Stratasys Ltd. (SSYS) Q3 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing-by and welcome to the Stratasys’ Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the conference to your speaker today, Yonah Lloyd, Vice President, Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us to discuss our 2019 third quarter financial results. On the call with us today are Elan Jaglom, Interim CEO; and Lilach Payorski, CFO. I remind you that access to today’s call, including the prepared slide presentation, is available online at the web address provided in our press release. In addition, a replay of today's call, including access to the slide presentation, will also be available, and can be accessed through the Investor Relations section of our website. Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding our expectations as to our future revenue, gross margin, operating expenses, taxes and other future financial performance, and our expectations for our business outlook. All statements that speak to future performance, events, expectations or results are forward-looking statements. Actual results or trends could differ materially from our forecast. For risks that could cause actual results to be materially different from those set forth in forward-looking statements, please refer to the risk factors discussed in Stratasys' annual report on Form 20-F for the 2018 year, as well as our report on Form 6-K and the related press release concerning our earnings for the third quarter of 2019, the latter two of which we are furnishing to the SEC today. Stratasys assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. As in previous quarters, today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance. Certain non-GAAP to GAAP reconciliations are provided in the table contained in our slide presentation and in today’s press release. Now, I would like to turn the call over to our Interim CEO, Elan Jaglom. Elan?

Good morning everybody and thank you for joining today’s call. Our results in the third quarter reflect a continuation of our track record of delivering earnings and profitability despite challenging global economic conditions that have impacted capital investments and general spending in the automotive and industrial machinery segments in Europe and Asia. In the third quarter, we continued to observe strong performance in the core professional and production areas of our Americas business, our largest market, with specific strength in high-end FDM and PolyJet systems, our F123 Series, and our target verticals of automotive and aerospace. Despite the pause in customer investments we are experiencing in Europe and Asia, we continue to see high levels of customer engagement and are encouraged by the interest in deploying our solutions there. As we have seen in the Americas region, major OEMs in our target verticals in aerospace and automotive are adopting our solutions at an increasing rate, and we expect customers in Europe and Asia to do the same once economic conditions improve. We are encouraged by the initial interest in the multiple new product announcements we recently made, including two new advanced PolyJet systems, new manufacturing-focused FDM materials, and an addition to the MakerBot Method line of performance 3D printers. Additionally, we recently announced plans to increase our ownership stake in Xaar 3D, our joint venture with Xaar PLC, to develop additive manufacturing solutions based on High Speed Sintering technology that will target low and medium volume end-use part production for industrial manufacturing, with an option to fully acquire Xaar 3D. We expect to make additional significant product announcements in 2020, and continue to believe that our new expanding portfolio will broaden our addressable markets. I will return later in the call to provide an update on our search for a new CEO, but first I will turn the call over to our CFO, Lilach Payorski, who will review the details of our financial results. Lilach?

Thank you, Elan, and good morning, everyone. Total revenue in the third quarter was $157.5 million compared to $162 million for the same period last year. On a constant currency basis, total revenue declined 2%. As Elan mentioned, we saw continued positive performance in Americas, where we had specific strength in our high-end Fortus platform, including a large multi-unit deployment to a leading automotive OEM, and we also saw strong sales of our workgroup-focused F123 Series and J750 full color, multi-material 3D printers. GAAP operating loss for the third quarter was $6 million, compared to GAAP operating income of $3.4 million for the same period last year. Non-GAAP operating income for the quarter was $8.1 million compared to non-GAAP operating income of $8.2 million for the same period last year. GAAP net loss for the quarter was $6.9 million, or $0.13 per diluted share, compared to a net loss of $0.7 million, or $0.01 per diluted share, for the same period last year. Non-GAAP net income for the quarter was $6.3 million, or $0.12 per diluted share, compared to non-GAAP net income of $5.7 million, or $0.11 per diluted share for the same period last year. Product revenue in the third quarter was $106.3 million, a decrease of 3% compared to the same period last year, or 2% on a constant currency basis. The decline in product revenue was driven primarily by economic weakness in Europe and Asia that impacted mainly systems sales in those regions. Within product revenue, consumables revenue for the quarter increased by 3% compared to the same period last year, and increased 5% on a constant currency basis, while system revenue for the quarter decreased 9%, compared to the same period last year, with no change on a constant currency basis. Service revenue in the third quarter was $51.1 million, a decrease of 2% compared to the same period last year, with no change on a constant currency basis. Within service revenue, customer support revenue increased by 3% compared to the same period last year, and 4% on a constant currency basis. GAAP gross margin was 49.2% for the quarter compared to 48.7% for the same period last year. Non-GAAP gross margin was 52.4% for the quarter compared to 52.1% for the same period last year. GAAP operating expenses increased by 10% to $83.4 million for the third quarter as compared to the same period last year. Non-GAAP operating expenses decreased by 3% to $74.4 million for the third quarter as compared to the same period last year, driven by the timing of R&D investments related to new product introductions. We remain committed to our long-term strategy and we continue to invest in developing new products that we believe will expand our addressable markets. The company used $8.6 million of cash from operations during the third quarter, as compared to $5 million of cash generated in the third quarter last year, primarily due to proactive steps to increase inventory levels in order to improve fulfilment time and support product demand as well as to prepare for new product launches in 2020. We ended the third quarter with $347.1 million in cash and cash equivalents, compared to $366.3 million at the end of the second quarter of 2019. To recap, we are pleased with our profitability and earnings in the third quarter, which reflect the positive impact of our continued commitment to expense management and operational efficiencies, despite the lower than expected revenues in some of our regions. We had positive year-over-year growth in our core Americas systems, consumables, and service revenues, which were offset primarily by the impact of economic conditions in Europe and Asia. Our balance sheet remains healthy and we are well positioned for future opportunities. I will now turn the call back over to Elan.

Thank you, Lilach. Our search for a new CEO is progressing, and I look forward to completing the process. We remain focused on being deliberate with our decision-making process and moving forward with a highly qualified leader that has the necessary public company experience and exceptional track record of delivering shareholder value. In the interim, we are happy to have a strong, experienced oversight committee that continues to work closely with me and with our management team. I would now like to turn the call over to VP, Investor Relations, Yonah Lloyd, who will provide greater details on our 2019 financial guidance. Yonah?

Thank you, Elan. We are updating full year guidance for 2019 as follows: Revenue guidance of $640 million to $655 million, compared to previous guidance of $670 million to $700 million. Despite lowering our revenue guidance, we are maintaining our guidance for GAAP net loss of $17 million to $3 million, or minus $0.31 to minus $0.05 per diluted share, with current expectations to be at the low end of the range. We are also maintaining our non-GAAP net income of $30 million to $38 million, or $0.55 to $0.70 per diluted share, with current expectations to be at the low end of the range. Non-GAAP operating margin of 5.5% to 6.5% and capital expenditures projected at $30 million to $45 million. Non-GAAP earnings guidance excludes $23 million to $24 million of projected amortization of intangible assets; $22 million to $24 million of share-based compensation expense; reorganization and other expenses of $1 million to negative $1 million; and includes negative tax adjustments of $2 million to $3 million on the above non-GAAP items. The estimated non-GAAP tax rate for 2019 is impacted by the ongoing non-cash valuation allowance on deferred tax assets that we expect to record throughout the year on U.S. losses. Given the expected ongoing negative impact of not recording a tax benefit on U.S. tax losses on our net income, as well as significant quarter-to-quarter variability in our non-GAAP tax rate, the company believes that non-GAAP operating income is the best measure of our performance. Appropriate reconciliations between GAAP and non-GAAP financial measures are provided in a table at the end of our press release and slide presentation, with itemized detail concerning the non-GAAP financial measures. Operator, you can now please open the call for questions.

[Operator Instructions]. Our first question comes from Jim Ricchiuti with Needham & Company. Your line is now open.

A quick question I have is just regarding the strength you are seeing in the Americas and the weakness you are seeing in Europe and Asia which obviously a lot of companies are talking about. Is there anything you can say more specifically? I may have missed it if you disclosed it in your release. But what kind of growth -- what was the growth rate in the Americas in the quarter and what are you seeing in Europe and Asia?

Thanks, Jim. Sure, the America is our largest market. It’s most advanced in the adoption cycle. We have leading OEMs in our target markets that are trading 3D printing as a strategic imperative for their businesses. So for example, the sales of our high-end F900 production systems were excellent this quarter, including multiple Aircraft Interior Solution F900s we sold to aerospace customers and a large multi-unit and multi-technology deployment that included F900s and F450s among others to a major U.S. automotive OEM. This demonstrates our progress in driving the adoption in these target verticals. By the way we also saw strong sales of our J7 Series and PolyJet with particular strength in our J750 multicolor and multi-material 3D printer. I would add as well that in the Americas, even the unit sales of our F123 Series grew substantially driven by the continued strength of the F123 portfolio. And over the last year, we added multiple new engineering grade materials to this F123 Series, so expanded the applications that can be addressed with that platform. And beyond just the quarter, I would add -- I would note that for the first nine months this year of 2019, in the Americas, we've actually seen meaningful growth in all target verticals, aerospace, automotive, healthcare and dental.

So, all in, the growth rate in the Americas?

All in for?

Yes, just I'm just looking for a percentage, if there is any -- I mean it sounds like you are seeing some nice momentum with the new products, nice momentum in the key verticals. And I guess what I'm trying to get to is, what was the growth rate in the Americas?

Right, so in the 6-K that you will be seeing at some point today when you have the opportunity, you will see the Americas growing by 1.7%. But we would note that the strong growth came in our professional and our production products, our systems, our consumables, and the services that are related specifically to those core business lines.

Got it. That's helpful. Thank you. I'll jump back in the queue.

Sure. Actually you also asked about EMEA, I believe, yes, as well.

I did, if you can give us that, that would be great.

Sure. Yes, absolutely. There were headwinds in both EMEA and APJ. You will see in the 6-K later today, EMEA declined by 10.8%, APJ by 12%.

Thank you. Our next question comes from Troy Jensen with Piper Jaffray. Your line is now open.

So, I guess my first question would be I guess for anyone in the room, but I think if you go back, David had previously talked about he is pleased with the pace of new product introductions and previously endorsed high single-digit revenue growth in 2020. I am curious if you guys still kind of endorse that type of growth for next year?

Hi, Troy. Good morning. Yes, so previously we talked about that. Obviously the timing and the level of growth in 2020 will be subject to macro conditions, as well as R&D and new product introduction timeline, and will likely be in a call at the second part of 2020 given the time of the product introductions that we -- are expected. Given the uncertain nature of market condition, the prediction of that exact growth rate is challenging. We do still believe that it will be meaningful, definitely compared to the growth that we saw in the previous year and in this year. So this is still our expectation.

Okay. And then for my follow up, I know during the quarter, you guys had increased your investment in Xaar 3D. Just wondering if you guys could give us any introduction or any update on timing of that product launch and any more insight will be helpful on Xaar?

Right. Troy, we're not actually updating the timing of the launch right now. We recently announced the plans to increase our ownership in Xaar, on Xaar 3D from 15% to 45%. We have the option to fully acquire Xaar 3D. Just as a reminder for some background, in July of ‘18, we announced the initial investment in Xaar 3D, a jointly funded venture between ourselves and Xaar plc, leading independent manufacturer of piezo-based drop-on-demand inkjet technology, to develop additive manufacturing solutions based on high-speed Sintering technology and we'll be targeting low to medium volume end use part production for industrial manufacturing. At this point, we're actually very pleased with the progress made by the team, the Xaar 3D team, and we look forward to sharing more details when they're appropriate.

Have you guys ever disclosed when you plan to launch those products?

We have not. Not as of yet.

Thank you. Our next question comes from Wamsi Mohan with Bank of America. Your line is now open.

You're clearly doing a good job on sort of the cost front here. You’ve boosted gross margin somewhat, you also have cut OpEx meaningfully to manage through these revenue headwinds. Can you give us some sense on how much room you see in continued cost rationalization both at sort of the COGS level and what you're doing there? And at OpEx level, and to the degree that you can talk about, how much of this OpEx rationalization do you think could potentially create some headwinds to growth in the future? And I have a follow up.

So, good morning, Wamsi. We are focusing on cost cutting measure, definitely when we see a headwind on the revenue, an area where we believe that we can influence, we do that. Having said that, in area where we believe that our key strategic imperative for us like R&D, we will continue to invest. We are focusing on launching those products in 2020, and we are not reducing expenses in those area. We do reduce expenses in area where we have regional flexibility, more on the G&A side of the house. And currently now, we are focusing to be within the range, targeting the low end of the range. So we believe we'll still be able to meet the low end of the range from the EPS and operating perspective, even though we're going to reduce our revenue guidance.

Okay, thanks Lilach. And if I could follow-up, can you talk a little bit about sort of your view of demand trends going into 2020. You're guiding roughly 10% quarter-on-quarter off a lower base here into the fourth quarter, similar to last year, but last year fourth quarter was a macroeconomic disaster. You saw some real fall-offs and especially in Asia, and sort of global markets were pretty weak too. So I'm wondering do you anticipate in your guide that things are deteriorating macro-economically or you're thinking that there are similar levels to today, and can you just frame that in the context of sequential growth rates that are similar to last year when the backdrop was a lot worse? Thank you.

Yes, sure, Wamsi. So indeed the -- we don't guide quarterly specifically, but we do expect the same seasonality as is typical historically where Q4 is sequentially a step up from Q3 on the top-line. We have discussed the macroeconomic headwinds. And so we're expecting Q4 could see a flat to slightly down year-over-year. And again, it will be impacted by the timing of any recoveries that may take place in EMEA and APJ. Of course, as well as the impact and timing from some of the new product launches that have been taking place toward in the back half of this year.

Thank you. Our next question comes from Shannon Cross with Cross Research. Your line is now open.

This is Ashley Ellis on for Shannon today. Maybe just kind of piggybacking on to Wamsi's question. I'm wondering what you're hearing from customers in Asia and Europe that gives you the confidence they will start adopting machines once the conditions improve? And then I have a follow-up. Thank you.

Thank you, Ashley. So just to sort of started off. I would say that the engagement levels that we've been experiencing in both EMEA and APJ continues to remain high and strong. And we truly believe that the issues that are being faced are macroeconomic issues that the industries, specifically the manufacturing industry is facing on a widespread basis, not particular to 3D printing at all. I would add that as you can see in the Americas region, the fundamental business is doing very well when macro conditions are as expected to be, are in good shape, let's say, certainly relative to what's happening in the other two regions. So those two combined issues, give us the confidence that when the macro conditions improve in EMEA and APJ along with the existing customer demand, we expect to see the growth return in those regions.

One thing, I want to add.

Sorry, I just think Lilach just wanted to add.

Yes, I wanted to emphasize a few more things. First of all in EMEA and APJ, even though we see headwind in the overall performance, we do continue to see higher utilization and consumables going up. So this is definitely a testimony of adoption of our product, and continue to invest in those. In Americas specifically, even there is some headwind even in the automotive segments, even though we see a large deployment in automotive, because of the view additive manufacturing as a strategic imperative decision for them, and they are still investing in those, even though there is maybe an overall weakness. So that's why it basically gives us the, kind of the confidence and the belief that we will -- once the condition in Europe and Asia will be improved, we will see customers coming back to invest in those segments.

Thanks. I think you just kind of prematurely answered my second question. Material sales rebounded in the quarter. I was wondering if that was primarily on shrink in the Americas, but I think you just said that utilization is still strong in Asia and Europe. Can you talk to those trends?

That's correct. The utilization and consumables had a positive quarter in both of those regions.

Thank you. Our next question comes from Brian Drab with William Blair. Your line is now open.

I wanted to ask about the services business first. Given that it's almost a third of sales, and it was down this quarter and has generally been flat for the last four years really, is that an area where you expect growth in the future? And can you even roughly give us an idea in the breakdown, what percentage of that is your on-demand service? And why would that be growing or actually declining this quarter. I know there's macro pressures, but the overall market for on-demand 3D printing service for your market has been growing nicely. Can you just comment on what you expect from that business going forward, and why it might be lagging?

Hi, Brian. Good morning. You pointed out correctly in terms of some of the decline in the pulp business and what we see that the services on demand is actually more vulnerable to an overall weakness in the macroeconomic, and this is kind of the area where first line to be impacted. So we see some slowness on that overall. In the services, we also have our customer support revenue, and this rate is growing, and we expect to see it growing in the future as well.

Okay. For my other questions, I'll just ask if you look forward to 2020, and you made some comments on OpEx already, but just maybe put a finer point on it. Would you expect that your overall OpEx dollars would grow about in line with revenue, above revenue growth or below revenue growth, even just a directional comment on of that would be helpful?

Yes, Brian, at this point, we are not providing guidance on our profitability for 2020. So we are not addressing that.

Okay. Is it fair to assume that OpEx dollars would be up as you're investing in new products rather than down with cost cutting, going forward, just in general?

We are not providing those guidance yet at this stage.

Thank you. Our next question comes from Ananda Baruah with Loop Capital. Your line is now open.

Two if I could, just starting off with the macro headwinds -- incremental macro headwinds in Europe and Asia. Could you give us any sense of context, what you heard from customers, at least what you saw, you head from the customers, you heard from the channel, anything that was incremental to you with regards to the slowing, even if it's linearity contacts so that we can get a sense of what might have been sort of incremental to what you guys thought 90 days ago? And then I have a follow-up as well. Thanks.

Hi, Ananda. Sure. As we said, the primary reason for the weakness in Europe is the current general industry situation there. There is a reduction of capital equipment investments, factory order reductions, there's workforce reductions, overall procurement slowdowns, and industrial manufacturing, and specifically in the automotive sector, and especially in Germany. Now our products and services are still used most often in product development. So we consider ourselves the leading indicator and as companies cut down on product development activities, we may see that impact on our business until the situation improves. So that's specific to us. At the same time, as we noted a little earlier, we still continue to see a healthy utilization in the installed base of systems, and the consumables usage was up. We see growth in new verticals as well where we're providing unique value. We've got verticals such as mobility, and we've put out some press releases about what we're doing in the railways industry. So we have some new incremental business coming in there. But at this time, based on economic indicators, we believe recovery may not happen until next year, and we're well positioned to return to growth in the Europe region, when the conditions improve. When it comes to APJ, it's specifically related to overall growth in China, which has slowed significantly, and we see the result again in lower investments in the high-end production solutions, primarily for the automotive and industrial machinery markets. Many other suppliers to the auto industry are also being hit by the slump in production, as the demand is falling in China. That's the world’s biggest car market. So we do continue to see that. And on another extent you have the macro economy issue of U.S.-China trade tensions that are impacting investments. So just to give you some of the color in a general way and as well as how it affected us specifically.

As my follow-up. This is a little bit bigger ticket. Any chance you could give us a sense of, kind of, what portion may be -- I don't know, anecdotal, any percent would be awesome, but more anecdotal is probably, so where you'll be more comfortable with. How we should think about kind of production exposure today? And is sort of as you get or after you get whether it's end of 2020 or kind of mid '21, whatever you're comfortable with, how that might change with the new products that you're coming out with, the new materials that you're coming out with, over the next four to six quarters. Just to give us some kind of framework to think about what the impact to the model might be?

Yes, sure, Ananda. As you know, we don't really break out the segment specifically, but I can give you a great example. We've referenced this automotive deal that we did just this quarter. It's a mix of products including the highest end, the F900s, the F450s and that was primarily for tooling applications, which is becoming a more and more important opportunity for additive manufacturing in the factories. We see high engagement in the U.S., we're making good progress with major OEMs. And as you know, adoption is dictated by the OEM’s expansion and investment plans. So that's going along as you can see quarter-after-quarter quite well for us in the Americas region. Also as a reminder, these are large deployments, they take time to develop. It's a long sales cycle. But it demonstrates the commitment of the large OEMs that they're making this adoption to our solutions for their manufacturing applications. This is both in the automotive sector and in the aerospace sector. So really demonstrates the success of our vertical focus and the close relationships we have with the target customers. Okay, I was just going to add that you can also see, and we're going to be talking more about the material, the material that we've added to the F123 line. And I think we're going to be talking about those in the future, specifically as they apply to help us continue growing our business on the tooling side of things.

And so would you be -- this is a quick follow-up and I'll wrap here. Is it fair to say that the company would be disappointed if in the next eight to 12 quarters, there were not to be [metals] and certain materials, but material is in significant shift in sort of end market use exposure, given the new products. And so I'm just trying to gauge, is it sort of dipping the toe exposure into the water or you actually you can see sort of a product impact shift to the company over the year as a result of the new products that are coming out and the new materials that are coming out?

Yes, we've spoken quite often in the past on about how the business in general is shifting slowly but surely from prototyping to production and manufacturing. We've already shown some metrics that we've put out, both today and in the past that reflect how excited the manufacturing industry is to adopt the production level, additive manufacturing, solutions that we bring to the market. I would add on top of that that we still have plenty more to come in the future. We have our layered power metallurgy, metal machine, which we've been talking about since last year. We've already deployed two of those as an early bird and the feedback from that is excellent. One of them by the way is in a major OEM. So I think we're well positioned when it comes to this evolution from prototyping to production, both with our current portfolio as well as the expanding portfolio that we'll be delivering later next year and beyond.

Thank you. Our next question comes from Hendi Susanto with G Research. Your line is now open.

Good morning, Elan, Lilach, and Yonah. First questions when macro conditions improve in Europe and Asia. How early or how much lag do you think a return to growth may take place?

Yes, it's definitely a challenging question in terms of, we will not know exactly when the macro economy will improve, but we are doing everything that we can to make sure that once the macroeconomic conditions improve, we will leverage that, and we will definitely show a growth.

And then can you verify whether we should expect that it will lag the macro conditions improvement?

I'm sorry, can you ask the question again. It was a little hard to hear you on that part?

Can you verify whether, let's say, the return to growth would follow or would lag improvement in macro conditions instead of recovering early when we see signs of macro conditions improvement?

It's definitely how the sales cycle takes time. We know already that we are in a major sales cycle and because of the macroeconomic condition, they're kind of being posed. So I think that once the macroeconomic condition will improve, we'll be able to leverage on the process that we already started and accelerated, but it's really hard to predict exactly.

I see. That's helpful. And then my second question, to help us think about year 2020, would you be able to share the timing of new product introductions in 2020? Whether it will be throughout 2020 or it will be toward late 2020 when Formnext takes place?

Right. So I think the most important concept around how 2020 is going to look, is that the impact of the new product introduction is going to take place in the back half of the year. But in terms of specifically tying it to, as you said, a particular event or moment, at this point we're not prepared to give that information.

Thank you. Our next question comes from Paul Coster with JP Morgan. Your line is now open.

This is Paul Chung on for Coster. Thanks for taking my question. So just on gross margins. Can you just talk about the puts and takes on how you're keeping them afloat, kind of despite the weak top-line? If we see some growth next year, what kind of leverage do you have on the gross margin line? I just wanted to get a sense for some margin upside-ish revenues do recover. And then separately, if you could expand on inventory levels which is seen somewhat elevated, what's going on there? And do you expect some accelerating turnover in 4Q? Thank you.

Good morning, Paul. Yes, so we are definitely pleased with our performance with the gross margin. We are very much focused on operational efficiency, and this is what we see it as, although we see the headwind on the revenue and despite that we were managed to have a steady gross margin due to a measure that we took on in operational efficiency as well as product mix. Our product mix benefit from high-end product this quarter, which we leverage on that. Specifically for 2020, we are not yet providing guidance on what going to be the gross margin expectation for next year, but we do focus all the time on the operational efficiency and introduce more and more cost-cutting measure in this area, very important. Regarding the inventory, we do see an increase, a continued increase in our inventory stock. This is definitely a proactive step we took a few quarters ago to improve our inventory level at the region to be available for timely demand as well as improve our logistic cost and optimize our logistic cost and help us on the gross margin. So we do see that as well as ramping up raw materials for building inventory for 2020, ready for new launches in 2020. So this together basically cause the inventory going up. But at the same time, we definitely monitor that and make sure that we optimize our inventory level as we actually introduce new product and phase out some of the old product.

Got you. So more harvesting maybe in the back half of 2020 on inventory. I appreciate it. Thank you.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Elan Jaglom for any further remarks.

Okay. Thank you, everybody. So, thanks for joining our call, and we look forward to speaking with you all next quarter. Thank you.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.