Peraso Inc. (PRSO) Q4 2023 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Peraso, Inc.'s Fourth 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, March 18, 2024. I would now like to turn the call over to the host for today's program, Mr. Jim Sullivan. Please go ahead.

Good afternoon, and thank you for joining today's conference call to discuss Peraso's fourth quarter and full year 2023 financial results. I'm Jim Sullivan, CFO of Peraso, and joining me today is Ron Glibbery, our CEO. Today after the market close, we issued a press release and related Form 8-K, which was filed with the Securities and Exchange Commission. 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 may be accessed through the webcast link on the Investor Relations website. As a reminder, comments made during today's conference call may include forward-looking statements. All statements other than the 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 update or 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, goodwill impairment charges, 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. All share and per share amounts disclosed during this call reflect the retroactive impact of 1-for-40 Reverse Split of our common stock as applicable that became effective aftermarket close on January 2, 2024. For those of you 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 to everyone on the phone and webcast. We appreciate you joining us. I want to start with a few brief comments on the fourth quarter and our current outlook. Then, I'll get into more detail and the key management and developments and progress that we've been making since our last conference call. Consistent with our prior expectations, multiple headwinds contributed to lower revenue for the quarter. In our mmWave business, our customer demand reflected the continued impact of the industry-wide inventory correction. Separately, while total order backlog for our memory IC products increased sequentially. Revenue was lower in the fourth quarter due to the timing of production and shipment schedules. Since the beginning of the new year, both of these headwinds have begun to moderate. We anticipate revenue growth to resume in the current quarter ending March 31, and also expect double-digit growth for the full year. These growth expectations are based upon two key drivers. First is the overall $12 million of total order backlog for our memory IC products; and second, our new orders we've recently begun receiving for mmWave products targeting fixed wireless access applications, including from our largest customer. Based on this initial return of orders and customer demand, we believe the prolonged inventory correction in fixed wireless is clearing. Turning to Slide 4. I want to provide a brief update on the end of life of our current memory IC products. Since notifying our memory customers of the planned end-of-life in May of 2023, we've received prices orders for the last time buys totaling $14 million. We've commenced initial shipments against these orders in the third quarter of 2023, which were largely fulfilled from existing inventory. Shipments against backlog orders slowed in the fourth quarter, primarily due to the manufacturing lead times required by foundry partners to fabricate additional wafers in these memory products. In total, for the second half of 2023, we completed end-of-life shipments of approximately $3.7 million. As of year-end, we had remaining end-of-life order backlog of approximately $10.3 million. We also had an additional $1.8 million of backlog for regular production orders. Based on current manufacturing schedules at our foundry partner, we expect shipments of our memory IC products to ramp again in the fourth quarter -- first quarter, and we expect to fulfill the majority of the combined remaining backlog over the next 12 months. As previously discussed on our last conference call, we anticipate these collective end-of-life orders and shipments from memory IC products to contribute significant revenue and cash flow throughout 2024. Flipping to Slide 5 and an update on our mmWave business. One of our key strategic initiatives continues to be building a larger and more diversified customer base for Peraso's mmWave technology. Having historically served as a relatively small number of fixed wireless customers in North America, in 2023, we set out to expand our market reach in terms of customers, geographies and end market applications. Our team's ongoing engagement efforts are continuing to drive tangible results contributing to a steady funnel of new opportunities and expanded number of active engagements. Over roughly the past six months or since October, we've increased active engagements to 18 -- from 18 to 25. We continue to put an emphasis on prioritizing the highest quality engagements in terms of both projected economic and anticipated time to market. Today, we believe we have more existing funnel opportunities than that are positioned to transition to active hardware evaluation engagements as compared with our last quarterly update. Consistent with the past, we continue to view our engagement pipeline as a leading indicator to measure our progress towards expanded reach and a more diversified business. With that in mind, one additional highlight related to our current active engagements compared with our last quarterly update, they now comprise a larger number of prospective customers and targeted applications outside of North America. Turning to Slide 6. We believe the value proposition of our 60 gigahertz mmWave solutions for fixed wireless access is continuing to resonate across an expanding number of equipment manufacturers as well as directly with WISPs or wireless internet service providers. The left side of the slide reflects only a sample of the WISP that we've identified with 60 gigahertz fixed wireless deployments enabled by Peraso's hardware. The total number of WISP deployments utilizing our technology is difficult to track because we don't have the visibility with regards to the ultimate end customers. Another way to look at the market traction we're getting with our 60 gigahertz mmWave solutions. On the right side of the slide is a list of equipment manufacturing WISP with commercial fixed wireless access products powered by Peraso hardware. In addition to each of them having multiple products using our technology, I want to point out that collectively, they are targeting a mix of rural and urban market applications. Keeping in mind that early tracks for mmWave solutions were primarily in rural fixed wireless applications in North America, this really highlights our accelerating expansion into urban market applications as well. Additionally, we are increasingly seeing many of the urban deployments targeting geographies outside of North America. Now looking at Slide 7. It's important to understand part of what is driving the expanded market opportunity in urban applications, although, there are shared challenges and needs between rural and urban fixed wireless applications, mmWave offers a unique value proposition for solving a series of challenges encountered in dense urban environments. Demand for Internet connectivity is ubiquitous. However, many technologies simply weren't designed to work well in densely concentrated population centers, especially those found in the emerging markets such as India, South America and Africa. In addition to significant upfront infrastructure and deployment costs, Wi-Fi technology, for example, struggles with the wireless congestion and interference resulted from high numbers of – and density connected devices. Another critical consideration in many dense urban environments and -- is electricity, which can often be limited in less reliable and emerging markets. In order to avoid service interruptions, infrastructure equipment must be able to remain operational for extended periods on alternative sources such as solar and battery power. Leveraging the inherent advantages of mmWave, Peraso technology provides a proven solution to WISPs, targeting deployments in these dense urban environments. Of the core of our solutions, the newest addition to our prospective series mmWave modules, the PRM2144X incorporates a 128 element phased array antenna that provides high gain and narrow beam width, which coupled with excellent power efficiency, make it ideal for achieving reliable connectivity investment environments. Now I'll turn to Slide 8. Building on the positive initial feedback from WISP following our introduction of the PRM2144X. In January, we announced the commercial availability of Peraso’s DUNE platform for fixed wireless access. Designed specifically for dense urban environments, this integrated hardware and software platform provides WISP with a cost-effective turnkey solution. In addition to multi-gigabit connectivity comprising a full suite of capabilities, including dynamic traffic management and adaptive loan balancing. Peraso’s DUNE platform employs network isolation to enable co-existing overlapping networks. This feature is absolutely critical for successful deployments in dense urban environments. The introduction of this platform was a result of first-hand dialogue with numerous operators to understand the specific deployment challenges they face in these environments. We recently announced our first commercial win utilizing the platform which is important third-party validation of the solution, and we have commenced proof-of-concept engagements with multiple additional service providers. Shifting to Slide 9. I want to briefly touch on aerospace and defense. Although, still a relatively new end market for Peraso, we continue to see expanded opportunities for our mmWave technology in various military defense applications. In addition to mmWave's ability to support multi-gigabit connectivity with low latency as well as utilize unlicensed unused frequency bands, our advanced integrated antenna technology allows for communication using unique -- uniquely narrow and focus beams. Unlike other traditional wireless technology, this directional beam forming capability makes it more difficult to intercept or even detect in sensitive data communications. On our previous conference call, I mentioned having secured our first commercial engagement in this area in the form of a customer-funded proof-of-concept. This initial engagement is progressing well and continues to be in the customer evaluation phase. Over the last several months, we have sourced additional new opportunities for our mmWave solutions and defense applications. We have conservative expectations with respect to any material and near-term contribution from these opportunities. However, they serve as evidence that defense applications represent an incremental future market opportunity. In closing, with our expanding engagement pipeline for mmWave solutions across an increasingly diverse customer base and market applications, as well as initial indications of renewed customer demand for fixed wireless access, we're very optimistic about the company's outlook for 2024. As we continue to execute on our strategic efforts to grow the customer base from our mmWave products, we believe there is a large opportunity to realize growth over the coming quarters and beyond. With that, I'll turn the call back to Jim to review the fourth quarter and full year financials as well as our revenue expectation for the first quarter of 2024.

Thank you, Ron. Turning now to the fourth quarter and full year results. Total net revenue in the fourth quarter of 2023 was $1.8 million compared with $4.5 million in the prior quarter and $3.9 million during the same quarter a year ago. Full year 2023 total net revenue was $13.7 million compared with $14.9 million in the prior year. Product revenue from the sale of our memory integrated circuits and millimeter wave antenna solutions in the fourth quarter was $1.5 million compared with $4.3 million in the prior quarter, and $3.8 million in the fourth quarter of 2022. For the full year 2023, product revenue was $12.9 million compared with $14.2 million in the prior year. Royalty and other revenue for the fourth quarter of 2023 was $0.4 million compared with $0.2 million in the prior quarter and $0.1 million in the same quarter a year ago. For the full year 2023, royalty and other revenue was $0.9 million compared with $0.7 million in 2022. GAAP gross margin was a negative -- was negative 147.3% in the fourth quarter, compared with positive 45.4% in the prior quarter and 44.2% in the year ago quarter. For the full year 2023, GAAP gross margin was 13.6% compared with 40.1% in the prior year. On a non-GAAP basis, excluding amortization of acquired intangible assets, gross margin for the fourth quarter was negative 116.6% compared with positive 58% in the prior quarter and positive 53.4% in the fourth quarter of 2022. For the full year 2023, non-GAAP gross margin was 28% compared with 49.7% in the prior year. The negative gross margin for the fourth quarter of 2023, primarily reflected inventory write-downs for the company's millimeter wave and memory IC products. The inventory write-downs were recorded in accordance with the company's accounting policies. The write-downs for our millimeter wave inventory reflected the application of significant management judgment and estimate in consideration of the industry-wide inventory correction, current order backlog and short-term sales forecast. Management continues to actively pursue orders for the inventory from both existing and new customers, and based on initial order flow to date, new customer engagements and mid to longer-term sales forecast, the inventory remains salable. The write-down of our memory inventory represented existing inventory for our Bandwidth Engine 3 (ph) product for which expected EOL orders have not yet been received to date. GAAP operating expense for the fourth quarter of 2023 were $5.5 million compared with $5.6 million in the prior quarter and $16.2 million in the fourth quarter of 2022, which included a $9.9 million goodwill impairment charge. For the full year 2023, GAAP operating expenses were $22.5 million compared with $38.3 million in the prior year. Non-GAAP operating expenses, which excludes stock-based compensation, amortization of reported intangible assets and the goodwill impairment charge incurred in 2022 were $4 million consistent with the prior quarter and compared with $4.8 million in the same quarter a year ago. Non-GAAP operating expenses for the full year 2023 were $16.4 million compared with $22 million in the prior year. Operating expenses on both the GAAP and non-GAAP basis were reduced by non-recurring gains on the 2022 asset license sale, of which $0.4 million and $2.6 million were recognized in 2023 and 2022, respectively. The year-over-year reduction in non-GAAP operating expenses for both fourth quarter and full year 2023 was attributable to a combination of cost reduction activities initiated in the second half of 2022, as well as incremental cost containment actions including layoffs implemented by the company during the fourth quarter of 2023. GAAP net loss for the fourth quarter of 2023 was $8.9 million or loss of $12.48 per share compared with a net loss of $0.6 million or $0.87 per share in the prior quarter and a net loss of $14.6 million or a loss of $28.45 per share in the same quarter a year ago. For the full year 2023, GAAP net loss was $16.8 million or a loss of $26 per share compared with a net loss of $32.4 million or $64.41 per share in the prior year. On a non-GAAP basis, net loss for the fourth quarter of 2023 was $6.1 million or a loss of $8.52 per share, which excludes stock-based compensation, amortization of acquired intangibles, a goodwill impairment charge incurred in 2022 and the change in fair value of warrant liabilities. This compared with a non-GAAP net loss of $1.1 million or $1.56 per [indiscernible] and a net loss of $2.8 million or a loss per share of $5.41 per share in the same quarter a year ago. Full year 2023 non-GAAP net loss was $12.2 million or a loss of $18.90 per share compared with a net loss of $14.7 million or $29.17 per share in the prior year. The weighted average number of basic and diluted shares outstanding for purposes of calculating both GAAP and non-GAAP EPS for the fourth quarter of 2023 was approximately 716,000 shares which excludes approximately 45,000 shares of our common stock and exchangeable shares that are currently escrowed. Adjusted EBITDA, which we define as GAAP net income or losses reported, excluding stock-based compensation, amortization of acquired intangibles, impairment of goodwill and change in fair value of warrant liabilities, interest expense, depreciation and amortization and the provision for income taxes was negative $5.9 million in the fourth quarter compared with negative $0.9 million in the prior quarter and negative $2.5 million in the prior year period. For the full year 2023, adjusted EBITDA was negative $11.2 million compared with negative $13.7 million in the prior year. From a balance sheet perspective, as of December 31, 2023, the company had cash and cash equivalents of approximately $1.6 million. We generated cash flow of approximately $0.9 million during the fourth quarter of 2023, which was primarily attributable to proceeds from the end-of-life of our memory IC products. Subsequent to year-end, in February 2024, we completed an underwritten public offering of common stock and warrants, generating net proceeds to the company of approximately $3.4 million. Turning to our outlook. As Ron mentioned, since year-end, we have begun to see indications of improving customer demand and order patterns while also having a solid backlog of non-cancelable purchase orders for our memory IC products. The company currently expects total net revenue for the first quarter of 2024 to be in the range of $2.6 million to $2.9 million. This concludes our prepared remarks, and I'll now turn the call back over to the operator to assist with the Q&A session. Operator?

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from David Williams with Benchmark. Please proceed.

Hey. Good afternoon, gentlemen. Thanks for letting me ask the question and congrats on the -- at least starting to see the fruits of maybe a little better backdrop here. First, you mentioned the backlog from your larger customer and that inventory, you're starting to see some improving order flow there. I know that's been an area that's had some pretty steep inventory issues in the past. It sounds like that's being cleared up. I guess my question is, do you get a sense that this is more demand driven? Are we seeing better in demand or is this just kind of work through of the existing inventory and just returning back to a more normal level you think?

Do you want me to take that, Jim?

Yeah. Why don't you speak to the customer demand, please?

Yeah. So Dave, to answer your question, I think it's a combination of both. I mean, for us, what -- the issue was, if you really recall back even in 2022, when the lead times were like pushing 12 plus months, customers ordered -- over ordered, I would say and so that was part of the inventory buildup. So a part of this is bleeding that off certainly, but we feel certainly the feedback from our lead customer and other customers is that, there is strong demand for fixed wireless access, as we all know, right? So it's really a combination of both. I mean we're kind of bleeding off that kind of 2022, early 2023 buildup. But at the same time, we are seeing demand from fixed wireless customers. So it's really a combination of both would be my interpretation.

Okay. James do you have anything you want to add there, sorry.

No. I mean, the key point was obviously at the end of the year, it's our annual audit. And just given the corrections, although, we believe we're seeing it clearing and I think other companies out there are reporting certainly by the June 30, kind of time frame, middle of the year, expecting to see that clear up. We just felt it was prudent based on where we sat to look at the valuation of the inventory and then applying our policies took some write-downs. We didn't jump the inventory. We're continuing to push to sell it. But just given the lack of visibility again, the follower accounting policies and apply conservatism took some write-downs there. [Technical Difficulty] Actually, when we look at the projections, we're seeing certainly a bigger pickup in the second half than the first. We're still in the millimeter wave, still in the early stages with some of the new customers. We've made the first DUNE shipments, expecting orders for additional working with additional providers and initial proof-of-concepts, that's probably going to take a little bit longer. We are going to see the memory end-of-life shipments really starts to ramp in Q2. Q2, Q3 and then probably come down in Q4. So we're looking obviously for heavy memory Q2, Q3, a little bit lesser in Q4, but really seeing millimeter wave kind of turn on starting in that Q3 time frame. Really beginning to ramp and beginning to offset once memory starts coming down. But it's obviously becoming at least on the memory side, a little bit more linear for the next two quarters.

Okay. Fantastic. And how long do you think that the typical design cycle is here? Just kind of based on your commentary now, it sound like you have some turnkey products that should ramp fairly quickly. I know it depends on that customer. But maybe just speak to any kind of indication you received from customers in terms of their design cadence or their rollout cadence.

Dave, I'll speak to that. Dave, so we have like a real example. I mean the DUNE order that we announced around Christmas actually was the customer that we engaged with in June of 2023, so it was really about six months. And I think you hit the nail on the head. The reason that it moved quite quickly was because -- we've actually got -- I mean if you look at one of the slides that I presented, there's actually, we have four manufacturers now. And so basically, there's just much more maturity in our ability to manufacture these products. So when we do find either a WISP or an OEM that wants to get to market quickly, we've got a very experienced manufacturers who can bring products to market very quickly. So I would say six months was very fast. But I think realistically, six, nine, 12 months is well within our wheelhouse in terms of -- from customer engagement to customer deployment. So that's a real improvement. I mean, if we go back to our first customer four years ago, it took two years, which was crazy, right? So that's one of the biggest changes, I would say, in our business coming in 2024. It's really the time to market for our customers is much more accelerated because of the manufacturing capability that we have behind us now.

Okay. Thanks for that. And one more for me, if you don't mind. But just kind of wondering do you feel like we're reaching that tipping point for fixed wireless access? I know we've been looking for this for some time, but it feels like we're really starting to gain some momentum here. So one, do you think we're starting to see that tipping point now, and then maybe is there a way to think about maybe your global TAM, just given how much more interest are receiving outside North America? Thank you.

Yeah. That's a good question, Dave. So last week or it was two weeks ago now in Oklahoma City, there was a trade super WISPs. And the good news is that we had a similar trade show in Las Vegas in September. And at the time, the feedback we heard from customers was kind of lukewarm on 60 gig. But this time, the feedback we got was much more optimistic. And I think frankly speaking, with -- let's say fixed wireless in the U.S. 5G space is kind of exploded over the last couple of years. I think the issue we had was a little bit where people were getting used to the millimeter wave side of things and 60 gigahertz. But now they're getting used to it, they're senior works. If you go to the chat sites, you can see for yourself that the people are really now believing that this technology works very well. And obviously, that's more of a -- historically been a rural cell for us, but the real -- we think the real growth over the next few years is, again, in more dense urban environments where traditional Wi-Fi solutions just are two -- cannot handle the congestion. So to your point, I -- based on what we're hearing from -- when we go to trade shows is that people are saying they're getting used to 60 giga and they're seeing that growth. So we're optimistic in terms of whether we hit that tipping point or not.

Great. Thanks again for the help.

Okay. The next question comes from Kevin Liu with K. Liu & Company. Please proceed.

Hey. Good afternoon, guys. First question here. Just wanted to understand in terms of your Q1 guidance. Any help you can give us in terms of the mix of memory IC versus millimeter wave sales anticipated in that guide?

Yeah. It will be predominantly memory, memory IC with the order backlog we have there. Based on where we sit quarter kind of quarter-to-date, you see millimeter wave being kind of flat with where we were to Q4. So still kind of the early ramping. We are seeing the orders turn back on to larger customers did get the initial June order but still see more coming in Q2 and then growing from there.

Understood. And then just on the memory IC side, are you guys still expecting to book additional end-of-life orders or production orders or is the fact remaining backlog you have on fairly set and this is kind of what we should anticipate from here on out.

Yeah. Certainly, we're guiding based on the existing backlog, kind of the overall $12 million number that we have. Now that said, the foundry is still processing wafers, I think, through September. So when we look at the two products, the vast majority of the orders of the Bandwidth Engine 2, we believe we're done there, but there is a potential for depending on the customers' cutover -- eventual cutover schedule to new product, how much inventory they're willing to stock to manage that risk, etc., that additional orders could come back in. We're certainly not guiding towards that. On the Bandwidth Engine 3, we have one lead customer there who was still working through a design. We kept the window open for that customer to order. We actually have the Bandwidth Engine 3 inventory in stock, which was right that was part of the write-down since we didn't have the orders, and we can't say for certain additional orders coming, but there is the potential there which would be great because we could fulfill that from existing inventory. But for now we're guiding with what we have and any of that will be upside, which we'll be happy to report if it comes to fruition.

Yeah. Makes a lot of sense. And then just turning back to the millimeter wave side of the business for a bit. When you look at the order flow is starting to come back from your larger existing customers, any sense now whether it gets back to kind of historical levels in relatively forward order or does it -- do you see kind of a more gradual ramp as you work through some of those inventory corrections?

So I can jump on that, Jim. So Kevin, I think that there's somewhere in between, like I said, like in 2022 and early 2023, they were probably above normal because people were stocking up. So as that bleeds off, I think what we're going to end up is somewhere like obviously, better than 2023, but maybe not as strong as 2022, but somewhere in between is what we're kind of seeing from the existing customers. I think the thing to keep in mind that's a really, really important part of our presentation is just customer diversification. And with Mark Lansford on as our Chief Revenue Officer now. The biggest thing we've done over the last year is really, really expanded our customer base. We had a slide where we showed several customers with products that they have in the marketplace. Like that a year ago was just two customers, right? So we really made a point of expanding our customer base. I mean that was really one of our -- we think one of our main limitations was just the vulnerability to having two customers that you kind of live with by. So that's been, I think, the main change in our business outlook and our backlog is really the customer diversification.

Understood. And Ron, just on that in terms of kind of the new customers that are coming to market with products now, any sense of how quickly these guys can become more material contributors to your revenue. I just want to understand, as you look at the four year millimeter wave guidance, whether a big portion of that is still from existing base or whether some of these new opportunities are sizable enough to contribute to that?

Well, I think every earnings call, we're going to show that progress, right? So we -- and as I mentioned to Dave earlier, Kevin, like, we really feel we guided, maybe another factor in our overall strategy is to -- another vector in our overall strategy was to shorten the time to market. And so with that, we've really engaged with now four manufacturers who are very adapted building these products. So if you look at the DUNE product or customer that we announced at Christmas, that customer was really time to market from June of 2023 to Christmas, so just over six months. Now that was extremely accelerated because that customer was highly motivated. But I think realistically, we can expect like kind of a nine months now, but we are engaged with, again, a pipeline of customers that we feel will be starting to ramp over the course of every single quarter this year. So really, there was kind of two highlights of our strategy. One was to diversify our customer base, which we feel we've achieved and is ongoing and continuing. And the other is to reduce that time to market. So frankly speaking two years ago or three years ago, our time to market was really -- was two years. So we didn't really see revenue from engagement for two years and now we've got that down. We think kind of realistically in the nine to 12 month range. So that’s been a huge change for us as well. So we’re really trying to work on the issues that have been plaguing us in the past, and we feel we’re going to start to see the benefits of that in ‘24.

Okay. Sounds good. Thanks for taking those questions and good luck here in ‘24

My pleasure, Kevin. Thank you.

Thanks, Kevin.

Okay. We have no further questions in queue. This concludes today's conference, and you may disconnect your lines at this time. Thank you.

Thank you.