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Edited Transcript of IDCC earnings conference call or presentation 2-May-19 2:00pm GMT

Q1 2019 InterDigital Wireless Inc Earnings Call

KING OF PRUSSIA May 8, 2019 (Thomson StreetEvents) -- Edited Transcript of InterDigital Wireless Inc earnings conference call or presentation Thursday, May 2, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kai Olavi Öistämö

InterDigital, Inc. - COO

* Patrick Van de Wille

InterDigital, Inc. - Chief Communications Officer

* Richard J. Brezski

InterDigital, Inc. - CFO & Treasurer

* William J. Merritt

InterDigital, Inc. - President, CEO & Director

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Conference Call Participants

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* Charles Lowell Anderson

Dougherty & Company LLC, Research Division - VP and Senior Research Analyst

* Eric Christian Wold

B. Riley FBR, Inc., Research Division - Senior Equity Analyst

* Matthew Evan Galinko

National Securities Corporation, Research Division - Senior Research Analyst

* Scott Wallace Searle

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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Good day, and welcome to today's InterDigital First Quarter 2019 Earnings Conference Call. As a reminder, this call is being recorded, and it is now my pleasure to turn today's call over to Mr. Patrick Van de Wille. Please go ahead, sir.

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Patrick Van de Wille, InterDigital, Inc. - Chief Communications Officer [2]

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Thank you very much, Terry. Good morning, everyone, and welcome to InterDigital's First Quarter 2019 Earnings Conference Call. With me this morning are Bill Merritt, our President and CEO; Kai Öistämö, our COO; and Rich Brezski, our CFO.

Consistent with last quarter's call, we'll offer some highlights about the quarter and the company and then open the call up for questions.

Before we begin our remarks, I need to remind you that in this call, we will make forward-looking statements regarding our current beliefs, plans and expectations, which are not guarantees of future performance, and are subject to risks and uncertainties that could cause actual results and events to differ materially from results and events contemplated by such forward-looking statements.

These risks and uncertainties include those set forth in our earnings release and our quarterly report on Form 10-Q for the quarter ended March 31, 2019, filed this morning and, from time to time, in our other filings with the Securities and Exchange Commission.

These forward-looking statements are made only as of the date hereof, and except as required by law, we undertake no obligation to update or revise any of them whether as a result of new information, future events or otherwise.

In addition, today's presentation may contain references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our first quarter 2019 financial metrics tracker, which can be accessed on the Investors section of our homepage, www.interdigital.com, by clicking on the link that says Financial Metrics Tracker for Q1 2019.

With that taken care of, I'll turn the call over to Bill.

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William J. Merritt, InterDigital, Inc. - President, CEO & Director [3]

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Good morning, everyone, and thank you for joining us on the call this morning.

As you saw from this morning's press release, we delivered a good quarter, highlighted by solid recurring revenue and [careful] expense management. We also continued our strategic evolution of the company, largely completing the integration of our first transaction with Technicolor and then taking the significant but very logical next step of moving to acquire Technicolor's research and innovation unit in France. We expect to close that deal in the first half of this year.

At that point, the strategically shaping of the company that we have been discussing for a number of years will be complete, evolving us from a single technology company focused on a single market, connected devices, to a much larger company with substantial innovation strength in 2 key technologies, video and wireless, operating in 3 massive overlapping and complementary markets: wireless devices, IoT and consumer electronics.

And then becomes all about execution, so let me talk about our operational priorities for the year of which there are 3: sign Chinese OEMs to new patent license agreements, sign new licenses under our new consumer electronic licensing program and manage our cost back to 2017 levels. Kai and Rich will provide some details on each of these, but let me give you just a few highlights.

On the Chinese OEM licensing initiatives, we are engaged with all the major unlicensed companies and leveraging resources across the company to bring these deals to closure. The effort involved not just our licensing teams, but our R&D groups, our government relations team, our executive management and, where appropriate, our Board. Obviously, this effort is and will remain our top priority as we understand the extreme strategic importance of signing the right deals. As I mentioned before, the overall tone around IP remains very positive driven in part by the trade negotiations that are underway between the U.S. and China where IP sits at the epicenter. Converting that positive tone to value-driving deals is our focus, and we are looking to report positive results this year.

On a separate note, we are very encouraged by the success of Avanci, the IoT patent licensing platform that we're a founding member of. In April, Avanci announced new licenses with Audi and Porsche. And slowly but surely, Avanci is proving that a single-stop shop for cellular IP can be very valuable to customers and inventors alike. That will create significant value for us over time.

On the consumer electronics play, we have taken what was largely a shuttered licensing program and successfully restart it. We had a very solid first quarter restructuring a license with a set-top box manufacturer that provided a meaningful revenue contribution to the quarter and also successfully engaged with the vast majority of the TV and set-top box manufacturers. We are encouraged by the response to date, and we would expect to deliver additional value during the course of the year.

Lastly, as Rich will explain, we continue to make great progress on managing our expenses. As we have mentioned with regard to our strategic journey, the simplest way for us to drive the greatest value is to move the top line up while holding the expense line in check. We are well on our way to doing just that.

With that high-level view, let me turn the call over to Kai.

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Kai Olavi Öistämö, InterDigital, Inc. - COO [4]

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Thanks, Bill, and good morning, everyone, and thanks for joining us. I'd like to provide a review of the main operational points during the quarter. I'll start with what's the biggest on our dashboard, which is the handset licensing.

There, we continue to engage with unlicensed companies against an obvious backdrop of broad trade negotiations between the U.S. and China. With those trade talks -- while those trade talks don't have a direct impact on our negotiations, any element of uncertainty can certainly bring some delay. That being said, we are optimistic that both countries will reach an agreement, and that importantly, intellectual property protection will be a centerpiece.

The first quarter of any year is also a very important quarter for the mobile business since the industry comes together for the Mobile World Congress in Barcelona. Our presence there this year was our most successful yet in every respect. Our experts twice spoke in the main stage, a tremendous result for any company. And our many demos, including some very exciting demos, completed in conjunction with Technicolor R&I and featuring their video technology showed that our research is leading edge and relevant as ever.

A lot also happened behind the scenes, and our licensing, corporate development technology and government relations teams were able to use the event as an accelerated backdrop for important meetings.

As highlighted by our co-demonstrations in Barcelona, one of the primary areas of focus right now is finalizing the integration of Technicolor acquisition, and we're to close the second of those transactions, the acquisition of Technicolor R&I division. That integration is proceeding to completion very, very well and includes the implementation of new patent management system that will bring tremendous visibility and efficiency to what is a very important part of our business. Right now, we are expecting to close the second transaction by the end of second quarter, and that will make us one of the largest long-term R&D and licensing companies in the world.

That integration and expanded footprint makes it particularly useful that we added Henry Tirri as a CTO almost exactly a year ago and recently expanded his role in leading our research efforts. With his background at Nokia and then additional experience as a CTO in consumer and business electronics at HARMAN, Henry is ideally suited to the role of leading both InterDigital Labs and the Technicolor R&I team once the transaction closes.

On the consumer electronics side, we began engaging with companies that implement technologies of our new combined portfolio. Like many companies involved in video coding as well as patent pools in space, we are at the stage where many of those meetings are exploratory and involve mainly price discovery.

Our current book of business, while obviously not as big as our core handset licensing business, is nonetheless meaningful and coupled with a tight expense control can be a profit driver. Our goal is to complete some deals, even small ones, in 2019 and early 2020, which will give us an ability to communicate to investors some data-driven estimates of market potential for us as a business.

Even at this stage, we are very confident that it is a business with tremendous potential.

So with continuation of integration and execution on the business plan, the pending completion of acquisition of Technicolor R&I team and the work to integrate their efforts with our InterDigital Labs team and our efforts to expand our core business, there's a lot of exciting work going on at InterDigital.

With that, I'll turn it over to Rich.

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [5]

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Thanks, Kai.

We delivered a solid quarter in Q1 2019 with growth in recurring revenue, careful cost control as we continue our integration and value returned to shareholders. Recurring revenue at $74 million saw a 16% increase compared to first quarter 2018 and included a $4.9 million contribution to recurring revenue from consumer electronics.

While obviously not as big as our core business, these numbers show that the new consumer electronics business is beginning to have a meaningful impact. As Kai said, our near-term goal for the CE business is to sign some deals in 2019 and use that data to size the market for investors.

On the nonrecurring side, we recognized a $5.5 million charge as a contra to revenue driven by the restructuring of the license arrangement with a long-term customer.

Moving on to costs. We're able to bring operating expenses in a little lower than we anticipated, although that was driven by lower integration costs. Excluding integration and intellectual property enforcement costs, we're about on par with Q4.

Last quarter, we reported our recurring cost to run the business was roughly back to 2017 levels, and I'm happy to report that, that continues to be the case.

As we move closer to the close of our acquisition of Technicolor's research and innovation division, which we hope to see as early as Q2, we will provide a better idea of where our Q2 cost might come in. More importantly, I do want to reaffirm our plan to reduce costs post-acquisition, such that we exit 2020 in line with 2017 levels as we've previously explained.

Finally, since the start of the year, we invested another $130 million to buy back almost 2 million shares of our common stock, bringing our outstanding share count to under 32 million.

Looking back a bit more broadly, the last couple of years have marked an important period of investment and cash management. In roughly that time, we announced 2 significant acquisitions, one that closed and another we expect to close soon. Since mid-2017, we've also paid out more than $80 million in dividends. And in addition, we've increased our buyback authorization by $200 million and repurchased more than $250 million in shares of our common stock. We've continued to buy back stocks since the most recent quarter end. And most especially, we look forward to earning return on these investments on behalf of our shareholders.

I'll now turn it back over to Patrick.

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Patrick Van de Wille, InterDigital, Inc. - Chief Communications Officer [6]

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Thanks very much, Rich. Terry, if we can open the call up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Looks like our first question will come from Eric Wold with B. Riley.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [2]

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I guess first question, just want to make sure I understood the comment around the $4.9 million contribution to recurring revenue from CE in the quarter. Is that -- I know you signed a deal in the quarter, so is some of that a kind of a make-good past sales component? Or is that a run rate going forward? Just want to make sure I understand how that looks.

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [3]

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Yes. Eric, so that's a recurring number. So it doesn't include past sales. And I'll note that we did have contributions in Q4 from the business, so it's not all growth sequentially but obviously year-over-year in comparison to the period when we didn't have the acquisition. So it's a recurring number based on both product shipments that happened during the period. And then to the extent that there's variable estimates that are made period-to-period, you also true those up.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [4]

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Got it. And then thinking about the IoT business, can you update us sort of where you stand on that kind of stand-alone versus including in Avanci as well? What we need to see this year in terms of deals getting signed, kind of efforts around Avanci to kind of get comfort in that long-range guide that you gave a couple of years ago or this confidence in a path towards numbers around that level in the next couple of years?

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William J. Merritt, InterDigital, Inc. - President, CEO & Director [5]

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Sure. So I'd say there are a couple of pieces there that contribute to the overall IoT business. So the one you noted is Avanci, and that's an important component of that. So it's great to see them having traction now with the automotive manufacturers. We hoped to see this, and we're seeing now indications that they start to have a little bit of a steamroll effect as more people sign up. So that will be a nice contributor towards the overall goal.

Avanci, as you know, also has other aspects of the IoT market that it was going to explore. And so that's another area we'd like to start to see some element of traction from them during the course of the year.

Separate from that in the IoT business was the sort of the middleware layer, and that was what was being pursued by the company. And now in combination with Sony, there's 2 pieces to that. There's a patent licensing piece, and there's a software piece to that. So I think, there, what we want to see is a further market uptake of the oneM2M solution. So Chordant is out there advocating that. I think if we see and -- we continue to see positive indications there and I think if we see more of that, it will tell us that the portfolio that we've built that supports the oneM2M business is a solid, going-forward portfolio. I wouldn't expect a lot of patent licensing revenues per se in that space this year but more just the adoption of the standard.

And then beyond that, there'll be a level of contribution coming from Chordant sales as well, and they continue to have success in terms of engaging with customers.

So I think it's some element of revenue growth. I'd say most of that will come from Avanci, a little bit from Chordant, but more -- the second part would just be market indications, and that's mostly around oneM2M.

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Eric Christian Wold, B. Riley FBR, Inc., Research Division - Senior Equity Analyst [6]

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Okay. And then 2 quick questions kind of on the Chinese OEM side. With the OEMs in China that you're still looking to sign initial handset deals with, would all of those benefit from the inclusion of Technicolor in the discussions or some of them kind of not seeing the value there? And would you frame the discussion that's kind of improving since Technicolor was part of the mix? And then on Huawei, kind of on the same bucket, so to speak, any known procedural dates? I looked in the 10-Q, nothing in there different, but any known procedural dates on the calendar around the complaint filed by Huawei?

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William J. Merritt, InterDigital, Inc. - President, CEO & Director [7]

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So I'll handle the second one. I'll give the first one back to -- on Huawei, there's no procedural dates yet. So -- and I'll give it back to Kai in terms of Technicolor's contribution to the overall discussion.

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Kai Olavi Öistämö, InterDigital, Inc. - COO [8]

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And that is very helpful in all of negotiations, and it is important for any potential handset licensee as video technologies are prevalent in every single smartphone today, and so it's equally important for any of the unlicensed people in China.

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Operator [9]

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Our next question will come from Charlie Anderson with Dougherty & Company.

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Charles Lowell Anderson, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst [10]

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So I want to start on the consumer electronics side that you mentioned, sort of roughly the $5 million of recurring revenue. I wonder if you can maybe just help us unpack that a little bit in terms of what types of devices you're covering there right now. I don't know if there's any customers you'd be willing to call out at this time.

And then as you started to sign -- I think it sounds like you started to sign a deal, can you maybe help us a little bit on maybe the content or royalty per device or anything just to sort of build up to what the TAM could be there. And then I've got a follow-up.

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [11]

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Yes. Charlie, this is Rich. So really there's -- at this point, I'll just note that it's a much more disaggregating market than the handset market. So it's not at this point in time large deals driving it in the aggregate. It's still just up to $5 million. But we certainly would plan, as Kai indicated and I indicated in my remarks, to unpack that a little bit more once we get some more traction in the market and set some goalpost up.

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Charles Lowell Anderson, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst [12]

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Great. And then for a follow-up. I noticed the buyback activity, obviously very strong. I think by my count, it was maybe the strongest in at least a decade. I wonder if you could maybe just give us a little bit of color on sort of why you're more aggressive than normal on the buyback.

And then secondarily, with the maturity date coming up on the convertible debt, I wonder if you could give us any updated thoughts on how you're going to approach that. I know last time, you guys basically did kind of -- a bit of a refinancing there. Any incremental color on how you're approaching that?

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [13]

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Sure. So let me start with the buyback. I always say not to focus on small time frames when you look at our buyback activity. Look at the bigger picture because the bigger picture certainly shows a long-term trend of returning capital to shareholders through buybacks. Certainly, that's reflected, as you commented, in the near term. But at this point, we have acquired the Technicolor licensing business and paid some cash for that in 2018, and that certainly was a marker. And we evaluate that every period, look at our cash balance. And ultimately, a number of different factors led to us buying at the levels that we've had.

With respect to your second question on the convert, the only thing I'll say there is, certainly, we appreciate the balance sheet strength. It is part of why we're able to be aggressive in buybacks from time to time. So that's always something that we're looking at. We'll continue to evaluate that.

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Charles Lowell Anderson, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst [14]

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Great. And then if I could just sneak in one more for Bill. Obviously, we had a pretty landmark deal signed recently between Qualcomm and Apple on the IP side. I wonder if there's any read-through from your perspective as to whether that's helpful or hurtful to all the peers in the industry.

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William J. Merritt, InterDigital, Inc. - President, CEO & Director [15]

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So I think it's helpful. I think anytime intellectual property is validated, as it was in that case, it's a strong indication for the rest of the market. There was also comments by Qualcomm yesterday that they felt that, that gave them some tailwinds in their discussions with Huawei, so that's so helpful to us as well. And so I think, frankly, all good on that front.

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Operator [16]

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(Operator Instructions) Our next question will come from Matthew Galinko with National Securities.

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Matthew Evan Galinko, National Securities Corporation, Research Division - Senior Research Analyst [17]

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So I guess I think in the Q, you might have mentioned that the revenue split might change for consumer electronics after the secondary deal closes. So with that consumer electronics revenue stream that you're now generating that's, I guess, recurring -- I guess for a deal you signed prior to that acquisition, would you -- would the revenue split change until you subsequently get additional revenue from existing agreements starting Q3? Is that the right way to think about it at this point?

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [18]

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Yes. So Matt, I think what you're referring to is the revenue -- what we call the revenue share, which is really under the original agreement in the consumer electronic market, which has been opened up to us by that acquisition. We've agreed to share a portion of revenue net of estimated cost with Technicolor. So that will get modified once we close the second acquisition. At this point, it's not as relevant based on the level of revenue that we have today, but it could be in the future. And we can -- see if we can provide some more detailed description of that in the future as well.

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Matthew Evan Galinko, National Securities Corporation, Research Division - Senior Research Analyst [19]

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Okay. And then it sounds like you have a fairly hands on -- or all hands-on effort to try to get licensing done in China now. Can you maybe project or give us some color on if we don't get a trade agreement done, if sort of trade hostilities continue, how big of a blocker is that going to be for you? How much is sort of within your control to get something done in the kind of existing environment? And how dependent are you on sort of external resolution of conflicts to culminate some deals in China?

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Kai Olavi Öistämö, InterDigital, Inc. - COO [20]

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So as I said on my remarks, so getting the trade deals done would remove one uncertainty in the marketplace, and hence, it would be helpful. But it is not a blocker in any which way that people are signing IP deals in the current environment as well.

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Operator [21]

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That next question will come from Scott Searle with Roth Capital.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [22]

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Just to back clean up here on a couple of things. Looking at the contra revenue charge, could you give us some idea of the impact of that going forward, that customer? How big they were in terms of fixed or per unit royalties? To help us kind of normalize the models going out. What that baseline revenue run rate should be on the wireless side of the equation?

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [23]

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Yes. So Scott, that's basically reflected in our recurring revenue for the period. So the recurring revenue would reflect the recurring impact associated with that.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [24]

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So wait, so just to clarify, Rich, so that's going to be a $5.8 million quarterly impact going forward?

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [25]

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No. No. No. That was a onetime nonrecurring impact. To the extent there was any impact from the restructuring of the arrangement, that impact is -- the recurring impact for the quarter was reflected within our recurring revenue.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [26]

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Okay. But what was -- could you give us some idea, though, to normalize what that had been on a quarterly basis and what that will be then going forward, right? Has that relationship been terminated? It sounds like it's been modified, right? So what is the actual impact to recurring revenue if I'm looking at going into the June quarter?

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [27]

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Yes. So what I'd tell you is that look to first quarter for that because the first quarter would show the recurring impact of that as well as everything else. So the -- I'm trying to see how I could say this better. It's a smaller license agreement that I can't get into the confidential terms on, but what's important to know is the onetime impact has been taken that's in recurring revenue and it's behind us now. The recurring impact -- to the extent there was recurring impact, that was basically reflected in the first quarter results. In essence, as if that impact, as if that was in there from January, 1/1.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [28]

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Got you. So wait, just to clarify, so if I back out that $5.8 million contra revenue charge, that is the normalized recurring revenue run rate to be working off of, correct?

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [29]

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Yes. Yes. Because that contra revenue charge, we took to nonrecurring revenue. So if you go to the metrics, you'll see it broken out. The recurring is $74.2 million, and the nonrecurring is negative $5.5 million. So as with any quarter, you can look at the nonrecurring and say, okay, that's relevant to this quarter, but it's not necessarily relevant going forward. The more relevant number going forward is the recurring revenue number.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [30]

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Got you. No. That's helpful in calibrating. On the CE relationship, you said $4.9 million this quarter. You mentioned there was some in the fourth quarter as well. Could you give us an idea of what that looked like? And then as it relates to the revenue share back to Technicolor, is that reflected in your patent administration costs?

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [31]

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So with respect to the first part of the question, that is -- it's definitely an increase over the fourth quarter. I'm not sure if we disclosed what the fourth quarter contribution from the CE business was. I almost -- I want to say that we did, but I don't have it at my fingertips. But I can definitely tell you, it's a sequential increase quarter-over-quarter.

With respect to the rev share, because it's net of an estimated level of expenses, that we haven't had a rev share to date there.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [32]

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Okay. And I would presume just kind of based on the revenue line items, fixed per unit royalty -- that the CE relationship is a fixed royalty arrangement or a fixed license arrangement?

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [33]

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Well, there's more than one CE relationship. So like the other business, they could be fixed or a variable. They probably tend to be more variable.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [34]

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Got you. And just following up on the cost front. I think you said on the call that the OpEx structure normalized for charges was basically flattish from the December quarter. Just wanted to clarify that because your SG&A and development were up about $2.5 million sequentially. Patent admin was up about $3.5 million sequentially. I assume there's something in there for the CE relationship and royalty paid back. But is that kind of the rough ballpark of nonrecurring items for charges and other fixed costs and they're related to the Technicolor integration?

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Richard J. Brezski, InterDigital, Inc. - CFO & Treasurer [35]

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Yes. So that's right. And I think we've defined in the past kind of what goes into that metric. The sum total of all those things is basically flat in Q1 versus Q4, and therefore, in line with 2017. The other thing that you didn't mention that I'll highlight is litigation is also pulled out of there as well because that's something that can move up and down and not really be reflective of our cost base, just more the stage of the litigation we might be in.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [36]

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Got you. And just lastly, looking at Technicolor, I was wondering if you could give us some idea, more qualitative, in terms of the level of engagement in that pipeline right now. I know you're just kind of getting out there and starting to shake the trees, but you've already had some pretty good results early on. And I know you don't want to commit to any sort of royalty numbers or unit numbers, but just kind of wondering if there is some softer metrics qualitatively in terms of how big that pipeline, number of companies that you're engaging with, how we should be thinking about that over the next 12 months.

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William J. Merritt, InterDigital, Inc. - President, CEO & Director [37]

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So I think the softer indicators would just be the number of meetings and the level of engagement. So as an example, those industry group within China that we're meeting with, that gives you access to that whole market or the people that participate in that particular consortium. There is meetings going on with the major manufacturers of TVs as well, as we said all along. I think TV piece is the bigger value piece there. Set-top box piece is a nice value-add. But just observing the level of activity, to me, is very encouraging. As we indicated in the script, there's a bit of price discovery that'll go on this year. But so far, we're very happy with what we're seeing.

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Operator [38]

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I'm showing no further questions in the queue at this time.

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Patrick Van de Wille, InterDigital, Inc. - Chief Communications Officer [39]

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Thanks very much, Terry. Thanks, everybody, for joining us today, and we look forward to being in touch with you again at our Annual Meeting in June.

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Operator [40]

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Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.