SAP SE (SAP) Q1 2013 Earnings Report, Transcript and Summary

Stefan Gruber - Vice President of Investor Relations William R. McDermott - Co-Chief Executive Officer, Member of the Executive Board, Member of Global Managing Board, Chief Executive Officer of Global Field Operations and President of Global Field Operations Jim Hagemann Snabe - Co-Chief Executive Officer, Member of Executive Board, Member of Global Managing Board, Corporate Officer, General Manager of Industry Solutions and Head of Development for The SAP Business Suite Werner Brandt - Chief Financial Officer, Member of Executive Board and Member of Global Managing Board Lars Dalgaard - Member of Executive Board and Member of Global Managing Board

Stacy Pollard - JP Morgan Chase & Co, Research Division Adam Wood - Morgan Stanley, Research Division Philip Winslow - Crédit Suisse AG, Research Division Gerardus Vos - Barclays Capital, Research Division Michael Briest - UBS Investment Bank, Research Division Richard G. Sherlund - Nomura Securities Co. Ltd., Research Division Josep Bori - Exane BNP Paribas, Research Division

Ladies and gentlemen, thank you for standing by. Welcome to the SAP 2013 First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Stefan Gruber. Please go ahead, sir.

Thank you. Good morning or good afternoon. This is Stefan Gruber, SAP Investor Relations. Thank you for joining us to discuss SAP's results for the first quarter 2013. I'm joined by co-CEOs Bill McDermott and Jim Hagemann Snabe; our CFO, Werner Brandt; as well as Lars Dalgaard, Executive Board Member and CEO of SuccessFactors. Bill and Jim will begin the call with remarks on this quarter's performance, and then Werner will review the financial highlights. We'll then have time for Q&A. Before they get started, I want to say a few words about forward-looking statements. Any statements made during this call that are not historical facts are forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as anticipate, believe, estimate, expect, forecast, intend, may, plan, project, predict, should, outlook and will, and similar expressions as it relates to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission, including SAP's annual report on Form 20-F for 2012 filed with the SEC on March 22, 2013. Participants of this call are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. Please keep in mind that, unless otherwise noted, all numbers referred to [ph] on this conference call are non-IFRS, and growth rates are non-IFRS on a constant currency basis. Before turning the call over to Bill and Jim, I have a few brief announcements. Starting with the reporting for the first quarter 2013, SAP will report deferred cloud subscription support revenue to provide even greater clarity into the quality performance of our cloud business, additionally reporting the cloud subscription and support backlog number. Werner will discuss this in more detail shortly. And finally, I'd like to mention that we'll be hosting a financial analyst meeting at SAPPHIRE Orlando on Wednesday, May 15. And with that, I'd like to turn the call over to Bill.

Thank you, Stefan. And thanks, everyone, for joining us on the call today. SAP had a solid start to 2013, with 25% growth in our software and cloud subscription revenue. We achieved EUR 824 million, which is equivalent to about $1 billion, in software and cloud subscription revenue, which makes this our best first quarter ever. Our solid growth was primarily driven by stronger-than-expected growth in HANA and cloud revenues. With 14% software and software-related services growth, this quarter also represents our 13th consecutive quarter of double-digit growth in software and software-related services. Our operating profit grew by 11%, and we did expand our operating margins as well. We gained significant market share from our primary competitor, especially in the areas of cloud and database. Our 25% software and cloud subscription growth is in stark contrast to our primary competitor, who did not grow at all in their latest quarter. It is clear that many application categories are increasingly transitioning to the cloud, and SAP is in the forefront of this transition. We see continued very strong growth in the cloud, with a 385% year-over-year increase in cloud subscription and support revenue and a 95% increase in deferred cloud subscription and support revenue. Now let me talk a little bit about the regional performances out there. Let's start with the Americas. The Americas delivered a strong Q1, with 51% software and cloud subscription growth. This was driven by excellent software revenue performance in Latin America and strong cloud subscription and support growth in North America. Brazil and Mexico continue to be growth drivers. They both delivered stellar software revenue performance for the company. We're clearly gaining market share from our primary competitor in this region, which saw year-over-year declines in their business in the latest quarter. These market share gains…

Thank you very much, Bill. Our double-digit growth for, now, 13 consecutive quarters is a clear indicator that our strategy is right for our customers and, as Bill said, that we are winning in the market. Our results in this quarter clearly show that the gap to competition is widening. In other words, we are leading the transformation of the industry, moving data off slow disks into fast main memory, simplifying data centers through the cloud and reaching people on the move with mobile technology. Let's take a look at how our innovations are fueling this transformation. First, let's talk about HANA. HANA is a home run. SAP HANA is the biggest breakthrough in the industry since R/3 and continues to be a major growth engine for SAP, evidenced by EUR 86 million in HANA software revenue this quarter. Last year, we were very proud to more than double our revenue on HANA. This quarter, we tripled our HANA revenue compared to Q1 last year. We continue to be the fastest-growing database vendor in the market. And HANA is rapidly now, becoming the preferred innovation platform for companies who want to speed up the entire enterprise and reduce costs in IT at the same time. Since Q1 last year, HANA went from being the real-time analytics platform for big data and data warehouses, to now, becoming the innovation platform of choice for analytical and transactional data, for structured and unstructured data, for internal and external data and for SAP and non-SAP applications. In Q1, we saw customers standardize their entire platform on SAP HANA. For example, Kingfisher, Europe's leading home improvement retailer, has chosen to extend its partnership with SAP by implementing SAP HANA across its entire organization. Kingfisher's adoption of unlimited SAP HANA usage is proof of the value…

Thank you, Jim. Before I do that, I want to address a few topics. First, given the increased focus on the cloud business, we are now reporting deferred cloud subscription and support revenue. This is a subset of total deferred revenue and represents the amount of revenue that we expect to recognize as cloud subscription and support revenue in future quarters. We also disclosed cloud subscription and support backlog at year-end 2012. This number represents expected future cloud subscription and support revenue that is contracted but not yet invoiced, and that's not recorded in deferred revenue. Secondly, you probably noticed that we are reporting our quarterly results earlier now. This is a result of our own internal adoption of SAP HANA. This quarter-end close was SAP's first close with SAP Business Warehouse running entirely on HANA. Now some additional information related to Q1 results. Non-IFRS support revenue increased at constant currencies by 10% year-over-year, in line with expectations. We also, once again, had a strong adoption of our Enterprise Support offering, at roughly 96%. Non-IFRS cloud subscription and support revenue increased to EUR 167 million in this first quarter, up 385% year-over-year at constant currencies. We continued to see increasing sales synergies between SAP SuccessFactors and Ariba. Non-IFRS deferred cloud subscription and support revenue was EUR 377 million at the end of Q1, which is an increase of 95% year-over-year. Cloud subscription and support backlog was EUR 800 million as of December 31, 2012. We'll provide these backlog metrics again at the end of 2013. Before I talk gross margins, I want to make a few comments on our cloud division profitability. With the EUR 28 million profit in Q1 of this year compared to minus of EUR 25 million in the prior year first quarter, our cloud division was…

[Operator Instructions] And the first question comes from Rick Sherlund from Nomura. Mr. Sherlund? I am sorry. We cannot hear you. [Technical Difficulty] Next question is from Stacy Pollard from JPMorgan. Stacy Pollard - JP Morgan Chase & Co, Research Division: Could you please discuss how you are -- sort of how and why you're very confident in the APJ returning to double-digit growth in Q2? And maybe talk about which countries are recovering, et cetera. And also, could you be more specific on mobile? You said double-digit. Is that sort of 10%, teens, 20s? And I think this is mostly platform. Is that right? And then what traction are you seeing around revenues from applications as well as developer partners, et cetera?

It's Bill McDermott here, Stacy. Mobile, 76%. Let's talk about Asia Pacific. They had a good Q4. We came into the year with expectations that were higher than their actuals. If you look at our license business, basically, the entire miss was in Asia. The reason why we're very confident that they're coming back is there was a lot of timing issues. They made 3 leadership changes, 1 in Southeast Asia, 1 in India and 1 in China. That's a lot of change for 1 quarter, and it resulted in some of these deals slipping into the second quarter. We have reviewed that pipeline, as you could imagine, quite extensively. And everybody understands what's expected of them, and they have committed the quarter to deliver strongly and be on track through the first half year-to-date. Considering the track record of 12 consecutive quarters of double-digit growth on the part of that leader and the fact that they have doubled the size of Asia-Pacific Japan in the last 3 years, we have tremendous confidence in the leader. Everybody has a bad quarter. He had a bad quarter, and he's going to fix it. Stacy Pollard - JP Morgan Chase & Co, Research Division: Okay. And sorry, a quick follow-up, just on cloud margins. Can you say how many years it would take to get cloud to group margins? That might be a question for Werner.

Jim here, maybe I can take that. We always said that margin in the cloud is about scale. And if you look at the last 4 quarters on the segment report, you'll see how, every single quarter, we've gone from negative to, now, positive in our gross margin. We're making EUR 28 million on the gross margin in the cloud now. And I think that exactly proves the point: It's about scale. We're having the scale and we have the right cost structure for that scale. So now it's a matter of how fast can you scale the business. Now it is a subscription revenue model, so it's not massive jumps, it's going to be hard work, but we're off to an extremely very strong start here with 385% growth in the quarter. I can't tell you when exactly that comes to the level of the rest of the business. We are not projecting that right now, but we feel very good about our projection to be the first really profitable cloud company.

Thank you.

Next question is from Adam Wood from Morgan Stanley.

I've got 2, if I could. Just first of all, coming back to HANA, particularly the Business Suite on HANA launch. Could you maybe give us a little bit of an indication about the customer response outside of the ramp-up clients, how open those customers are to changing database on the transactional side? And maybe, did you feel that, that caused any disruption in the first quarter, either to the ERP business or to the HANA business, as you kind of explained the new case and moved away from simply talking about Business Warehouse? And also, is -- pricing, which I think has been clarified a bit, has that helped with customers? And how do they think about that? And then just secondly, coming back to the margin question. Appreciate it was a little bit below where consensus is looking for in Q1, but with the headwinds you had, it looked as if margins were up at least 100 basis points on an underlying basis. And the hiring rate was actually quite a bit down in Q1. Is that what you -- what we should be -- expect going forward, that the leverage we get from the benefits of hiring last year, that continues through this year?

Well, I'll -- Jim here, I'll take the Suite on HANA question. I think it's a very, very important question. Clearly, that milestone, from an innovation point of view, meant that HANA is now not just an add-on to the existing landscape, it becomes the innovation platform of the future. And we have not seen major impacts in this first quarter because we're still in ramp-up and it's very early. But clearly, the interest from our customers is very, very high, in particular, when they realize that this is not just about running their business in real time, but that HANA, as a database, actually reduces complexity and costs in significant ways in the infrastructure. And we've been a good example ourselves. We've put our CRM on HANA, and the implications in terms of reduced costs of hardware are tremendous, beyond what anyone had expected. And so we will see this product grow in general availability midyear, which means the effect of this will be back-end loaded in the year, and I think it's a multi-year way of accelerating the core and renewing it in a big way.

And with regard to the margin, what you had in mind for Q1 is actually what we are shooting for, for the full year, as you cannot [ph] really down to 1 quarter, especially not to the first quarter only. And remember, there are 2 things which has to happen. First of all, we have to stay very disciplined on the cost side. And on the other side, we also need the respective revenue growth. And here, software revenue growth is very essential in order to bring up the margin. So you will see an expansion going forward.

Next question is from Phil Winslow from Crédit Suisse. Philip Winslow - Crédit Suisse AG, Research Division: Just one question for Bill, then a follow-on for Jim. Bill, you talked about some deal slippages in the U.S. driven by the budgetary concerns. What are your customers telling you about sort of your timing of these projects? A, are they still the sort of same-size projects that they were 6, 9 months ago? What are the focuses? And when do you start -- do you think you'll start to see these come back in and close? And then for Jim, on the cloud side too, I know we've talked about, in the past, the idea of just these hybrid architectures between the cloud and on-premise SAP. Just where do we stand in that? And has that even started to kick in, in terms of just integration between SuccessFactors, Ariba and SAP?

Phil, thank you very much for the question. First, the investment areas that you see continuing to be the large ones, the theme of growth, remain HANA, because big data and real-time predictive analytics is the way to the consumer; mobile, because you have to connect to that consumer in real time and make the ease of business obvious and competitive; and of course, the cloud. So if you look at the cloud and the U.S. adoption of the cloud, it's a first mover, it's an early adopter, and you're going to see more and more growth in the United States go to the cloud. This can be the public cloud. This can also be the private cloud, which touches on the second part of your question, and I'll allow Jim to take that, since you directed it his way. And I would also say, in terms of a lot of the larger projects, as we look at SAPPHIRE, a lot of our customers look to us for thought leadership and our point of view. And SAPPHIRE is a very important milestone in the buying cycle of SAP. It's no coincidence, in my opinion, that Q1 tends to be the slowest quarter for SAP, not just because it's historic and it's year-over-year and that's the way things are, but because customers wait for our point of view. And I think they're very interested in the Suite on HANA. That's a big move for us as a company, in exactly how we can give them different consumption models around that, so they can consume that innovation and have a faster cycle time to value. And we have plans for them in that regard. So I think you're going to see the trend continue towards the cloud, public and private. But what I love about SAP's positioning is we're giving the customer choice. And depending on the size of the customer, the complexity of their environment, they will choose to deploy however they want to. And we're ready to have that conversation in the customer's language.

Thank you, Bill. Let me talk a little bit about the cloud. Bill already addressed the public cloud. It -- we've always said and we continue to believe that, if you want to be successful in public cloud, you need applications and architecture that was designed for that. And Lars Dalgaard and his team at SuccessFactors, as well as Bob Calderoni at Ariba, have shown us what that means. And you see that in our numbers this quarter. The fact that we are now marginally [ph] positive on gross margin is a recognition of our architectures designed for cloud. Now Bill mentioned also the private cloud, and that's where the hybrid comes in. It is clear that we have an increasing amount of customers who is asking for ways to simplify their own infrastructures. And we have the biggest, most strategic interest there is [ph] in this market to do exactly that. And we will make efforts to accelerate the simplification of landscapes, also for customers in the private cloud kind of environment.

Next question is from Gerardus Vos of Barclays.

A few, if I may. Firstly, during the quarter, we've -- if you look at the kind of core KPIs, we've seen the macro kind of deteriorating. We haven't really spoken about it, but did you see some kind of tougher environment towards the end of the quarter and impacted the closing of the quarter? And then secondly, on the kind of sales productivity, which has been quite weak for the last 5 quarters. You did a little hiring last year. When should we expect that the incremental sales is becoming -- going productive? And then finally, just on the core. Clearly, that was weak. So I define core licenses, minus mobile and minus kind of HANA, was very weak in Q1. Do we expect that to grow for the full year?

Yes, so first of all, this is Bill, on the environment, the environment in the public sector category has been very, very choppy and slow on a global basis, for the most part. Whether it's China and making leadership changes and state-owned enterprises changing their buying behavior, it's the U.S. with sequestration and various fiscal policy issues, it has definitely slowed down that segment of the market. The good part is there's a lot of pent-up demand. And if you've got high-value solutions and pent-up demand, it generally rationalizes itself at some point. Which quarter that will happen, we're not waiting on our heels for. We're going after other industries that are buying, and there are industries that are buying. For example, financial services has become the fastest growth vertical in the world for SAP. HANA is solving problems in the health care industry that heretofore were impossible to solve. If you look at retailers, they've got to get much more in touch with their consumer and behave in real time. So where there's a business case and there's a customer and companies and industries need it to grow, we're there. And those are decisions that are being made and investments that are being made. So I do think there's more caution, in terms of some of the large-scale companies that tend to wait for fiscal clarity and policy clarity, but I believe this is mostly going to affect companies in the commodity space, especially hardware companies, and you see that in the negative double-digit year-over-year declines. We're growing, they're not, because we're on the value side, the innovation side and the growth side of the customers' agenda. And even in a down environment, that's the best side to be on.

Yes, there was this question on the core. The way we look at it is, in fact, that, with HANA now being the platform for the core, we're kind of redefining the core. And you'll see how companies will buy as default the business Suite on HANA or the Business Warehouse on HANA or both of them, which means that HANA becomes part of the core as well, at least the part that's the onetime license for HANA. I think the beauty of the strategy is that the core gets pulled by some of the new innovations. The mobile makes the core easier to consume, and with that, we get more users. And HANA makes the core significantly more competitive. And again, we'll have a pull in the core. So we actually believe in growth opportunities in the long run in the core, and we'll see that playing out for us coming -- in the quarters to come.

Then on the sales productivity side, you did ask a question on sales productivity. Please note that the hiring investment that we had made in the past, we intend to fully leverage in the present. So there isn't large-scale plans to increase headcount. We're running a tight ship here, a tight, tight ship, because we believe that we have the assets we need to leverage our revenue growth in a highly profitable way, and Jim touched on it and I touched on it. When you have the Suite on HANA in a private cloud, you can do a lot of things for ease of consumption for large-scale customers, and we'll be right there. So we're not sitting on our heels waiting for the market to come to us. We've got plans to go get the market. We're aggressive and ready to roll.

Next question is from Michael Briest from UBS.

On these calls, we normally get an update on the number of customers and live customers on HANA, so I was wondering if you can give that and maybe also how important BW was to the HANA contribution in the quarter. And then secondly, Bill, maybe one for you. You've obviously added a lot to sales headcount in the last 12, 18 months. You've delivered good license growth despite the volume deals being fined [ph], falling now for 4 quarters in a row. So you seem to be getting more dependent and more successful, to be fair, on large deals, when a lot of your competitors and peers are struggling. Is that deliberate? Is it something we should expect to change, where the volume of deals will now pick up going through the rest of the year?

Yes, thank you very much, Michael. So on the volume of deals, when you see the size of a deal increase, especially with large strategic global companies, it underscores the leverage and the relevance that SAP has as a strategic partner. Yesterday, in speaking with ConAgra, I was like, "Why did you go with us in the cloud? Why did you make the investment in HANA?" To which they replied, "We choose to compete and disrupt our own competitors on our own terms, and HANA is the real-time platform by which we can do that. The reason we chose you in the cloud over the best-of-breed coming out of Silicon Valley is because we want to partner. And when we think about the enterprise and we think about the best partner, we think about SAP." So I feel very good about large-scale customers still investing with SAP on an enterprise level because of all the innovation that we have. In terms of the volume of the deals, we have some really good progress with the ecosystem. You see a constant climb in the amount of our revenue coming from indirect channels, and that's really powerful, but we can do even better. As we take our solutions and put them in the cloud, we can make the ease of consumption, in places like Brazil or China or even the United States, so much easier for the small- and mid-size ones, and that's what we want to do. That's where you can radically see a hockey stick come in small- and mid-size businesses, by fully leveraging the power of the cloud. And that's where SAP will really roll on the number of transactions that we do. That's the best way to get scale. That's what we're gearing up to deliver on throughout the 2013 and beyond cycle.

You asked about HANA as well. And we have more than 1,300 customers who chose HANA. We have many, many implementation projects now ongoing. You see them in 3 categories: the accelerators, which will accelerate existing functionality that they already have installed; the infrastructure for analytics, which is typically the second step, where we went big last year; and now we begin to see the first enterprise-oriented decisions and implementations, where HANA becomes the future platform. That's also why we tripled the revenue in the quarter. It's because we saw the impact on the enterprise-type deals, and we see that as a trend. When companies have tried it and seen the magic of HANA, then they go on and increase the scope very rapidly.

And finally, Michael, on the sequential growth in the number of customers quarter-over-quarter, in case you're tracking that, it was more than 30%, in the number of customers.

Do you think the harmonization of the pricing between BW and the suite-based version of HANA is something that's helping momentum? Is that driving adoption?

Yes, it is. I think it's very clear now, customers can enter with BW at a very low price, then they go to the full suite, which is a normal database price in spite of the fact that the database is superior to anything else in the market. And then they go to the enterprise license. And there's a great logic between the 3 levels.

Next question is from Rick Sherlund from Nomura.

Jim, first on the Business Suite on HANA. Would you anticipate that there would be a popular solution, that SAP and your partners would host this for customers to allow them to adopt Business Suite on HANA a lot more easily? And if you could also address the robustness of the capabilities of HANA for a production environment. At the middle of the year, when it's a GA, will you deliver -- I think it's [indiscernible] you're working on and real-time clustering and high availability, high reliability, the things we think about when we think of a production environment. Is that -- or is that something that will still be a work in progress, or do you expect to have that in place? And then lastly, if we could just ask Lars for an update on ByDesign, in terms of his work on making that more modular and on HANA and where we stand on that?

Great. Let me talk about Business Suite on HANA. And thanks for all the questions. This is really an important part. You ask, "Could you consider SAP and others hosting it?" It's very clear that the moment you run the Business Suite on HANA, you have a massive simplification of landscapes as a consequence. We've seen that at SAP. And as a consequence, customers would be looking for opportunities to accelerate their pace to that future, and hosting could be one. So clearly, there will be a demand for this. And in terms of robustness, listen, we are now running on Business Warehouse. We closed our quarter on HANA, and we are now running one of the most important transactional systems, namely our CRM, on HANA. We wouldn't do that if we felt the system wasn't robust. And yes, all these tools that you mentioned will, of course, be there for a robust enterprise-ready infrastructure, which is what we have been delivering for 41 years.

Thank you. And the question to Lars?

Yes. So Rick, what -- the success we're having in unbundling Business ByDesign's architecture has been extremely strong recently. We just got some really, really big wins on a line of business focused in Sales OnDemand. And we're seeing that this line-of-business initiative -- which actually was started by SAP before I got there, but I've just been able to put a lot more tonnage behind the strategy. It is clear that people buy cloud in business units and a line of business, and that's the way that it's bought. And so we've had real success in splitting that out. And particularly, what we're seeing from the ByD code is the financials is what's very popular. So about 70% of the decisions is on the financials area. And we had some nice wins against NetSuite and others in this quarter for that. And then finally, obviously, we have been able to achieve very strong growth in those areas. I don't think we split out, specifically, what the growth is. But as you know, we've also been able to have significant wins on the SuccessFactor side, because of the resources we're able to take from SAP and invest 100% into the cloud positioning and product, and that's exactly what we're doing in the CRM side and it's what we're doing in the marketing side and, of course, on the supplier side. So we believe, all of us feeling, Bob and myself, that we're getting this big push now onto the trajectory also, if we maybe had a linear trajectory or sort of moving more towards a geometric trajectory going forward. So it's pretty exciting.

Okay. Thank you.

The question is from Josep Bori from Exane BNP Paribas.

Just a couple of quick ones. The first one, just following up on the HANA numbers. I mean, I just wanted to know, how should we think about the product seasonality compared to versus the group? I mean, if we use the group license seasonality pattern, about 13% to 15% for Q1, those EUR 86 million imply about EUR 573 million to EUR 661 million of HANA revenues for the full year, which is a bit below your target. So how we should think about that? And the second question is, when you were talking about the midterm target, the 2015 targets of the EUR 20 billion revenues and EUR 2 billion of profitable cloud revenues, you did not mention the 35% operating margin. Is that still on the table? Or as a result of the comments you've made about the unpredictability of when cloud revenues are going to be at the level of the group, that's a little bit more elusive.

Okay, one of the things of merit, just on the HANA number, one of the things I wanted to just refresh everybody's mind on, not just on HANA but in general: Q1 represents about 14% of the total annual license revenue for our company, or software revenue. So you shouldn't take the EUR 86 million that we did in HANA in Q1 and kind of forecast that out as our new normal for the rest of the year. We guided on EUR 650 million to EUR 700 million and we stand by the guidance for HANA. And incidentally, if you put that in U.S. dollar terms, I think it's the fastest software product to ever hit USD 1 billion in the history of enterprise software. And then secondly, on the EUR 20 billion in revenue, that's euros in revenue, by 2015 that Jim mentioned in his opening remarks, we also stand by the 35% operating margins, and yes, we stand by the 35% operating margins. And even though we will have more of our revenues coming from cloud, we intend to do it all.

And just so there's no confusion, I did say that as well in my opening remarks. The 35% margin was in there.

Well, thank you very much. This was the last question, and this concludes the financial analyst call for today. Thank you for joining us, and goodbye.

Ladies and gentlemen, this concludes the SAP 2013 First Quarter Earnings Conference Call. Thank you for your joining, and you may now disconnect.