Teleflex Incorporated (TFX) Q3 2012 Earnings Report, Transcript and Summary

Good day ladies and gentlemen and welcome to the third quarter 2012 Teleflex, Incorporated earnings conference call. My name is Stephanie and I will be your coordinator today. (Operator Instructions). I would now like to turn the presentation over to the host of today Mr. Jake Elguicze, Treasurer and Vice President of Investor Relations. Please proceed.

Thank you, Operator, and good morning everyone. And welcome to the third quarter of 2012 Teleflex, Incorporated earnings conference call. The press release and slides to accompany this call are available on our website at www.teleflex.com. As a reminder, this call will be available on our website and a replay will be available by dialing 888-286-8010, or for international calls, 617-801-6888, pass code 77519595. Participating on today's call are Benson Smith, Chairman, President, and Chief Executive Officer, and Thomas Powell, Senior Vice President and Chief Financial Officer. Benson and Tom will make brief prepared remarks and then we'll open up the call to questions. Before we begin, I'd like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events as outlined on slide four. We wish to caution you that such statements are in fact forward-looking in nature and are subject to risks and uncertainties, and actual events or results may differ materially. The factors that could cause actual results or events to differ materially include but are not limited to factors made in our press release today as well as our filing with the SEC, including our Form 10-K, which can be accessed on our website. In addition, during the third quarter of 2012, due to changes in the company’s management and internal reporting structure, the company’s Latin American operation were moved from the Asia and Latin America segment into the North American segment. As a result of this change, the North American segment is now referred to as the Americas segment and the Asia and Latin America segment is now referred to as the Asia segment. With that, I'd like to now turn the call over to Benson.

Thanks Jake and good morning everyone. On today's call, I'll begin with an overview of the results for the third quarter and discuss some strategic highlights. Then Tom will provide you with a more detailed review of our third quarter financial performance, including details of our product line and geographic revenue mix and then finally our outlook for the remainder of 2012. He will then turn the call back to me for some closing remarks, so let's begin with our financial highlights. Building upon the solid performance from the first half of the year, the third quarter of 2012 was another strong quarter for Teleflex with revenues reaching $368.1 million. This represents an increase 1.5% versus the prior year quarter on an as reported basis. However when you exclude the impact of foreign currency fluctuations, sales increased 6.2% versus the third quarter of 2011. During this past quarter, we once again achieved constant currency sales growth across all of our geographic regions as well as in all of our strategic business unit franchises. Turning to gross and adjusted operating margins, they were 49.1% and 16.5% respectively. This represents a year-over-year improvement of 70 basis points at the gross margin line but a decline of 50 basis points on the operating margin line. And although Tom will go through the financial results in more detail in his prepared remarks, I want to add that these amounts were in line with our expectations and the guidance we provided on our last earnings conference call. The year-over-year decline in adjusted operating margins were a result of the four late-stage technology acquisitions that we closed during the second quarter this year. Had we not done these acquisitions, our adjusted operating margins would have approached 17.7%. And finally, adjusted earnings per share for the third…

Thanks Benson and good morning everyone. Revenues for the third quarter were $368.1 million, up 1.5% on an as reported basis. When adjusting for currency fluctuations, revenue grew at 6.2%. Growth in constant currency revenue is largely due to higher volume which contributed approximately 3.5% of growth, sales of recently introduced products which contributed another 1.5% of growth and price increases which contributed another 1.2%. Turning to gross profit and margins, they were $180.6 million or 49.1% in the third quarter of 2012. This compares to $175.6 million or 48.4% in the prior year quarter. The increase in the three months period is primarily due to selective price increases in all segments and lower manufacturing costs in North America. Moving to adjusted operating expenses, adjusted selling, general and administrative expenses were $105 million during the quarter, up from $101.6 million last year. The current year amount is adjusted to exclude acquisition related costs, including a $7.6 million loss on foreign currency forward exchange contracts which were established to hedge the LMA purchase price and $2.3 million in other transaction related costs. The increase in adjusted SG&A for the quarter was largely due to approximately $2.6 million of incremental amortization in operating expenses associated with the four late stage technology acquisitions completed in the second quarter of this year and approximately $1.9 million of higher selling costs driven by increased revenues and the support of new product introductions. Turning to R&D, in the quarter research and development spending was $14.8 million, up from $12.3 million last year. The higher level of R&D spending principally reflects R&D costs associated with the four late stage technology acquisitions and to a lesser degree, increased investments related to vascular access products in North America. The increase in SG&A and R&D was partly offset by favorable…

Thanks Tom. So in closing, I would like to say that our senior leadership team is pleased with Teleflex performance for the first nine months of 2012. I do want to take a moment to thank our employees around the world for their continued hard work and dedication. As a result, each of our franchises in geographic regions continue to perform well and we're continuing the process of creating a platform that will allow for consistent, sustainable and profitable revenue growth and margin expansion for many years to come. That includes the formal prepared remarks section of the presentation. With that, I would like to turn the call back to the operator for questions. Operator?

(Operator Instructions) Your first question comes from the line of Matt Taylor with Barclays.

I just had two quick ones. One was I guess, now you’ve closed the LMA, you put out some pretty juicy targets in terms of the expectations for synergies over the next couple of years. Is there anything that’s changed since you held the last call in terms of how you think those synergies may progress or where they may come from or anything in general that has changed in terms of your target there?

The brief answer is really no. We are in obviously initial stages of implementing the programs that are necessary to get the synergies in 2013 and our look at it right now is exactly what we anticipated.

Great. And you continue to do well on the pricing front, especially in Europe in a difficult environment. Just curious I guess as you look out over the next couple of years certainly you have a little bit of runway left to go to hit your ultimate goal and was just curious as to how you view those efforts evolving as you start to lapse some of these gains that you’ve made?

So our original plan was not to try and take all of the pricing differential in one fell swoop but to split it out over several years. That strategy from everything we can see appears to be working and I would say working a little better than we had anticipated when we first laid it out. So based on everything we can see right now Matt, we continue to expect those pricing gains to materialize between the 250 and 300 basis points getting us to our high-five goals.

Your next question comes from the line of Jonathan Palmer with CLSA. Jonathan Palmer – CLSA: Maybe Benson, can you just elaborate a little bit on LMA and what you have to do over the next 3 to 6 months and then maybe one year plus to really integrate the assets fully into business?

So the initial phase this year really is consolidating the LMA sales and marketing organization within the United States with our own anesthesia sales and marketing business unit. We are going through a process of looking at the best performers in -- from each company as we re-assign people to sales territories. We expect to have some leftover personnel, if you would, from that process and we are then looking to fill any additional vacancies we have throughout our selling organization in the United States to try and accommodate as much of the folks from our two organizations as we possibly can. That process is pretty well underway in terms of the planning part of that process. The additional element for 2013 is really the consolidation of the aspects of LMA which were necessary to run a public company and again that is -- will relatively quickly be compressed into our international business unit structure. We deliberately are holding off the move from dealer to direct organizations for a year. We want to get well calibrated in terms of the contributions that the dealers are making. We do have some basic assumptions about what that's going to look like but are proceeding in a very methodical way in terms of making the actual plant distributor by distributor. Our key here really is to keep as much of the business momentum going as possible. And the third area is, and this is a bit longer range, but LMA had been using essentially an outside manufacturer. We have been engaged in very active discussions with them about their efforts to try and reduce the cost of the products being manufactured. They really had some aggressive programs underway and we are in the short-term tied to some longer-term contracts that were entered into but we expect to see some significant cost improvements in the year 2015. So there is a staged approach to how we’re going about this. I think the plans are well-developed for the 2013 synergy targets and at this point, we fully anticipate to hit those targets in 2013. Jonathan Palmer – CLSA: Appreciate the color. And then two quick ones for Tom. You mentioned the five selling day impact in the fourth quarter. Could you maybe just give a gander in terms of what the percentage impact is going to be, maybe a range there?

Yeah, when we spoke about in the first quarter, that was a six-day impact largely because there was an extra day in the year and we estimate that to be in the range of 5% as a result of being lesser – we’re expecting this to be about 4% impact for the quarter. Jonathan Palmer – CLSA: And then I apologize if you mentioned this already, but at some point you’re going to release restated results for all the various divestitures and restatements of the segments.

So Jonathan, this is Jake. I think that as we move forward here with the filings, certainly of our 10-K we will issue the restated multi-year Americas segment information. Given the fact that we just made a change here in this quarter moving Latin America from the Asia and Latin America segment to now a newly defined Americas segment, we should have some historical financials out there and probably in conjunction with the filing of our 10-K.

Your next question comes from the line of Lawrence Keusch with Raymond James. Lawrence Keusch – Raymond James: I guess, Benson, first question, if you could just – if you exclude price just sort of help us understand your thoughts around the current dynamics for utilization demand in Europe and the U.S.

So I think it's fair to say that we see some uncertainty in some particular European markets at this point. Nevertheless our constant currency growth in Europe for the quarter was 3.5%. It was right in line with what our expectations were and as you know the summer months in Europe were typically somewhat slower than the rest of the year. So it doesn't seem to be having a material effect on our own business lines. I would say as we move to the United States again we don't see the same negative impact that some of our competitors have reported. However, I think we are of the impression that there is a bit of a slowdown in the procedures. Usually that plays itself out in more acute patients showing up at the hospital a few months down the road. But almost across-the-board we saw positive results in the U.S. So again it’s hard to say whether we’re just not seeing the results from the slowdown in procedures or is masked by share gains in somebody's product categories. But it's clearly not having the same impact on us that’s having on others. Lawrence Keusch – Raymond James: And then two quicks, on the converts, just can you bring us up to speed on again how we should think about potential dilution going forward and a way that you might help mitigate some of that? And then the second part of the question but I just want to make sure I am understanding this. In terms of the adjusted earnings-per-share you mentioned some forward FX hedge associated with the LMA acquisition, and again I just want to just make sure I understand what exactly that was for?

Okay. Why don’t I start with the forward hedge? So essentially when we entered into the agreement to purchase LMA, we wanted to take the variability out of the cash used to consummate the transaction. So we entered into forward currency contracts to lock in Sing dollars and U.S. dollars required to finish the deal. And as a result of that, I guess when the contract closed out in fact, the euro had appreciated over that period of time resulting in a loss on those hedges. So we essentially entered into them for the economic reason, now taking the variability out, kind of establishing the level of cash, ends up with an accounting charge associated with the hedge. And then with regard to the dilution from the converts, there is a – perhaps the best way to think about this is at various stock prices what potential dilution would be. So for instance on a $70 stock price dilution would be about 810,000 additional shares or 2% and at $75 of potential dilution of 3%. So that’s the estimate of dilution. Now in terms of ways to mitigate that, one of the benefits of the convert is in fact that while there is additional dilution, there is also a benefit from achieving a lower interest rate all the way. We have not taken any other steps beyond that to actually go back and buy back shares or do anything else to offset the convert dilution at this point in time. Lawrence Keusch – Raymond James: And just to finish that out, so you can’t buy back stock if you chose to do so particularly if the share price moved in excess of $75 and the dilution I think starts to get larger, if you move up toward $100. And also I guess it’s important to note that I wanted to make sure I am right on that is that, again this is obviously not a cash flow dilutive event, it’s a reported EPS dilutive event?

That’s correct.

Your next question comes from the line of David Lewis with Morgan Stanley. John Demchak – Morgan Stanley: Hello, this is actually John Demchak in for David. Had a quick follow-up on LMA. First of all, appreciated all of the detail about the synergies and timing that you guys stated on the call. But I was wondering if you could give us a little more I guess color of some of the assumptions that might be embedded in those, particularly in the amount of synergies that you might be expecting it driving like COGS and SG&A and also an impact to the synergies?

Sort of repeat myself a bit, the primary cost savings in the U.S. really comes from the consolidation of what are now two separate business entities into one entity into the United States and the combination of two sales forces into a single sales force. And while that single sales force will be a little larger than our current sales force, it will certainly be smaller than the combined headcount for the two independent sales forces right now. So the primary savings in the U.S. really comes from a reduced headcount associated with the number of people in the sales organization. John Demchak – Morgan Stanley: On another strategic one, I guess regarding acquisitions as well. When you kind of look at acquisitions that you may be targeting going forward, do you expect them to be more in line with the larger I guess mature company like LMA, or more the late stage technologies that we probably were expecting more of like Hotspur and Semprus? Any color there would be great.

So just sort of to remind the listeners our progress to date we've done four acquisitions this year that we would put into the late stage technology bucket and one in this sort of larger revenue enhancement category. And I think that ratio is about the right capital allocation strategy for us. It is a bit dependent on what's available and how good of a fit what's available is within our product portfolio. And we are more driven by buying things that meet some particular algorithms we had set up than necessarily a set number every year or set dollar value. We’re fortunate now in the sense that there's a lot of activity going on this late stage technology field. So we’re quite busy there and I think we’re fortunate in the sense that LMA really just hit all the right bells for us overseas cash from existing area of strong business interest for us, a lot of synergies and a global market share. So the hard work here isn’t deciding we would like to do more of this, it's actually digging them out and finding them. John Demchak – Morgan Stanley: And one quick last one, kind of as I look at pricing and how it's trended over the past I guess almost 2 years, it looked like you had an initial ramp up to about 800 basis point level starting in 2012 and then now you’ve I guess been more steady in the I guess 100 to 130 basis point positive pricing. Is this sort of level that we should kind of expect going forward or do you think there could be another incremental step up or alternately do you expect it to maybe step down and set a little lower?

And so again our plan here was to take an incremental approach to this. We are convinced at this stage that approach is working and therefore it’s the right one. So we’re not making an effort to try and ramp up pricing beyond the levels. I mentioned on the call that our current performance is a little bit north of our expectations but certainly in the general area of what we expected to see. So I think more of the same is what’s baked into our 2013 assumptions.

Your next question comes from the line of Richard Newitter with Leerink Swann.

I just wanted to go back to – I know you gave a little bit of color around the Asia Pacific performance. That was a very strong number at 32% and I think you were trending in the 10% to 11% in the prior quarter. Can you just maybe tell us a little bit more about what’s happening in that region and how you achieved such a high level of growth this quarter?

So the quarter by quarter comparisons are a little bit difficult to interpret. We did have some events last year as we opened up an Asian distribution center that had some impact on our ability to ship products. And so the comparison from one quarter to another quarter I think gives you a bit of a misleading sense of our trend improvements from second quarter to third quarter this year. However we are focusing I think more attention and more resources on growth in that area. Even though the general economy of China may be slowing, it's not impacting the growth in the healthcare segment at this point in time. And so part of that increase is really just from continued resource expenditure and growth in the region.

And then I think Benson, earlier you had mentioned utilization environment, maybe you’re incrementally more cautious but impacting Teleflex may be a little bit less given share gains. Any – where do you think the share gains are occurring the most and offsetting potential utilization issues? Can you identify that? Is it the surgical division? Is it more in vascular access?

So we’re seeing very good response in vascular access through the VasoNova positioning system. That has not done a lot to move the share needle so far. Now we have expectations as we move into 2013 and 2014 that these early conversions will start to make a much more quantifiable difference as we really start to see a repeatable order pattern developed. In the area of surgery, we are continuing to see good acceptance in our ligation products. That certainly continues to grow and by all indications, particularly the dollar share of the market, our share is increasing there. In respiratory therapy, we had good gains this year, that’s a little bit -- that has a little bit to do with comparison of the flu season from one year to the other. But we have gained a number of GPO contracts in the area of respiratory therapy. And so that is certainly helping us with share gains in that product category as well.

And then maybe if I could just get one last one in there on Europe pricing in particular, any trends or feedback by region specifically whether it’s strength versus others that are allowing you to kind of exceed your original expectations, where is the surprise to the upside coming from for you?

Well, I think a lot of the original presumptions we had in Europe were driven by kind of overall market assessments not just by us but really by a host of competitors and participants in the European market, who reported very in many cases a sluggish sales growth to no sales growth and in many cases negative pricing trends. When we started this effort to improve our pricing, our negative pricing in Europe was almost about 100 basis points a year in the decline. And so we were cautious about what to expect out of that region. We applied the same discipline and strategy that we did in other parts of the globe. We just -- I think we’re internally much more cautious about expecting what he ramp of that might look like, because it's a very bid driven economy in general and we just thought it was going to be harder to move the needle in pricing in the right direction. So this occurred about really two quarters faster into positive territory than we originally planned. But essentially we are employing the same sort of strategy there that we are in the rest of the world.

Your next question comes from the line of Chris Cooley with Stephens.

If we could, Benson, could you maybe just walk us through LMA in the past, what do you see there that you can help to drive growth more than that 5% range going forward? They already have about 85% share within that larengeal mass segment. Help us think about kind of maybe geographic expansion, pricing and products and how those contribute to growth? And then I just had another quick follow up. Thanks much.

So I am going to break that up into two kinds of questions and one is geographic expansion. There certainly China is the single biggest opportunity from a market size and just the original substitution of an LMA type product for an endotracheal tube in shorter duration general anesthesia procedures. We actually spent a lot of time looking at what we thought was going to be the development of those products in China prior to making the acquisition and see that as the principle area for geographic expansion. The other expansion really relates to the continued use of LMA masks to replace endotracheal tubes in surgical procedures of longer duration. There has been some reluctance in the United States, for example, to go as far as other countries. In the UK, for example, they use an LMA type product and about 50% of the cases in the United States it’s about 35% of the cases. This is driven about around some concerns -- about regurgitation during a longer procedure and a lot of the development efforts in the LMA product line are really to address those concerns and minimize the risks associated with its use in longer procedures. We are quite confident that if those developments meet our expectations will be met with an enthusiastic audience because LMA's solved a lot of problems that are created by endotracheal tubes. So we certainly see some benefit in trying to get to the same usage rate with this current product line that we see in in the UK for example, but I think more of our expectation is around addressing some of those user concerns or issues with some improvements to the product line.

And as a quick follow up, in the past in particular as you referenced your domestic – your Americas business now, you have discussed the contribution from both GPOs and IDNs as a percentage of volume in that growth rate. Could you just update us as we think about the Americas in terms of the contribution, maybe in the aggregate from both GPOs and IDNs combined and also where you are in terms of contract wins year to date?

So we’re going to dig out the number, I think, of contract wins year to date. Our current level of sales in the United States is about, 50% of our volume goes to GPO contracts. That has grown a little bit as we have gotten more and more awards in the U.S. but not substantially different from what we reported on our last quarter. The last numbers we looked at showed that our growth rate within that segment of products for the United States was around 6%, which was at least a full two percentage points greater than our average growth rate in non-GPO kinds of products. And again I don't have that specific breakdown yet for the third quarter, but we would expect a continuation of that trend as our GPO awards have only increased from one quarter to another. Relative to the total number of GPO contracts this year –

Chris, from a GPO perspective on a year to date basis we have won 17 awards through the end of the third quarter. That includes the five additional awards that we won in the third quarter alone. From an IDN perspective we’ve won 14 awards on a year to date basis through the third quarter. And again that includes the two additional awards that we won in the third quarter.

Your next question comes from the line of Jim Sidoti, Sidoti & Company. Jim Sidoti – Sidoti & Company: Well, first of all, how did you break out with the storm and how do you expect that to affect operations going forward?

Thanks for asking. Our corporate headquarters are in Limerick and we obviously have two other locations, one in Reading and one in Mount Holly that were sort of within the path of the storm. As far as we understand right now we did not experience any significant damage to any of our property and we have no reports of any of our employees that were injured. We do have a number of people that had their power interrupted at their homes. We still have some difficulties people just commuting to work because the tree’s down on the roadways and some of those issues. Manufacturing was interrupted at the Mount Holly facility and the Reading facility for a full day. Yesterday at 2:30 manufacturing resumed at Reading and I don't have the immediate details of the resumption of manufacturing in Mount Holly. At this point we would expect the biggest impact likely to come from the delay of procedures and hospitals within the New York, New Jersey area, just trying to get back up and running and deal with their current patient populations. There is within that community that we’re looking at about 29, what we would call major health care facilities that look like there will have some impact, and I would say that's 29 out of what we would consider to be 1000 similar major institutions in the United States. So we expect that their procedure rates will be slow for the next several weeks as they regroup. Jim Sidoti – Sidoti & Company: Well, I am glad to hear everybody is okay, and I can relate to power and commuting issues but all in all, I think we’re all pretty lucky.

We thought that way. It was a lot less impactful here than just the state over. Jim Sidoti – Sidoti & Company: Right. So now the guidance for revenue for 2012, does that include the contribution from LMA in the last couple months of the year?

Yes, it does. Jim Sidoti – Sidoti & Company: And so I am not sure what you broke out of the first quarter because of the divestiture, can you just give us a range assuming currency stays where it is today, where you think revenue will land for the fourth quarter?

So typically we don’t give quarter to quarter revenue projections. We are anticipating again with LMA that the year will end up between that 6% and 7%. LMA constitutes about 1% of that and we were -- our previous range was 4% to 6% and without LMA and we still are estimating that we’re going to be at the higher end of that range on a constant currency basis for growth. Jim Sidoti – Sidoti & Company: What was the revenue in the first quarter excluding the divestiture?

First quarter of 2012 revenues were right at $380 million. Jim Sidoti – Sidoti & Company: And that’s without the OEM divestiture?

That’s correct. That’s first quarter 2012. Jim Sidoti – Sidoti & Company: Right and then the second quarter you broke that out because of the discontinued operation I believe?

Right. Jim Sidoti – Sidoti & Company: And R&D it seems like it’s ticked up a little bit in the quarter and it will tick up because of the recent technology acquisitions. Where do you expect that to fall – can you give us a range in the fourth quarter and 2013 just as a percentage?

Yeah, most of those acquisitions which contribute to that were completed in the second quarter. So the third quarter expenditure represents a pretty good approximation of what the fourth quarter is going to look like. Jim Sidoti – Sidoti & Company: And then unless there is additional deals around that level of 2013.

Correct. Jim Sidoti – Sidoti & Company: And then just the last question, have you gotten any more clarification on how to account for the medical device tax and do you expect that to kick in at the beginning of the year or do you think there is any chance that gets to push back a couple quarters?

So at this point, we are planning on it being implemented January 1. There is -- I was just at a CEO meeting for healthcare executives about this a couple weeks ago. There is some increased awareness of the consequences that this tax is going to have in the Senate right now. There are some states and have very significant medical device concentrations in them, New Jersey, Massachusetts, California which normally have Democratic senators, there seems to be some favorable movement in at least recognizing the consequences of this. And some people are of the opinion that they may seriously take up the bill that the House has already voted on. From our perspective, we have to prepare for the worst and at this point as we look at the impact on 2013, should it go into effect for the full year, which again we’re planning on would be about $0.25 a share to us. Jim Sidoti – Sidoti & Company: And where would all that go in the P&L?

That will go into operating expense. Jim Sidoti – Sidoti & Company: As part of SG&A or

Yes.

Your next question comes from the line of Anthony Petrone with Jefferies Group. Anthony Petrone – Jefferies: Just a couple on LMA. Can you provide us again with the geographic revenue mix currently and then you alluded to that sort of shifting going out over the next few years? And if you sort of bring that down to the P&L with the tax benefit as to Teleflex today assuming that most of the revenues are generated overseas?

The revenue mix largely mirrors Teleflex’s revenue mix with about half of their sales in the U.S. and about half of their sales outside the U.S. We -- because of the Asian markets we expect the ex-U.S. segment at least over the first year or two to grow a little faster than the U.S. segment and we expect some shift in that as the new products enter into the picture that we think will have more of a home and applicability in the U.S. market. Anthony Petrone – Jefferies: That will result in a favorable tax benefit if we look toward 2013 or is it just a similar sort of tax structure that we have today?

Yeah as we look towards 2013 our expectation is that the tax impact on adjusted EPS is actually about that we expect, actually somewhere in the low 20% range. So that would be a benefit versus where we are currently running at the company excluding LMA. Anthony Petrone – Jefferies: And then one strategic question for LMA if I may. You have a – the price increase campaign going on across the portfolio and LMA certainly has a large share of the airway management market with larengeal masks. But it sounds like the approach here is to expand that share I guess beyond the 35% of applicable procedures. Does the price increase sort strategy that you have with the remaining portfolio play into the LMA assets that you acquired?

Not nearly as much so. LMA is already the premium pricer in the market segment. Most of the growth that we expect will come from upgraded versions of the product as opposed to pricing.

With no further questions in queue, I will turn the call over back to Mr. Jake Elguicze for closing remarks. Please proceed.

Thank you, operator. And thanks everyone for joining us today. I’d also like to remind everyone that Teleflex will be holding an analyst day on December 13 in New York City at the New York Palace Hotel. The event will begin at 8 AM and will last approximately 4 hours and we hope that many of you who follow Teleflex will be able to attend. And thanks again for joining us this morning. This concludes the Teleflex Incorporated quarter earnings conference call.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and have a great day.