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Edited Transcript of KTCC earnings conference call or presentation 30-Oct-18 9:00pm GMT

Q1 2019 Key Tronic Corp Earnings Call

SPOKANE Dec 5, 2018 (Thomson StreetEvents) -- Edited Transcript of Key Tronic Corp earnings conference call or presentation Tuesday, October 30, 2018 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brett R. Larsen

Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer

* Craig D. Gates

Key Tronic Corporation - President, CEO & Director

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Conference Call Participants

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* George Melas-Kyriazi

MKH Management Company, LLC - President

* Sheldon Grodsky

Grodsky Associates, Inc. - President & FINOP

* William J. Dezellem

Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer

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Presentation

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Operator [1]

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Good day, and welcome to the Key Tronic First Quarter Fiscal 2019 Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Brett Larsen. Please, go ahead, sir.

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [2]

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Good afternoon, everyone. I am Brett Larsen, Chief Financial Officer of Key Tronic. I would like to thank everyone for joining us today for our investor conference call.

Joining me in our Spokane Valley headquarters is Craig Gates, our President and Chief Executive Officer.

As always, I would like to remind you that during the course of this call, we might make projections or other forward-looking statements regarding future events or the company's future financial performance. Please remember that such statements are only predictions. Actual events or results may differ materially. For more information, you may review the risk factors outlined in the documents the company has filed with the SEC, specifically our 10-K, quarterly 10-Qs and 8-Ks.

Please note that on this call, we will discuss historical, financial and other statistical information regarding our business and operations. Some of this information is included in today's press release, and a recorded version of this call will be available on our website.

Today, we released our results for the first quarter ended September 29, 2018. For the first quarter of fiscal 2019, we reported total revenue of $125 million -- $127.5 million, up from $117 million in the prior quarter and from $109.2 million in the same period of fiscal year 2018.

We adopted the new revenue recognition standard, beginning July 1, 2018. The impact, related to the adoption of the standard for the first quarter of fiscal 2019, includes the accelerated recognition of approximately $4.9 million in revenue in the fiscal quarter of 2019, primarily due to the change from point-in-time to over time recognition of revenue for certain customers as the standard requires.

Excluding this benefit, revenue for the first quarter of fiscal 2019 would have increased 5% from the prior quarter and 12% for the same period of fiscal 2018. We saw most of our new programs continue to ramp. Once again, our overall revenue and productivity was adversely impacted by industry-wide shortages in key electronic components.

For the first quarter of fiscal year 2019, gross margin was 7.5% and operating margin was 2.0% compared to 7.2% and 1.1%, respectively, in the same period of fiscal 2018.

Our gross margin was adversely impacted by increased utility rates in Mexico due to recent regulatory changes and the continued component shortages negatively affecting productivity, coupled with the ramp-up costs associated with our new program wins. We expect to see gradually improving gross margin as shortages in electronic components are mitigated and our new programs move into full production, further utilizing existing production capacity.

We plan to further invest in production equipment that will reduce labor and energy costs, while preparing for future growth and enhancing our strategic footprint. For example, in the next few months, we will be relocating and adding new equipment in Arkansas, and we are now leasing additional contiguous space for our facility in Minnesota.

Internationally, we are also looking to possibly augment our global footprint with another manufacturing location in Asia due to current market conditions and tariffs.

For the first quarter of fiscal 2019, we had net income of $1.6 million or $0.15 per share compared to $0.4 million or $0.04 per share for the same period of fiscal 2018.

Turning to the balance sheet, we continued to maintain a strong financial position. Despite the continued ramp of new programs and delays in shipments due to component shortages, we managed to lower our inventory by approximately $10.8 million or 10% from the previous quarter, excluding the adjustment due to an arbitration settlement.

We expect to see our net inventory levels gradually come more in line with increasing revenue levels as component delays are addressed and new program ramps continue in coming periods.

Trade receivables at the end of the first quarter were down 3% from the previous quarter. We expect our consolidated DSOs to remain around 40 to 45 days in coming quarters.

By carefully managing payables during the year, we reduced our total debt by $5.7 million compared to the first quarter of fiscal 2018. We hope to accelerate our reduction of debt in coming quarters.

Over the longer term, we expect to continue to pay down the term loans and revolving line of credit. We also recently renewed our term loan and revolving line of credit on favorable terms.

Total capital expenditures in the first quarter of fiscal 2019 were approximately $1.7 million. We continue to invest in our production facilities, SMT equipment and sheet metal and plastic molding capabilities, as well as improvements in our facilities in Arkansas and Minnesota. We plan to have approximately $10 million in capital expenditures in fiscal 2019 to keep up with recent new program wins and invest in future growth.

Moving into the second quarter of fiscal 2019, we expect more of our new customer programs to ramp and move into production. Taking these factors into consideration, we expect that the second quarter of fiscal 2019 will have revenue in the range of $120 million to $125 million. For the second quarter of fiscal 2019, we also anticipate earnings in the range of $0.13 to $0.18 per diluted share. This assumes an effective tax rate of 20%.

In summary, we're encouraged by the prospects for future growth in revenue and earnings. The overall financial health of the company is strong, and we believe that we are well positioned to win new EMS programs and continue to profitably expand our business over the longer term.

That's it for me. Craig?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [3]

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Okay. Thanks, Brett.

For the first quarter of fiscal 2019, our new programs continue to ramp despite the continued industry-wide supply chain shortages for key components that hampered our growth and increased our costs. We also continued to diversify our customer base, reduce our debt and reduce inventory levels and have returned to growth.

During the first quarter, we benefited from the continued ramp of SkyBell Technologies, a global leader in patented WiFi video doorbell technology that improves home and neighborhood safety. As we discussed last quarter, this important new relationship is projected to expand our customer base and contribute to profitable long-term growth.

During the first quarter, we also continued to win significant new business, both from EMS competitors and existing customers, including new programs involving industrial motion control products, power metering and fire protection systems. Our broader and more diversified customer base significantly lowers the potential future impact of a slowdown by any one customer.

At the same time, our productivity continued to be adversely impacted by industry-wide shortages in key components, resulting in delays in delivery, inventory pressure and increased costs. Moreover, the tariff situation, as it exists today and as it is anticipated to evolve, has complex ramifications for KTC. Certainly, for our customers in our Shanghai site, the tariffs are a huge problem for any product imported back into the USA. But for those current customers, a transition of their business out of our Shanghai site to our Juarez or USA sites is facilitated by our centralized command and control. This dramatically reduces the risk and time associated with the move back to our North American sites and, thus, allows these customers some leeway to respond to the rapidly changing tariff landscape.

Meanwhile, for companies with business at our China-centric CM competitors, KTC's North American sites become extremely competitive for USA-bound products subject to the new tariffs. This has resulted in a storm of inquiries and requests for quotes from prospective customers. But there is certainly a wait-and-see aspect to these customers' interest in Key Tronic, as many hope the tariffs will be repealed soon.

On balance, we're increasingly well positioned for the returning tide of North American-based customers, as they correctly analyze the total cost for overseas production, pushing production into both Mexico and the U.S.

As we discussed on our recent calls, we see continued strong results from our domestic facilities. We believe that this reflects a growing appetite for U.S.-built products and a significant value of having highly efficient domestic production facilities. While we are carefully managing our expenses, we're making investments in our facilities, SMTE sheet metal and plastic molding capabilities in both Mexico and the U.S.

With respect to sheet metal-centric programs, we see very strong growth and few real competitors in North America. We're also deploying innovative new manufacturing equipment in each of our facilities, which make our long -- which make our production less labor-intensive and more efficient. These investments are expected to enable planned future growth with lower costs and more efficient production of existing business.

Our steady pipeline of new business opportunities continues to be boosted by our unmatched level of vertical integration, our multi-country footprint and the excellence of our manufacturing sites in comparison to other EMS competitors of our size. As OEMs face an increasingly uncertain geopolitical landscape, Key Tronic is uniquely equipped to offer risk mitigation with our vertical integration and manufacturing facilities located in China, Mexico and the U.S.

Moving further into fiscal year 2019, although we continue to face industry supply chain shortages, we expect growth in revenue and earnings. In preparation, throughout fiscal 2019 we plan to invest in new equipment and processes to be more productive in our Mexico facilities, and we're expanding and enhancing our highly profitable U.S. facilities. We're optimistic about our opportunities for growth in fiscal 2019 and beyond.

This concludes the formal portion of our presentation. Brett and I will now be pleased to answer your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question from Bill Dezellem with Tieton Capital Management.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [2]

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As usual, I have a group of questions. The first one is the same standard question, size of your new wins this quarter, please.

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [3]

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5 to 10 each.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [4]

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And anything special to mention about any one of them that is either unique or may lead to something more meaningful in the future?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [5]

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I don't think so. These are pretty much our standard average wins.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [6]

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Okay, great. And then, relative to SkyBell, are you -- talk a little bit around the issue of the component shortages there and the degree to which they are settling down or improving or getting worse? And what are you seeing on that front, please? And how is that matching with demand that you're seeing for their product?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [7]

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The component shortages and long lead times have severely limited our production. We've been -- probably half of the demand is where we've been producing for the last 2 or 3 months. We see a number of components in that family of products that have 40- to 50-week lead times. As we have been working our way through those products, we've been able to increase output from the factory, but we're still nowhere near what the market would like us to be shipping. We see a, I guess, -- I hope it's not wishful thinking, but we see a slight improvement in supply over the last couple -- 3 months. Certainly nothing where anybody can stand up and celebrate, but I think I am sure that it has ceased to continue to get worse every day.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [8]

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Given the pace that you currently see or trajectory that you're on, when would you anticipate that component availability would match demand? And please don't say 1,000 years?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [9]

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Well, the problem is there's 2 variables here. One is the increase in demand from the market, and the other is the improvement in supply from the supply chain. So I don't really have the ability to tell you when those 2 verticals are going to cross. I can tell you that over the next 3 to 4 months, we see our output continuing to improve nicely, but our demand also continues to improve, which is a great problem to have, but, nonetheless, a problem.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [10]

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All right. That's appreciated. So -- and in all seriousness, putting the joking aside, is the increase in your supply of SkyBell products on the market leading more prospective customers to be aware of the product and, therefore, that's pushing demand? Or is there something else that is driving that?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [11]

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I think it's safer to say, we haven't even reached that stage yet. Right now, the increase in demand is from current customers who are gaining confidence in our ability to supply and are turning lose their sales team to do a little promoting and take some orders. So I would say that we haven't begun to tap the new customer demand, new channels. And all we're doing is filling up some of the demand from existing customers and convincing them -- and our performance is convincing them that it's safer to let their sales guys be a little bit more aggressive in selling this product.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [12]

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Craig, if I may interpret that, are you saying that up till recently, that SkyBell's customers just didn't have confidence they were going to be able to get them product? Now that Key Tronic is manufacturing for them, they are -- they now have that confidence? And so that's what leading to them sell -- actually go out and sell, whereas they really had that spigot basically turned off before?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [13]

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That would sound like tooting our own horn a little bit, but basically, yes, I would say that's the case as -- and we're still a long way from having their current customers believe that they could go completely balls to the wall and sell as much as they could get orders for. But it certainly has improved their confidence in what they can do and what we're going to be able to do in the near future.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [14]

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So when you had originally shared with the investment community this new relationship, are you gaining confidence in the end-product demand more so than you originally had? Because if I remember right, you thought the potential was pretty great to begin with.

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [15]

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Yes. So I -- we continue to believe that the potential is great. And as we produce product and it gets basically snapped up as soon as we can get it into the warehouse in El Paso, we're gaining confidence that continuation of the demand is there.

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Operator [16]

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(Operator Instructions) We'll take our next question from Sheldon Grodsky with Grodsky and Associates (sic) [Grodsky Associates].

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Sheldon Grodsky, Grodsky Associates, Inc. - President & FINOP [17]

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It's nice to see double-digit earnings per share. I'd like to see higher double digits soon. I just wanted to check on one of the numbers that you actually mentioned in the presentation that I wasn't sure if I quoted right. What are your capital expenditures expected to be for the current year?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [18]

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We're looking around...

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [19]

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Currently, it should be around $10 million.

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Sheldon Grodsky, Grodsky Associates, Inc. - President & FINOP [20]

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$10 million? Okay. That's a...

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [21]

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$10 million.

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Operator [22]

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We'll take our next question from [Hans Bindeberg] with [Logos IM.]

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Unidentified Analyst [23]

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I had one on the arbitration and the settlement. Did the company already receive the settlement payment? And if not, when do you expect to receive this amount?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [24]

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We did receive the payment already.

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Unidentified Analyst [25]

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Was it already off -- in the Q3 numbers or, I mean, on the balance sheet? Or is it after -- was it received after Q3?

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [26]

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It was received prior to our first quarter ended in September. So it's included in the balance sheet.

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [27]

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Yes.

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [28]

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That was included in the results.

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [29]

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Yes.

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Operator [30]

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We'll take our next question from George Melas with MKH Management.

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George Melas-Kyriazi, MKH Management Company, LLC - President [31]

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Can you give a little bit more color on the utility and the labor cost increases? I sort of calculate in a very back-of-the-envelope way that a 50 bps decline in gross margin is roughly $600,000 to $700,000. Can you sort of -- some color on that?

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [32]

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Sure. I can take that one, Craig. Definitely, the utilities themselves were approximately about a $400,000 increase in costs quarter-over-quarter. In addition, there was some additional labor costs, we were a bit inefficient the first part of the quarter, predominantly in some of our U.S. locations. So your half a percentage of estimated cost increases during the quarter is accurate based on those 2 events.

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George Melas-Kyriazi, MKH Management Company, LLC - President [33]

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Okay. Great. Brett, next one is for you too. There is a new item on your balance sheet, contract assets of roughly $16.8 million. That looks like it's a reclassification. What is it?

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [34]

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So what that is, is new general accounting principles require that Key Tronic and other contract manufacturers recognize revenue over time. So as we build products, we actually recognize the revenue upon completing that production and not upon shipment, so what that is, it's a change in revenue recognition. So that $16.7 million is really inventory and work in process and its associated margin that has been recorded through the income statement.

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George Melas-Kyriazi, MKH Management Company, LLC - President [35]

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Well, that sounds complicated.

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [36]

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It is, it is. I mean, in reality, it's a one-time adjustment. It's kind of a lean forward of your revenue. And the impact as we disclosed in the first quarter was roughly $4.9 million of additional revenue. We don't anticipate any future material impacts due to this new revenue recognition standard, but included in Q1 is about $4.9 million of extra revenue.

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George Melas-Kyriazi, MKH Management Company, LLC - President [37]

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Okay. And did that -- that, I imagine, did not have much of an impact on gross margin -- on the percentage gross margin. Did it have an impact on OpEx?

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [38]

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No. No. Not materially, no.

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George Melas-Kyriazi, MKH Management Company, LLC - President [39]

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Okay. And then a quick other question. Your SG&A came down quite a bit and maybe that's because of a decline in legal cost.

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [40]

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Yes.

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [41]

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Yes.

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George Melas-Kyriazi, MKH Management Company, LLC - President [42]

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If you look at your OpEx now, they're roughly 5.5% of revenue and I was sort of modeling at 6%. What would be a good number to use or a dollar number? I'm not sure how you think about it.

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [43]

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I think as a percentage, I think 5 -- between 5.5% to 6% is a good estimate. As you mentioned, we spent far less in legal cost now that the arbitration is behind us. It's an increase in revenue. I would hope to keep that closer to the 5.5% than 6%, but yes, that's a reasonable estimate within that range.

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George Melas-Kyriazi, MKH Management Company, LLC - President [44]

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Okay. Great. And then, Craig, is there a way you didn't have any constraints on the supply chain and shortages of what would be the additional revenue that you would be able to produce and recognize?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [45]

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Really, crude number would be probably another $10 million to $15 million in the last quarter.

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George Melas-Kyriazi, MKH Management Company, LLC - President [46]

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And that -- I imagine, this would come then with some improved gross margin because you wouldn't have the delays, the scheduling issues and that kind of stuff, right?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [47]

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Yes, it would be -- actually, the effect would be twofold. One is, as you just pointed out, SG&A is a number rather than a percent, even though it's easier to use a percent. So every little bit we add to revenue, helps. And on top of that, we've got a bunch of people in Juarez who have to sit around at the beginning of the week, while we wait for components to show up. And then we have to build as quick as we can, so we can ship parts out and meet our customers' expectations. So we're running very inefficiently right now in order to try to fulfill market demand, and yet deal with parts that don't show up on time or at all.

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Operator [48]

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We'll take our next question -- (Operator Instructions) We'll take the next question from [Hans Bindeberg] with [Logos IM.]

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Unidentified Analyst [49]

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I was just looking at the working capital and the balance sheet a little bit. And it looks like, if I'm looking correctly, that payments that you received for the settlement didn't really go into reducing the debt. Can you, perhaps, give some color on where that -- those funds went?

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [50]

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Sure. I can take that. So the -- roughly $6.7 million that we received as part of the arbitration did, in fact, help us get back to paying payables early, allowing us to again initiate early pay discounts, and as well helped us increase in the amount of inventory that's available for some of these ramping new customers. We would've liked to have seen some additional decreases in debt, but hope to see those in the near future as we continue to work down the inventory.

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Unidentified Analyst [51]

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Very good. And the Other line from current assets, I saw that increasing a little bit from the Q4 of last fiscal year. Is that anything specific? It's now at $70 million, I think.

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Brett R. Larsen, Key Tronic Corporation - Executive VP of Administration, CFO & Treasurer [52]

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I would need to look into that, but I believe what that is, is the foreign currency contracts. Many of them now are in an asset position rather than a liability within the next 12 months.

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Operator [53]

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We'll take our next question from Bill Dezellem with Tieton Capital Management.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [54]

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In the opening remarks, I believe that there was some reference to fiscal '19 growth and your confidence that you would be growing this year. Would you dive into that and provide some more commentary about how you are thinking about fiscal '19 unfolding, please?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [55]

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Okay. We've been winning business over the last couple -- 3 years as we recovered from the decline of that one large customer who we also had to sue in arbitration to get paid from. So we're at -- I think we're not at, we're little bit past the tip point where we've replaced them. And now what's been going on under the top line, it should start to stack on top of the top line.

So the cadence of the wins continues, and, in fact, has speeded up. And we're no longer trying to fill a hole, now we're packing on top. So that's where we think it's going to come from. Companies like SkyBell and others that we've mentioned are going into production and that's basically where it's going to come from. We're not counting on any type of an acquisition to achieve the growth that we foresee.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [56]

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And so the -- do you kind of have a conceptual or qualitative view about the March and June quarters? And just how that trajectory looks? Will you continue at a modest rate of growth? Or are you seeing some increase in that trajectory? What are you currently thinking there, please?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [57]

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We're thinking that we're not going to put any kind of numbers to that. As for...

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [58]

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Well, that'll give me something to think about at night.

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [59]

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Me too.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [60]

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So let me jump on one of your answers to a prior questioner. $10 million to $15 million of additional revenues that you believe that you could be shipping if you had the components -- if we just simply assume low end of the $10 million and an incremental gross margin of roughly 20% with a 20% tax rate, that gets us an additional $0.15 a share. And so is there anything flawed with my thinking that if you didn't have these component shortages, the business could be running at $0.30 a quarter of earnings or roughly $1.20 annualized run rate?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [61]

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No. The only flaw in that thinking would be if that was a onetime or if it repeated every quarter. So it's hard to say if that would be a onetime bump. And then once we filled all these storages, if the fulfilled POs would then be filled in from behind with more demand, hard to figure that out. But certainly there's a chunk of unfulfilled demand out there today that we can't ship.

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William J. Dezellem, Tieton Capital Management, LLC - President, CIO and Chief Compliance Officer [62]

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Right. Okay. That is helpful. And then, lastly, for now, in the opening remarks, there was a reference to an evaluation of a new Asian facility location. Would you talk to that, please?

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [63]

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Yes. So about 5 or 6 years ago, we took a look and decided that we had a lot on our plate, so we were going to hold off. But if the tariff situation continues as it is, our China facility is not going to be very attractive to people who want to ship into the States. So we're going to have to come up with another spot for those folks who don't want to be in Mexico, don't want to be in the States, but still want to ship into the States.

The nice thing about that is since we are centralized, it's pretty easy for us to step and repeat a new facility. As you may or may not remember, we've had facilities in France, in Ireland, and outside of Budapest. And we don't see a really big challenge to picking one up in, say, India or Vietnam or Thailand or wherever it is that we decide that we want to go. So we're pretty far down the road. We had done some greenfield studies a while back and looking at the costs and doing pro forma quotes for products out of those facilities. Since that time, the mature -- I mean, the supply chain within those target countries has matured. And I think it's not going to be that hard to make a move if we decide to do it.

We're kind of like the customers we talked about, is we've got a little bit of wait-and-see because we don't know what's going to happen with all the tariffs. But even without the tariffs, it's interesting to come up with another Asian site. And so that's why we mentioned it.

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Operator [64]

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(Operator Instructions) That concludes our questions for today. I'll turn it back to Craig Gates for closing remarks.

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Craig D. Gates, Key Tronic Corporation - President, CEO & Director [65]

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Okay. Thanks again, everybody, for participating in today's conference call. Brett and I look forward to speaking with you again next quarter. Thanks, and have a good day.

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Operator [66]

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Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.