are expecting to bring the burn down there and obviously talked about some of the painful cost reduction actions we took specifically last week, which was difficult. But unfortunately, we had to reduce OpEx and burn, but we remain optimistic about prospects and are still chasing I think, a quarter or 2 had talked about opportunities for funded development, et cetera. The current macroeconomic environment uncertainties have really slowed those down. But we are still looking to chase one of those down and have a need to -- business need to bring folks back to support those. But looking out here, I think I will say in our 10-Q we're funded into the first quarter. We're obviously taking actions to address that. But the EOL, having the visibility of those orders here in the next kind of six to 10 weeks or six to eight weeks will be critical as we assess it. We are always alert to financing opportunities as well as any company in our position should be.

Okay, great. Thanks so much, gentlemen. I certainly appreciate the time.

Thank you, Dave.

Okay. We have reached the end of the question-and-answer session. There are no further questions in queue. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.