Richardson Electronics, Ltd. (RELL) Q2 2011 Earnings Report, Transcript and Summary

Welcome to the Fiscal 2011 Second Quarter Earnings conference call. My name is Veronica and I will be your coordinator for today. At this time all participants are in listen-only mode. We will be conducting a Q&A session towards the end of today’s conference. If at any time during the call you require assistance, please press star followed by zero and the coordinator will be happy to assist you. I would now like to turn the conference over to your host for today’s call, Mr. Ed Richardson. Please proceed.

Good morning and thank you for joining our second quarter conference call for fiscal 2011. Joining me on the call today are Kathy Dvorak, Chief Financial Officer, and Wendy Diddell, Executive Vice President – Corporate Development and General Manager – Canvys. This call will include forward-looking statements that involve risks and uncertainties that could cause our results to differ materially from management’s expectations and plans. We encourage you to review the Safe Harbor statement found in our press release and also to review our most recent regulatory filings for a full description of these risk factors. As you may know, we are diligently working to complete the sale of our RF, Wireless and Power division, or RFP, to Arrow Electronics. The transaction is expected to close in the next 60 days. I’d like to begin by providing a summary of the transaction and then move on to discuss the operational, financial and strategic outlook for our remaining businesses. Following that, we’ll be happy to take your questions. In reference to the transaction, the proceeds from the sale will be $210 million with an incremental purchase price adjustment related to a working capital target. Needless to say, this transaction is complex is the sense that we’re separating a large division from a consolidated operating company. Immediately following the closing, we will move into a transition phase where both parties will be providing transitional services to each other. This transition phase will likely take several months. Once this period has ended, we can turn our attention to realigning our cost structure to fit the remaining business units. Our objective is to do everything possible to exit fiscal 2011 with a support function cost structure that enables the remaining business to hit our near-term operating margin target of 5%. Now let’s get back…

Thank you, Ed, and good morning. Our second quarter results reflect RFPD as a discontinued operation. All prior periods, as well as our fiscal 2010 balance sheet, have been restated to reflect our discontinued operations activity. Highlights of our continuing operations during the second quarter include sales of 41 million, up 23.7% from the prior year. Gross margin was 28.8% this quarter compared to 32.9% in last year’s second quarter. As Ed described, our decreased gross margin rate reflects reduced margins in Canvys related to the decline in the healthcare business, as well as the impact of a strategic alliance with an EDG supplier which has contributed significantly to the top line, although at lower margins. SG&A was 27.3% of sales compared to 32% of sales in the second quarter of fiscal 2010. In terms of dollars, our SG&A is up about 600,000 from last year’s second quarter. This increase is primarily the result of incremental startup costs related to our distribution agreement. We will be incurring these incremental expenses for the third and fourth quarters and then should see lower expenses, combined with more favorable margins, starting in fiscal 2012. Operating income for the second quarter was 595,000 or 1.5% of net sales. We believe that we will be able to get to a 5% operating margin in a relatively short period of time through a combination of margin improvements and cost reductions. Interest expense during the quarter was 39,000 compared to 325,000 in the prior year’s quarter. This lower interest expense reflects the retirement of our convertible bonds. Our current borrowing rate is approximately 1.5%. In the quarter we saw the dollar weaken slightly relative to foreign currencies; therefore, this year’s second quarter earnings were impacted by 197,000 foreign currency loss compared to the 700,000 foreign currency loss…

Thank you, Kathy. Canvys ended the first half of fiscal 2011 with 22.3 million in sales compared to 24.2 million during the same period a year ago. Second quarter sales of 12.3 million represented a significant improvement over our first quarter sales of 10 million. Also on a positive note is the fact that bookings have exceeded billings every month since the beginning of the fiscal year, driving our backlog higher than it has been in more than two years. Canvys’ OEM business in both North America and Europe is up slightly over the prior year. The OEM business includes display solutions sold to medical and industrial equipment manufacturers. These displays often require touch integration or other customizations such as special housings, electrical or mechanical changes which preclude the ability to use off-the-shelf solutions. OEMs also require longer panel life to avoid costly rework, certifications and retrofits. OEM projects typically take longer to close but result in recurring business for three to five years or more. In this segment, our business growth is coming from both existing customers in the medical market as well as relatively new customers, including 3M and Varian. Today, OEM business accounts for nearly 65% of Canvys’ business. Our healthcare business, which includes sales of displays for picture archive and communication systems, or PACS, operating room displays, and related medical equipment directly to hospitals and medical facilities, is project-based. In addition to several well-known brands, we offer our own private label monitors which incorporate our proprietary DICOM calibration software under the Image Systems brand. DICOM, which stands for Digital Image and Communications in Medicine, is the universal format for PACS image storage and transfer. Canvys’ business in the healthcare segment is down year-to-date versus prior year due to a significant non-recurring order from Phillips which was…

Thanks, Wendy. Now I’ll conclude with a brief discussion of the Electron Device Group, or EDG. Sales for EDG were extremely strong during the second quarter. Sales increased by 42.4% compared to the prior year’s second quarter. This reflects market recovery combined with market share gains related to a major distribution agreement. Margins declined in the quarter to 32.9% from 33.3% as a result of the mix of sales to OEMs versus end users currently associated with this agreement. As I mentioned earlier, we’re working to transition this business to include a greater percentage of end user customers which should improve our gross margins from current levels. Operating expenses included some one-time startup costs that are also associated with the distribution agreement. These expenses will continue to be incurred for the balance of fiscal 2011. Bookings in total for EDG continue to grow. Backlog is currently over 25 million in January. In summary, I’m very proud of our accomplishments this quarter and the organization’s dedication and focus on the core business while completing the RFPD transaction. Going forward, we’re committed to building the business based upon our strategy of engineered and integrated solutions. I would like to thank you for your support of Richardson Electronics, and now Kathy, Wendy and I will be happy to take your questions.

Ladies and gentlemen, if you’d like to ask a question please press star followed by one on your touchtone phone. Again, if you’d like to ask a question, please press star, one. Our first question comes from the line of Robert Moses of RGM Capital. Robert Moses – RGM Capital: Good morning.

Good morning. Robert Moses – RGM Capital: Just two pretty simple questions, more housekeeping. Could you talk about expected depreciation and amortization for maybe the remaining entity as we think about 2012? And I think, Kathy, you mentioned limited CAPEX, but could you just give us some at least estimates for perhaps 2012 on the ongoing business?

Yes. Depreciation and amortization should be somewhere around $1 million on a go-forward basis. Robert Moses – RGM Capital: Okay.

What was the other piece you wanted? Robert Moses – RGM Capital: Just CAPEX. Is CAPEX similar then?

CAPEX will be much less than that. I mean, right now in the quarter it was 100,000, so I’d say definitely under a million. Robert Moses – RGM Capital: Okay. And I think you’d mentioned last call—you mentioned kind of the tax rate today of 32 to 34%. Will you be in a—will cash tax and accrued tax be about the same in 2012, do you think? Are you still benefiting from any tax loss carry-forwards?

We will use the majority of that related to the proceeds from the gain on sale, so the taxes will be pretty similar – 32 to 34. Robert Moses – RGM Capital: Okay. Secondly, could you just talk a little bit about the timing – I think you said next 60 days – just the remaining hurdles. I think the shareholder vote is maybe January 13 or so, I guess, next week. Could you talk about any remaining hurdles and just kind of maybe narrow in that timing a little bit?

Sure. Most of the remaining hurdles have to do with foreign governments’ approval of the transaction. We’re selling assets in some 25 countries of the world, and every country requires a filing and approval of the transaction. The remaining hurdles right now are China and then some smaller ones – I think Taiwan and Brazil. We think it’s just red tape. China, for example, takes at least 30 days after the filing, and we understand it was actually filed the 29th of December so that’s some of the holdup. But we really don’t see any other major issues. It’s just going through the process of getting approval from each one of these countries. Robert Moses – RGM Capital: Okay. And then lastly, I guess, we should expect to hear something regarding the deployment of the cash. We’ll need to wait until this closes sometime within the next 60 days. Would you expect to—just give a sense as to cash utilization, whether it’s earmarked for acquisitions, dividends, buyback, et cetera at that point?

Well, I think it’s all of the above. At this juncture, we’ve just in general said it would be a combination of dividends, stock buyback depending on the stock price, and we’re looking at some small bolt-on acquisitions to grow the business going forward. But it’s a combination of those three. Robert Moses – RGM Capital: Great. Thanks so much.

Thank you.

And our next question comes from the line of Al Tobia from Sidus.

Hi Al. Al Tobia – Sidus Investments: Hi Ed. How are you?

I’m doing very well. How about you? Al Tobia – Sidus Investments : Great. Nice quarter, Ed. Since we talked about the cash, can I just have some housekeeping facts? Do you know how much of the cash will be sort of, quote, trapped overseas?

Kathy, you want to take that?

Yes. When you’re talking about trapped, you’re talking about—my answer will talk about long-term trapped; and there’s really only about 15 million that will be trapped overseas long-term. The rest is just a timing issue of how fast we can move it back to the U.S. Al Tobia – Sidus Investments: Okay. And then if—so logically, is that—Ed, as you look at acquisitions, is overseas a good place to think about where you would do acquisitions and therefore that cash could be used without having to repatriate it with a penalty?

Well, to some extent. We’re certainly interested in some acquisitions in China. We’ve already been travelling there, talking to some companies in the alternative energy space. But I don’t see anything really major. They’re sort of, as I look at it, small bolt-on acquisitions, and we’d certainly take advantage of the trapped cash in the foreign subsidiaries where we could. Al Tobia – Sidus Investments: Okay. And then just if I run through the balance sheet, it looks like you have about $30 million positive working capital post the deal. Is that about right?

Kathy?

Yes. Al Tobia – Sidus Investments: Okay. And I assume that you’re probably a little working capital heavy right now, or no?

That’s a fair statement. As both Ed and Wendy described, working capital efficiency has improved for both businesses. Al Tobia – Sidus Investments: Okay. And so now we pick up about 180 to $185 million worth of cash after the deal closes, right?

Yes. Al Tobia – Sidus Investments: Add that to the 30 that I just mentioned, so we’re about 210, 215. How much cash would go out in the restructuring of the existing businesses?

Oh, it’s small. Kathy, can you estimate that?

Again, I’d say under a million, 2 million. Al Tobia – Sidus Investments: Okay. So using 210 to 215 minus 1 to 2 as a range for net cash is probably pretty good. And 18 and very small change million shares is the right share number, correct?

Right.

Yes. Al Tobia – Sidus Investments: Okay. So I want to put that aside, so put the balance sheet aside now. For the remaining businesses, the 5% operating margin target, I assume—is that an interim target you’re looking at; meaning that’s where you hope to get post a restructuring, but any growth should come at margins that are above that? I mean, is there leverageable growth as you look forward beyond the 5%, or is that a structural—

No, no. That’s based upon the current business without bolt-on acquisitions or the growth that we envision. So that’s—Kathy, I’ll let you comment on it, but that’s really working with the core business as it is today with the restructuring going into FY12.

Yes. That truly is our near-term goal. Longer term, we certainly hope to do much better than that.

And we think there’s a major opportunity to grow the business. For example, the majority of EDG’s business is in the power grid tube industry, which today is about a $400 million market, and we do, well, possibly 70 million, 80 million in that market. But there is also a microwave tube market that’s about $1 billion which we have very small participation in, and that market—the major vendors are the same vendors that supply power grid tubes to us. They’re Talus, who is probably the largest player at around 250 million in revenue in that business, and then CPI, which is also one of our largest vendors, if not the largest vendor, and they do approximately 225 million in the microwave side of the business; and then L-3, which is the Litton of the past, who is also a major vendor. So by adding some technical resources, we think we can participate in that business, and these are the same vendors that we’ve worked with for years – very similar customer base, the same infrastructure we already have in place. So we think there’s a major opportunity to grow there with a minimal investment. Al Tobia – Sidus Investments: Okay. So basically it’s more of while this is not a secular growth market in terms of vacuum tubes, you’re underrepresented in some key segments that you can identify and get to sort of quickly; so this 160 million revenue run rate that we’re at now could step up despite this not being a secular growing market.

Absolutely. Al Tobia – Sidus Investments: Right. Thanks a lot.

Sure. Thanks, Al.

Our next question comes from the line of Mark Zinski from 21st Century Equities.

Hi Mark. Mark Zinski – 21st Century Equities: Hi, good morning, and congratulations on the quarter. Were there any transaction costs—material transaction costs for the quarter?

Kathy?

Yes, there were, and they are in the discontinued operations line. Mark Zinski – 21st Century Equities: Okay. In terms of EDG’s geographical sales, are you seeing any softness in Europe, for instance?

No, not really. Actually, we’ve seen a reversal. Europe has picked up nicely so far in FY11 in the first six months. We’ve actually seen strong growth in Europe, North America and Asia. Some of that has to do with the new distribution agreement we have, but I think we’re seeing strong growth across the board. Mark Zinski – 21st Century Equities: Okay. And then I just had a question about the—you had mentioned the possibility of a bolt-on acquisition in the alternative energy space, and obviously you’ve built up some nice relationships in that space prior to the divestiture. I’m wondering if you were to go into the manufacturing side, could you leverage those previous relationships, and how does that interplay with the non-compete clause with Arrow?

Okay, well the answer is yes and yes, but let me give you some details behind it. First of all, we’ve had some success over the past few years in manufacturing inverters and converters for the alternative energy market, and also the same market but for battery chargers. Currently, we’re working on a project to provide battery chargers for the Nissan LEAF automobile. And the answer to that is that those sales today are handled through RFPD, but we have a manufacturing agreement with Arrow where, going forward, we can continue to manufacture those products and RFPD will do the distribution for us. On the other hand, if they’re new products that are not currently serviced by RFPD, then we’re free to develop those products and manufacture them for companies as well, particularly if RFPD doesn’t want to distribute them. So we’re going to continue with that technology. Some of the acquisitions that we’re looking at, particularly in China, are bolt-on acquisitions in the alternative energy space, and what we’re particularly interested in is inverters and converters that would be used in wind and solar applications, or battery chargers for electric cars. So those are some of the opportunities that we’re going to look at. But we’re completely aligned with RFPD and Arrow to go forward with that strategy. Mark Zinski – 21st Century Equities: Okay. And so then arguably that could ramp up fairly quickly because of some of these existing and prior relationships. Is that fair to say?

Well, that remains to be seen. We’re certainly hopeful that it can ramp up, yes. Mark Zinski – 21st Century Equities: Okay. And then just lastly in terms of kind of the nuances of the new cost structure—for instance, the EDG business, I think you mentioned before has a pretty predictable reorder pattern to it. I’m just wondering in terms of how resources are allocated in terms of sales and engineering, how the new cost structure is going to be different than the previous.

I’m not sure I understand, but the areas where we can reduce cost structure are primarily corporate support areas. For instance, in the supply chain area, Arrow will be moving the inventory for RFPD from LaFox to their facility in Reno, Nevada; and so we’ve had – Wendy, you’ve got to help me with this because of supply chain – but we’ve had, like, 35 employees in supply chain in LaFox, something like that, to handle those shipments. And obviously going forward, that means that 70% of the transactions that were handled in LaFox will be handled at Reno, so we have the opportunity to reduce our supply chain personnel, and that’s the kind of thing we’re looking at. Mark Zinski – 21st Century Equities: Okay, great. That’s it for me. Thank you.

Okay.

And our next question comes from the line of Dan Okray [sp] from—he’s a private investor.

Thanks for taking my call, guys. You’ve answered the majority of my questions that mostly just had to do to the redeployment of the proceeds from sale, and more specifically the ramp-up period after the deal closes. Like I’d mentioned, you’d mostly answered it, so I do appreciate your answers.

Okay, thank you.

Our next question comes from the line of Ethan Steinberg from Freiss Associates. Ethan Steinberg – Freiss Associates: Hi guys. Thanks for taking my call. Just a couple questions. I missed the gross margin on EDG—or, I’m sorry, on Canvys for the quarter?

Gross margin for Canvys for the quarter was 23.1%. Year-to-date is 23.2%. Ethan Steinberg – Freiss Associates: And what was it a year ago—in the quarter a year ago?

A year ago was 27.2 for the quarter, and 26.2 year-to-date. Ethan Steinberg – Freiss Associates: Okay. And the near term target of 5%, is that mostly or entirely based on OPEX coming down once you realign things for the run rate you’ll be going on the revenues?

Yes, it is.

Yes. Ethan Steinberg – Freiss Associates: Okay. And then I think, Ed, on the last call you said you thought EDG should be a 35% gross margin. I think you said today it should be going up from that 32.9. Are you still thinking 35, or higher or lower?

Thirty-five, I think, is a good benchmark. As we mentioned, in the new distribution agreement that we’ve taken on in this last year, we also took on a substantial amount of fairly low margin business or OEM business that had serviced their own aftermarket in the past, and so our objective is to convert that business to the user or aftermarket business, which has really been our strategy for so many years. And as we do that, the margin will increase on a linear basis, so the 35% goal is something I think we can get to for EDG in the next couple of years. Ethan Steinberg – Freiss Associates : Okay. And maybe I’m just remembering this incorrectly, but I thought last quarter you said that the lower margin piece would continue this quarter and maybe into the quarter we’re now in, but then would pretty quickly move up to 35% or towards that. Am I remembering that correctly or incorrectly?

Well, I think it will be linear. You know, it won’t move—you know, you probably look at a point, or maybe a point or two a year, or something like that. We’ll move it as quickly as we can but part of what we’ve seen in this past quarter are some of the OEMs taking advantage of annual contracts and releasing products at the old price ahead of the price increase, and so that had some impact. Ethan Steinberg – Freiss Associates: Okay. And then what do you think a reasonable gross margin rate for Canvys should be in a normal revenue environment?

I would say it should be back at where it was in the prior years, so 26, 27% range. Ethan Steinberg – Freiss Associates : Okay. So when we think about where the leverage in the business can go, if you can get to that 5% pretty quickly, just on SG&A you’ve got another, I don’t know, 300 basis points-plus from gross margin in addition to that as those gross margins move up on top of the 5%, right? Am I thinking about that correctly?

You are. Ethan Steinberg – Freiss Associates: Okay.

It’s just a matter of how fast we can get there. Ethan Steinberg – Freiss Associates: Sure. And then do you have any kind of idea of what you think SG&A should be as a percentage of sales, or as a dollar amount?

Kathy, you want to address that?

I think I’d prefer to just stick to my 5% target. I think you can pretty much do the math. I mean, we’ve got about right now in the current quarter—you have a 1.4 million you’d have to take out of SG&A to get to the target, and if I look at that I’d also say to you that embedded in that 1.4 million is some of the one-time costs that we’ve talked about relative to the exclusive distribution agreement. So you know, to get to the 5% is not that difficult. So right now you’re probably about SG&A of 10 million per quarter. Ethan Steinberg – Freiss Associates: Okay. And then also--just maybe somebody asked it and I didn’t hear the answer, but as far as what you’re thinking on the cash, and we talked last time about tendering for the stock just because a regular buyback could be pretty slow given liquidity, what are your latest opinions on that assuming the deal goes through as planned?

Well, I think we’ve just sort of left it open. We’ve said that we’ll look at the possibility of dividends. A stock buyback, obviously, is about the most accretive thing we can do, depending upon the price of the stock. And then these bolt-on acquisitions, although we haven’t really identified anything, that takes up a lot of cash. But I’ll tell you – our focus right now is trying to conclude the transaction, and we haven’t spent a great deal of time trying to figure out what we’d do with the cash until we’ve got it in the bank. Ethan Steinberg – Freiss Associates: Yeah, okay. All right, well congrats and thank you for what you’ve done for all of us. We appreciate it.

Thank you very much.

And again, ladies and gentlemen, if you’d like to ask a question, that’s star, one. We have a follow-up question from the line of Robert Moses from RGM Capital. Robert Moses – RGM Capital: Just one question, relatively new to the Company. But Ed or Kathy, could you give us just some sense as to if EDG is, I don’t know, $100 million business and Canvys is maybe 50, is there a way to break down either the end markets customers, et cetera? You talked about the power grid side, I think, being 70, 80 million. Could you just kind of fill in the blanks just to give me a better sense as to the industry exposures that you have in the separate businesses; and maybe in Canvys it’s largely healthcare but any other end markets of note?

Sure. Well, I’ll address EDG and then I’ll let Wendy address Canvys. EDG today is—about 80% of the business is aftermarket, selling replacement tubes and components to users. The other percent, about 20%, is OEM. The largest portion of the OEM business is semiconductor wafer fabrication industry, and so we sell anything from tubes into equipment that’s used for curing silicon, for example, all the way to doing microwave generators which uses a tube as a power source. So the semiconductor wafer fab portion of that business is around 18 to 20 million, something like that; and the balance of the business is primarily aftermarket for replacement tubes that are going into industrial applications for dielectric heating, induction heating, CO2 laser cutting – you know, all kinds of applications for welding plastics and laminating plywood and vulcanizing rubber and heat-treating steel parts. I could go on and on. But it’s a very predictable aftermarket – 25,000 customers all over the world and a really broad base. So that should give you some kind of idea. We can even break it down more for you. We do some in avionics, some in marine. Wendy, would you like to address the Canvys customer base?

Sure. Within Canvys, we primarily divide the business into the OEM, digital signage, and healthcare segments of the business. The OEM is about 65% of Canvys’ total business, and that’s about 60% which would be more medical related applications and 40% being more what we would call industrial applications. The digital signage business is about 15% of the total, and then the healthcare – and we distinguish healthcare from medical, and the healthcare segment are those PACS displays that are sold directly to the end user, the hospitals themselves – that’s about 20% of the business. Robert Moses – RGM Capital: That’s very helpful. Thank you.

And we have a question from the line of Rick Winer from Risk Management.

Hi Rick. Rick Winer – Risk Management: Hi, good morning. What are you looking at your tangible stockholders’ equity to be at the end of next quarter?

Kathy?

Wow. Rick Winer – Risk Management: It could be an approximation.

You mean after we have the proceeds and everything? Rick Winer – Risk Management: Yeah, exactly.

I think we’ve pretty much heard someone kind of walk through the math on that; and so I haven’t quite calculated where we’re actually going to be, but—I mean, you know where our cash balances are, and you know where everything else is. So I don’t think there’s going to be anything too surprising there. Rick Winer – Risk Management: Okay, fair enough. I thought I would take a shortcut from doing the math myself.

Well, you can almost work the cash. I mean, we’re going to be somewhere with 180, 185 as proceeds from the deal, and we have an additional 15, $20 million worth of cash. So divide that by 18, and I guess you could add in—Kathy, what’s the net asset value of the residual business after the transaction?

Well just—I mean, it’s exactly what we’re showing right now. The total assets is the 264 million minus the discontinued, which is the 174. Rick Winer – Risk Management: Maybe one of these smart analysts on the call has already run through these numbers over the last 30 minutes, and maybe they want to beep back in and give us their summary of what that number would be. If they do, I would welcome hearing that. Thank you. Thank you very much.

Al, are you still out there? I know you had worked a number that sounded pretty reasonable. Must have left us.

And we have Al Tobia.

Oh, there’s Al. Al Tobia – Sidus Investments : Hi, Ed. I had about 11.75 or so of net cash, meaning I took $30 million of your positive working capital and assumed that there was some conversion of cash, and then added that to the 180 to 185 coming in and divided by 18, and I got about 11.75 or so.

All right. Al Tobia – Sidus Investments: And then I think that your long-term assets over your long-term liabilities are also a positive—

Yes. Al Tobia – Sidus Investments: So—because you don’t have really any long-term liabilities.

That’s right. Al Tobia – Sidus Investments: So if I—I’ll check, one second. If I look at that—you know, you only have $8 million of long-term cash and 4 million in long-term liabilities, so let’s call those a wash. So the balance sheet’s pretty simple – it’s all current, right? So 11.75 to $12 is about a net tangible book number, I assume; and you probably have some understated land and things like that there, I guess, right?

Yeah, absolutely.

(Inaudible) statements. Al Tobia – Sidus Investments: Right. Maybe Ed’s got some artwork in his office that’s appreciating over time!

There’s land and buildings on the books that are almost fully depreciated—not land, but they are certainly worth a lot more than they are on the books for. Al Tobia – Sidus Investments: And you don’t really—I mean, this is the simplest balance sheet I’ve ever looked at. You have a couple—a little bit of prepaid expense, and I assume your inventories are pretty much dollar good because you’re turning them fast enough, so.

Right. Al Tobia – Sidus Investments: So that’s—yeah, $12. A good number.

That’s good. Nice to be in that position. Al Tobia – Sidus Investments: Exactly.

Thanks, Al.

And now ladies and gentlemen, that does conclude our Q&A portion of the presentation. I’d like to turn the call over to Mr. Richardson for further remarks.

Thanks, Francine. Well, once again, I’d like to thank you for your support, and I’m confident that we’ll continue to earn your confidence going forward. We look forward to reporting on the closing of the RFPD transaction in the next few weeks, and then on our ongoing progress in the core business again in April. So thanks for your investment and your recognition of the Company. We look forward to talking to you soon.

Ladies and gentlemen, that concludes today’s conference. We thank you for your participation. You may now disconnect and have a great day.