Pixelworks, Inc. (PXLW) Q3 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Pixelworks Incorporated Third Quarter 2016 Earnings Conference Call. [Operator Instructions] This conference call is being recorded for replay purposes. I would now like to turn the call over to management and your host, Pixelworks' Chief Financial Officer, Mr. Steve Moore.

Good afternoon and thank you for joining us today. With me on the call is Todd DeBonis, Pixelworks' President & CEO. The purpose of today's conference call is to supplement the information provided in our press release issued earlier today announcing the Company's financial results for the third quarter ended September 30, 2016. Before we begin I would like to remind you that various remarks we make on this call including those about our projected future financial results, economic and market trends and our competitive position constitute forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially. All forward-looking statements are based on the Company's beliefs as of today, Thursday, October 27th, 2016 and we undertake no obligation to update any such statements to reflect events or circumstances occurring after today. Please refer to today's press release, our annual report on Form 10-K for the year ended December 31, 2015 and subsequent SEC filings for a description of factors that could cause forward-looking statements to differ materially from actual results. Additionally, the Company's press release and management's statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms including gross margin, operating expenses, net loss, and net loss per share. These non-GAAP measures exclude stock-based compensation expense as well as certain charges related to the Company's announced restructuring earlier this year. We use these non-GAAP measures internally to assess our operating performance. The Company believes that these non-GAAP measures provide a meaningful perspective on our core operating results and underlying cash flow dynamics. But we caution investors to consider these measures in addition to, not as a substitute for, nor superior to, the Company's consolidated financial results as presented in accordance with GAAP. Included in the Company's press release are definitions and reconciliations of GAAP to non-GAAP net loss and GAAP net loss to adjusted EBITDA, which provide additional details. With that said, I will now turn the call over to Todd for his opening remarks.

Thank you, Steve, and good afternoon to those joining us on today's call. Let's begin with a quick recap of our financial results for the quarter. Revenue in the third quarter was $13.7 million representing approximately 9% sequential growth and coming in at the higher end of our 13 to $14 million guidance range. We also did a good job of managing our OpEx for the quarter which resulted in incremental reduction of our net loss per share quarter-on-quarter. Lowering the revenue level required to achieve breakeven and ultimately profitability was one of the primary objectives behind the restructuring we implemented in the first half of the year. I'm pleased with our results and significant progress towards achieving that objective. I will let Steve speak to the specifics of our guidance for the current quarter but most importantly our expectations for the fourth quarter include us delivering on our prior commitments of year-over-year growth and achieving cash flow breakeven by year-end. While clearly those milestones aren't the endgame, they do reflect the improvement we've made to our financial model in a relatively short period of time. And more importantly going forward, the model we now have in place today has improved leverage and will allow incremental revenue growth to accelerate fall through to the bottom line. As mentioned last quarter, we substantially completed all the work associated with the restructuring and we have since shifted the balance of our efforts and focus to further solidifying our position in the projector market and strengthening our sales capabilities in support of driving increased adoption of Pixelworks' technology in the Mobile market. Although we did not make any formal product or customer announcements during the quarter, there continues to be a significant amount of positive activity across both of our businesses. Starting with the Projector Business, as many of you are aware, our Projector Business as well as our product offerings have had consistent fundamentals for quite some time. However, the projector market itself has presented a series of challenging headwinds that we've had to navigate over the last several quarters, including a severe inventory correction that began in late 2015 and a more recent 3LCD panel supply disruption that impacted a number of our customers. Today, I think we can finally say with a high degree of comfort that these two market headwinds appear to be behind us. We are no longer seeing weakness in our customers related to the availability of 3LCD panels although we believe certain projector OEMs not reliant on Sony panels were able to take advantage of the supply disruption to gain incremental market share. Given our broad position in the 3LCD market we don't anticipate any of these shifts among customers to have a meaningful impact on our market share. More specific to Pixelworks, we saw order patterns from both OEMs and distributors increasingly begin to normalize throughout the third quarter and as reflected in our fourth quarter guidance we have seen further improvement since quarter end. In fact, we believe the supply chain is now somewhat tighter and potentially even healthier today with reduced inventory in the channel compared to the levels prior to the 3LCD supply disruption. Based upon our current read of customer order patterns and inventory in the channel, we expect in our normal modeling internally for a more normalized revenue cycle with typical seasonality for 2017. And lastly on our Projector Business we've completed the streamlining of the business including the EOL process for multiple legacy chips in our portfolio many of which consists of either low unit volumes and or less favorable ASPs. We effectively have all the expected EOL orders in hand today and therefore have a reasonably good estimate of what the revenue contribution will be from these products in the first half of 2017. In general, our customers have continued to be accepting of these product transitions and consistent with prior expectations, we do not anticipate any negative impact to Pixelworks' market share. During the quarter, we also completed the end of life for our legacy products that we had historically sold into non-strategic applications such as Ultra High Definition TVs and HD monitors. Similar to the EOL for legacy projector chips, we now have a large majority of the expected EOL orders for these legacy TV panel products in hand today, and collectively they will represent a larger portion of the total EOL revenue contribution we expect to record in the first half of 2017. Steve will provide further details on the total expected EOL revenue contribution as part of his guidance commentary towards the end of the call. Turning now to our Mobile Business, we've made meaningful progress on multiple initiatives during the quarter in support of our objectives to strengthen our sales capability and drive incremental adoption of Pixelworks technology. I'll start with a brief update on ASUS. On our earnings call last quarter we highlighted that ASUS had launched two mobile devices that incorporates Pixelworks' Iris processor, the ASUS ZenFone 3 Ultra and the ZenPad Z8. The ZenFone 3 was our first ever design-win for a smart phone and then the ZenPad Z8 was a 7.9-inch Tablet with a 2K resolution that's available exclusively at a Tier 1 North America carrier. We continued to ship volume production in support of both of these devices in the quarter, however the total number of units on these respective platforms is expected to remain fairly small. Early in the month ASUS announced the launch of another new tablet, the ZenPad Z10 which also incorporates Pixelworks' Iris processor. It is now available exclusively at the same Tier 1 North America carrier. The ASUS ZenPad Z10 features a larger 9.7-inch, wide-angle, 2K display and a Pixelworks enabled blur-free mode which is capable of 60 million pixel-optimizations per second to eliminate blur. The Tablet retails for $329 or can be purchased cheaper with a new contract but regardless, this device's display and video quality are truly impressive especially at this price point. Although we expect this device to also have fairly modest unit volumes we believe that ASUS repeated choice to incorporate Iris in additional new devices speak strongly to the value proposition that Pixelworks technology offers as ASUS looks to continue differentiating with superior mobile viewing experience. We look forward to maintaining our strong collaboration with ASUS and enabling best-in-class video quality on more of their future platforms. Regarding future platforms, as highlighted in today's press release we recently began sampling our 3rd Generation Iris Processor at key smart phone and tablet customers. This latest mobile device is a result of our ongoing product development aimed at further increasing the value proposition of Iris while at the same time lowering the hurdles that OEMs must overcome as part - as part of designing a new component into a next gen mobile device. Accordingly, our 3rd Generation Iris Processor has smaller physical footprint requiring less space on the board and it consumes less power by intelligently leveraging multiple power modes based upon display content to extend battery life. This new processor also includes a series of advanced features and functionality that we are actively demonstrating to target OEMs as an impactful way that they can differentiate their next-generation smart phones and tablets. We are also working to cultivate increased awareness of advanced video processing more broadly in the industry which features such as ACR or High Dynamic Range. In support of this feature - this effort, during the quarter Pixelworks became a contributing member of the UHD Alliance, an inter-industry group charged with advancing the Ultra HD ecosystem as well as promoting the benefits of Ultra HD entertainment technology across a wide array of consumer devices. Specific to Iris, we are actively engaged with multiple OEMs on potential new design win opportunities, including with our 3rd generation device just mentioned. The early feedback we received from prospective company customers sampling the device has been positive and we are convinced based upon conversations with these and other industry participants that Pixelworks maintains a material lead over alternative partial solutions for improving video quality on mobile devices. If we are successful, the sampling of our 3rd Generation Iris Processor should enable us to win designs on higher unit volumes mobile devices that are targeted for launches in the second half of 2017. More generally, we continue to make progress on our dual go to market strategy consisting primarily of device sales in the near term while simultaneously seeding the intermediate to longer term opportunities through dedicated IP licensing efforts. Ultimately, both elements of our strategy share the same objective of driving broader adoption of Pixelworks' technology across a greater number of customers and mobile platforms. As we've talked about before in previous conference calls, Pixelworks has done an impressive job of evangelizing the benefits of our technology and superior video quality to establish awareness with mobile OEMs. We now are intensely focused on converting this awareness to commercial adoption, broad adoption of most features and functionality on the mobile devices as well as components that enable them often depends on gaining visible success as part of one OEM trying something new to differentiate a device or a platform, which then leads to other OEMs replicating the feature or function in an attempt to stay competitive and avoid falling behind the competition. This underlying concept of the adoption process along with the increasing need for OEMs to differentiate is fundamental to our strategy of increasing Pixelworks sales capability and focus on China. In addition to providing a relatively large group of prospective target customers, the number of mobile OEMs in China creates a competitive landscape with the potential for accelerated adoption. Mobile OEMs in China are increasingly willing to experiment with new features and functionality in an effort to differentiate their products. And OEMs have also become very quick and efficient at copying new features that are introduced by competitors. As a result, the market dynamics in China are particularly attractive for Pixelworks as we work to drive increased adoption Iris in our mobile technology. As part of the strengthening our mobile sales capabilities in China, we announced in today's press release that we recently hired Ting Xiong as Pixelworks' Senior VP of Worldwide Sales. Ting joins Pixelworks after having held multiple roles at Qorvo, previously TriQuint Semiconductor where most recently he headed the Asia Pacific sales organization as part of their IDP Group. He will be based primarily Shanghai and largely complete the planned expansion of our mobile sales team and capabilities that we discuss throughout the year. During the quarter, we also appointed a country manager in Korea. As a reminder, last quarter, we also hired a vice president of sales in China to focus on opportunities with mid to high end smart phone OEMs in China. In addition, I mentioned last quarter the addition of Dave Sabo who is dedicated to leading our business development and IP licensing opportunities across the Company but also serves as a valuable resource in some of our current mobile efforts. These individuals combined with the additions -- the other additions that we've made to our sales team and capabilities throughout the year provide us a broader sales footprint with coverage across all the key markets in Asia. We now have significantly more depth in sales experience than Pixelworks has ever had focused on our mobile initiative. In summary, we continue to make meaningful progress during the quarter as demonstrated by our improved financial results as well as the business updates that I've just outlined. Looking forward, the revenue growth we're guiding to in the fourth quarter combined with our recently reduced cost structure has us poised to deliver on our commitment to achieve cash flow break-even, by the end of this year which will provide a solid foundation for further financial improvement in 2017. From a business development standpoint, the Company sales capabilities have never been more focused and proficient given the team we've assembled year-to-date. Moreover, with our strength and sales team in place our newest Iris processor sampling and our continued commitment to intermediate term licensing efforts, we are well-positioned to advance the adoption of Pixelworks' technology in the mobile market. I look forward to reporting on our additional progress, as we continue to execute over the coming quarters. With that I'll turn the call over to Steve Moore to review our Third Quarter Financials and Fourth-Quarter guidance in more detail, Steve?

Thank you, Todd. Revenue for the third quarter of 2016 was 13.7 million compared to 12.6 million in the second quarter. The sequential improvement in Q3 revenue primarily reflects increased sale of chips sold into our digital projection market as well as somewhat higher revenue from legacy products sold into the TV panel market. Year-over-year revenue in the third quarter reflects the 3LCD supply disruption at Sony following an earthquake in April 2016. The breakdown of revenue during the third quarter was as follows: revenue from digital projection was 11.9 million; mobile revenue was approximately 270,000; and revenue from legacy chips sold into the TV panel market was approximately 1.5 million. As previously indicated, we expect contribution from these legacy products to ultimately decline to zero in the future following our fulfillment of end-of-life orders over the next two to three quarters. I will provide additional details on our expectations related to EOL revenue as part of the guidance in a few minutes. Non-GAAP gross profit margin was 48.6% in the third quarter compared to 51.6% in the second quarter of 2016. Gross margin was lower quarter-on-quarter primarily due to a less favorable revenue mix specific to products sold into our digital projection market. Non-GAAP operating expenses were 6.8 million in the third quarter compared to 7 million in the second quarter of 2016. Adjusted EBITDA was 670,000 for the third quarter of 2016 compared to 296,000 in the second quarter. A reconciliation of adjusted EBITDA to GAAP net loss may be found in today's press release. On a non-GAAP basis, the Company reported a net loss of 438,000 or a loss of $0.02 per share in the third quarter of 2016 as compared to a non-GAAP net loss of 756,000 or a loss of $0.03 per share in the prior quarter. In addition to excluding stock-based compensation expense, the net loss in the third quarter excluded 30,000 in charges related to our previously announced restructuring in early 2016, in the second quarter excluded approximately a hundred thousand. Moving to the balance sheet, we ended the third quarter with cash and cash equivalents of approximately 16.6 million, a decline of 1.2 million from 17.8 million reported at the end of the second quarter. Note that excluding a capital outlay related to the introduction of our 3rd Generation Iris Processor cash flow from operations from operating activities was positive in the third quarter. Other balance sheet metrics include day sales outstanding of 26 days at the quarter end compared to 28 days at the end of the second quarter. Inventory returns during the third quarter was stable at approximately 8.7 times compared to around 8.8 times in the prior quarter. Now turning to the guidance, for the fourth quarter of 2016, we expect revenue to increase to a range of between 15 and 16 million. This range reflects our expectation for solid, sequential, growth in our core digital projection business as OEM and distributor order patterns continue to normalize from the previously mentioned supply channel disruption. Additionally, we expect revenue from mobile to be roughly flat and TV panel to decline approximately 40% on a sequential basis in the fourth quarter. We expect the gross profit margin in the fourth quarter to be in the range of between 50% and 52% on both a GAAP and non-GAAP basis. In terms of operating expenses, we expect the fourth quarter to range between 8 and 9 million on a GAAP basis and at 7 to 8 million on a non-GAAP basis. As a result, we expect fourth quarter GAAP EPS to be in the range of between a net loss of $0.06 per share and breakeven and we expect non-GAAP EPS to be in a range of, between a net loss of $0.03 per share and a net income of $0.04 per diluted share. And finally, as indicated in our conference call last quarter, we're going to provide additional detail on our revenue expectations specific to the previously discussed and implemented end of life for legacy products mostly sold into TV panel markets. First let me emphasize that the revenue figures we are providing represents the consolidated amount of EOL revenue that we expect to exceed what would otherwise be our normalized run rate business during the first quarter and second quarter of 2017. The following figures do not reflect projections for our operating business in 2017. For the first quarter of 2017, EOL revenues in excess of what would otherwise be our normalized quarterly revenue is expected to be approximately 7 million and for the second quarter of 2017, EUL EOL revenue in excess of or otherwise normalized quarterly revenue is expected to be expected to be approximately 5 million. Lastly, while we are not going to provide specific guidance for our run rate business beyond what I provided earlier in the fourth earlier for the fourth quarter of 2016, for modeling purposes we do believe it would be reasonable to assume normal seasonality for our run rate business in the first quarter of 2017. With that we will now open the call for questions.

[Operator Instructions] Our first question comes from the line of Brian Alger from Roth Capital.

Hi guys, good afternoon. Congrats on a good quarter and obviously, a pretty good guide. It's nice to see the execution coming through with the guidance. As we look at the business Todd, in setting up for next year, are there any areas where the cost controls that you're putting in place may be hampering the growth opportunities or is really what you've been able to accomplish just aligning the resources appropriately?

Thanks for the question Brian. So, I think as we had -- we had communicated last quarter, when we did the restructuring we did it with the intent to not diminish our capabilities in either our current projector business which we - is a sustaining business even though it's a mature business, there are new devices that we're developing and new engagements with customers. And so, we restructured to not diminish that or our mobile initiative but we did it by outsourcing I would say certain functionality versus insourcing. I still believe that we are in a good position to execute on growth in 2017 with the cost structure we have in place. You know, probably the one area that if we start seeing success that we would have to respond quickly with some new hires would be in the field applications arena. But you know, I mean, we have a very good systems engineering team that backs up the FAs out in the field but the few FAs we have right now are getting thin, they're - they're - they're all engaged with activity. So that's the one area I would say that we have to respond pretty quickly. But other than that, no. I do not believe we are putting any risk on execution and I think we're positioned for growth.

Excellent. Obviously, it's - that's what we want to hear. It's - it's an impressive transition that you've been able to accomplish in a short period of time. I'm - I'm wondering as we - as we look at this you know, a kind of one-time effect over a couple of quarters here with the End-of-Life, I guess this is probably more for Steve, what kind of gross margin impact should we expect from these EOL buys? Are these running at normal margins that they would've gotten you know, over a longer period of time or is there just kind of involved there? I guess what I'm getting at is, how much of this is going to flow to the bottom line?

Good, good, question. Well first of all will get the benefit of a better absorption so one should expect our gross margins to be somewhat higher during the EOL period relative to what we're suggesting for Q4. Additionally, the mix, and we have a pretty good idea, the mix of products is actually a little bit better than I would have normally guessed, given a lot of this - most of it is legacy business and historically our legacy business has been somewhat lower our mature margin gross average. This is more in line with our average because the - I guess primarily because the lower gross margin legacy stuff is not being ordered quite as far out as some of the higher gross margin and that actually giving thought to it, it make sense. You know, if you - if you're making a medical monitor, you're probably paying a lot for the chip and you're going to want to have that chip available for years so that you have to redesign the monitor.

Sure, and not to you know, get too simplistic in this but if we're looking at -- it looks like roughly 12 million of EOL revs and you know, your corporate average is being you know, called around 50%, is this essentially bring-in or pull-forward, you know, roughly $5 million bucks to the - to the balance sheet? Is that - am I my thinking about that correctly?

You are, you are. It's pulling in something north of half a million - or $5 million in cash in - between those spreads. I would say that Q1, most of this revenue is going to be turned into a receivable at the - at the end of the quarter but we'll collect all of it in Q2 or --.

Right.

Yes, mostly all of it in Q2.

Excellent, great. That's - that's certainly fantastic and I guess just one last one for Todd, and this is perhaps a bit more strategic. The value of the Company's, technology and video processing expertise, that you talked a little bit about in your prepared remarks and the importance of video adoption, certainly ASUS has realized, how many other vendors out there are looking at video quality and the and the enhanced experience as being a differentiating factor. Is it a majority of the customers or a majority of the manufacturers or is it a small smaller sample as when you look into that kind of demographic?

Well, I mean, let me just first broaden the answer with beyond the China demographic. That is an area of focus for our bridge chip, it is an acute area of focus for our bridge chip. But I would say when you look at the IP licensing effort that we are pursuing, I would not focus on China, look on a broader scale there right. So, to me I'm looking, I think that the Company is going to put this, we're really focused at trying to catch a wave that is happening and will happen with or without Pixelworks. We believe Pixelworks can be can have a material participation but it's going to happen with or without us and what is happening is on the high end mobile platforms, every major provider is using some form of visual processing and the display technology itself to try to differentiate their high end unit. And I will give you an example, I mean it's a shame because it's the Note 7 which is probably, is no longer available but when they came out there was a series of features and functionalities that they marketed heavily as their differentiator, and one of them was the first phone capable of displaying HDR content from a streaming provider and the streaming provider that they collaborated with was Amazon. So, you could go on to their phone and if you have the Amazon app you could download UHD content, stream it directly to your phone. If you would go to any other high end phone that did not have that capability, Amazon wouldn't even make available the UHD content for download purposes. So, this, I don't believe it was Amazon's intent to do an exclusive with Samsung. What I do believe is and this is a little more than a guess, so when I say, I believe, there is some information I know is that they wanted to qualify a phone to meet certain criteria to display this UHD content. And so, Samsung worked diligently for long period of time to meet those criteria and actually, said that they did so by implementing their mDNIe technology that was originally developed for their Smart TVs and has and they are now putting this technology into their phones. And actually, they've said it before they've put this technology into phones, so this I'm using this as an example to show you one, Tier 1, high end phone, absolutely focused at video processing as a way to differentiate their phone right. We do see this expanding beyond the top two phone manufacturers. So, I hopefully that will answer your question. If you have a more specific one I can answer, Brian but.

No, that's gets to exactly what I was getting at their we're looking for in that. The opportunity is not just with the Chinese opportunity on the bridge but that virtually all the manufacturers are - at least looking at this for, minimally their high-end segment but presumably over time it's - it's the differentiation feature they expect to utilize over a broader product set, so that's good. That's what I was looking for. Guys, keep up the good work. It's a - it's good to see your progress. Thank you.

Thank you. Our next question comes from the line of Jorge Rivas, from Craig Hallum Capital. Your line is open.

Good afternoon guys, congratulations on the quarter. First, housekeeping question, I missed your revenues for Mobile; how much were revenues for Mobile in the quarter?

Revenues for mobile in the quarter were about flat with last year - with last quarter, it was --

Got it.

$270,000.

Okay, great. Thank you. And then it's nice to see the progress on your Iris chip, on the 3rd generation and it feels like you're sampling that with tablets and smart phone customers and I was wondering if you can - if you - if you can provide - probably break them out, what are you seeing more interest from customers to deploy this chip on tablets or smart phones. What do you see more interest for, as far as like the adoption of the chip?

We're seeing strong interest in both categories.

Would you say it's like 50-50?

There's only a handful of tablet guys left in the market, there's a lot more valid manufactured.

Okay. And then one - last question here, so your gross margin guidance was stronger than we've seen probably in the last three years are so. Was this mainly just driven by mix or are you seeing you know, probably some benefits also from your, you know, EOLs they are implementing?

Well, for Q4 no. It's not from EOL, it would be from mix and from absorption in the higher revenue level, absorbing our operations cost but there is - there's definitely a mix element as well that's improving Q4 to Q - from Q3.

I'd say in addition to that, you know, I think we previously announced post the restructuring that we went through a product streamlining and through that --

Right.

At some point we would see an outcome of higher ASPs and better margin mix. It is probably just starting to reflect in the numbers in Q4. We expect it to --.

Okay.

Gain prominence as you move forward into 2017.

Correct, okay, great. So, there is some element of sustainability into that. Okay guys, that's all I have. Thanks very much.

Thank you. Our next question comes from the line of Jessica McHugh from Dougherty & Company. Your line is open.

Hi there. Thanks for taking my questions and congrats on the quarter. One of your long-term goals is to having a licensing business, would you talk about the process for that. Do you have a library of IP cores, you could tell at this point?

We do, we do have multiple IP cores and most of them, they are proven in silicon and demonstrated some - some demonstrated even through past licensing efforts. I would say that you know, we've been - the Company just went through a change from fielding some inbound requests in pursuit but not really doing any outbound effort, sales effort on it, to now we are doing and outbound sales and marketing effort. That is, you know, three months into it right, I would say the initial response from the market has been positive. But those are it's a unique set of IP that a handful of people in the display processing pipeline would be interested in. And so this is not something we are going to go out and pursue 50 different customers but you know, maybe 10. And when you get a serious engagement, those engagements they go through a great deal of scrutiny and effort before they would turn into a deal. So, I would say we're early in the process and the reception from the market has been extremely positive.

OK, great. And then, the original video display processors started came out two years ago. I was just wondering how has mobile trends as well as your customers and potential customers help to shape, features and pricing for the current iteration of the Iris chip, the 3rd generation?

Probably more dramatically than any of the previous generations. The biggest single issue with the two previous generations were effectively Iris 1 was tried it tried to do way too many things. It tried to be a device that could hit Notebook, Tablet, Phone, different interfaces and as a result was extremely costly and consumed a great deal of power, and frankly it missed the target spec for almost all the target markets because of that. Iris 2 was a response to that and in some cases, some features that are now in Iris 3 were eliminated out of the thought process of Iris 2 in an effort just to go get the cost and the power down. We have now expanded the features and functionality in the Iris, the 3rd generation of Iris and still fairly dramatically brought down the power and not only the size of the chip but the entire placement size that would be required on a PCD. So, it definitely was in response to customer feedback. And, I would say the previous two generations were almost out of the game from the smart phone from day. I mean, the one smart phone we won on the 2nd generation was a very large smart phone, right with a large battery and could handle some of the power consumption requirements there. I think it would have been difficult with that generation of device, if somebody would have been extremely committed to put it into, let's call a mainstream phone, right, on a 5.2 inch screen, with the battery and power requirements that a phone like that would have available. The 3rd generation is definitely within the realm of that, so we have responded to the market.

Great, thank you.

Thank you. Ladies and gentlemen that now concludes today's question-and-answer session. I would like to turn the call back over to management for closing remarks.

OK, thanks everyone for joining and we look forward to talking with you again next quarter.

Thank you.

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program and you may all disconnect at this time. Everyone have a great day.