Q2 2024 Viavi Solutions Inc Earnings Call
Participants
Ilan Daskal; CFO; Viavi Solutions Inc
Oleg Khaykin; President & CEO; Viavi Solutions Inc
Michael Genovese; Analyst; Rosenblatt Securities, Inc.
Tim Savageaux; Analyst; Northland Securities
Alex Henderson; Analyst; Needham & Company Inc.
Meta Marshall; Analyst; Morgan Stanley
Ruben Roy; Analyst; Stifel Nicolaus and Company, Incorporated
Presentation
Operator
Hello, everyone. My name is Rob. Welcome to the RB Solutions Second Quarter Fiscal Year 2024 earnings call. All lines have been placed on mute to prevent any background noise. The speakers' remarks there will be a question and answer session. I'll now turn the conference over to Ed on Tesco, the RV Solutions, CFO. Please go ahead.
Ilan Daskal
Thank you, operator. Good afternoon, everyone, and welcome to Viavi Solutions. Second Quarter Fiscal Year 2024 earnings calls by naming Zealand does cause the IV solutions as CFO. And with me on today's call is all taken our President and CEO. Please note this call will include forward-looking statements about the Company's financial performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations and estimations. We encourage you to review our most recent annual report and SEC filings, particularly the risk factors described in those filings.
Forward-looking statements, including guidance that we provided during this call are valid only as of today. Brp undertakes no obligation to update these statements.
Please also note that unless we state otherwise all results discussed on this call, except revenue are non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitations in today's earnings release, their release as well as our supplemental earnings slides, which include historical financial tables, are available on Viavi's website at w. w. w. dot investor dot Viavi Solutions.com. Finally, we are recording today's call and we'll make the recording available on our website by 4.30 P.M. Pacific Time this evening. And now I would like to review the results of the second quarter of fiscal year 2020 for net revenue for the quarter was $254.5 million, which was above the midpoint of our guidance range of $240 million to $260 million. Revenue was up sequentially by 2.7% excuse me, and on a year-over-year basis was down 10.5%.
Operating margin for the second fiscal quarter was 13.2% and exceeded the high end of our guidance range of 9.6% to 12.8%. Operating margin increased 80 basis points from the prior quarter and on a year-over-year basis was down 300 basis points. EPS at $0.11 exceeded the high end of our guidance range of six to $0.1 and was up $0.02 sequentially and on a year-over-year basis was down $0.03.
Moving on to our Q2 results by business segment, NSE revenue for the second fiscal quarter came in at $179.6 million, which is above the midpoint of our guidance range of 169 to $185 million. On a year-over-year basis, revenue was down 13.3%, primarily due to lower CapEx spend by names and weaker spend by service providers. Any revenue for the quarter was $155.5 million, which is a 15.2% year-over-year decline as your revenue was $24.1 million and grew 1.3% from the same period last year. NSE gross margin for the quarter was 63.4%, which is 100 basis points lower on a year-over-year basis and a gross margin was 62.5%, which is a decrease of 190 basis points from the same period last year and was primarily due to a combination of product mix and lower volume as the gross margin was 68.9%, which is an increase of 460 basis points from the same period last year and benefited from higher margin product mix. NSE's operating margin was 3.6%, which is an increase of 270 basis points sequentially and a decrease of 530 basis points on a year-over-year basis, NSE operating margin was above the midpoint of our guidance range of 0% to 4%. OSP revenue for the second fiscal quarter came in at $74.9 million, which was at the high end of our guidance range of $71 million to $75 million and was down 3.2% on a year-over-year basis, for which the gross margin was 52.1%, which is a decrease of 20 basis points from the same period last year. And was primarily due to lower volume and unfavorable product mix. Osp operating margin was 36.4%, which is 140 basis points lower sequentially and increased 90 basis points on a year-over-year basis. Always the operating margin exceeded the high end of our guidance range of 32.5%, so 34.5%.
Moving on to the balance sheet and cash flow. Total cash and short-term investments at the end of Q2 was $571.8 million compared to $489.7 million in the same period last year. Cash flow from operating activities for the quarter was $20.4 million versus $46.2 million in the same period last year. We have not purchased any shares of our stock in the second quarter as we plan to retire the outstanding balance of our March 2024 convertible notes in the amount of $96.4 million. Fully diluted share count for the quarter was 223.5 million shares down from 227.1 million shares in the prior quarter and was 228.8 million versus 222 million shares in our guidance for the second quarter. CapEx for the quarter was $5.8 million, which is $12.3 million lower versus the same period last year when we are completing the construction of our new facility in Chandler.
Moving on to our guidance for the third fiscal quarter of 2024, we expect revenue in the range of $245 million and $253 million. Operating margin is expected to be 10.4% plus or minus 160 basis points and EPS to be between $0.05 and $0.09. We expect NSE revenue to be approximately $176 million, plus or minus $3 million with an operating margin of 1.5% plus or minus 150 basis points. OSP revenue is expected to be approximately $73 million plus or minus $1 million with an operating margin of 31.8% plus or minus 200 basis points. Our tax expenses for the third quarter are expected to be around $8 million as a result of jurisdictional mix. We expect other income and expenses to reflect a net expense of approximately $3 million and the share count is expected to be around 224.7 million shares.
With that, I will turn the call over to Oleg.
Oleg Khaykin
Thank you, Yolanda, and welcome to your first earnings call. As we address the fiscal second quarter 2024 came in stronger than expected. Revenue was slightly above the midpoint of our guidance, helped by stronger demand for 400 gig and 800 gig Fiber Mil Aero and SE products. Eps came in above the high end of our guidance, driven by a richer margin revenue mix and lower OpEx. In the near term, we expect stronger demand in the above product areas to help offset continued weakness in the service provider spend.
Starting with NSE, the second fiscal quarter NSE revenue came in above the midpoint of our guidance range, although the NSE revenue declined on a year-over-year basis, driven by a slowdown in 5G and fiber build-outs by major service providers. There was a number of bright spots. Fiber level production has continued to recover, driven by stronger in 100 gig demand, offsetting weakness in computing and storage. Aerospace and defense products saw robust growth, driven by strong demand for avionics and P and T or positioning navigation and timing products. And the new SE. products continued to perform well, resulting in a slight year-over-year growth despite the decline in service provider spend.
Looking ahead, we expect continued demand recovery and growth in our fiber, 11 production, aerospace and defense and SQ products compensating for the continued near term weakness in the service provider spend.
Now turning to OSP with the declines on a year-over-year basis, primarily driven by lower demand for anti-counterfeiting products. This decline was partially offset by strong 3D sensing demand. Overall was the results came in at higher end of our guidance range in the March quarter. We expect all three to be slightly down from the December quarter with a stronger demand for anti-counterfeiting products offsetting the seasonal decline in 3D sensing.
Looking ahead to calendar 24, we expect telecom service provider spend to continue to be soft with the notable exception of the North American cable operators. We expect cable spend to ramp in the middle or second half of calendar year 2024. That said, our strategy in the past six years to diversify outside the service providers into level production and aerospace and defense makes it easier to ride out the telecom cycle downturn, 11 production spend is seeing a faster recovery versus service providers during by the demand for the new technologies such as 800 gig in Open RAN. Recently, ERP was awarded a $21.7 million grant by ATIA. to create an advanced test lab to empower and accelerate the development of Open RAN technologies and components. These awards reflect we have is technology leadership in 5G, upcoming 6G and Aura our aerospace and defense products are seeing strong demand and growth driven by the next-gen avionics and the need to protect critical infrastructure and assets against German spoofing and cyber warfare In conclusion, I'd like to thank my VRV team for managing in this challenging environment and express my appreciation to our employees, customers and shareholders for their support. For that, I will now turn back to the operator and Q&A.
Question and Answer Session
Operator
At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. And your first question comes from the line of Michael Genovese from Rosenblatt. Your line is open.
Michael Genovese
Great. Thanks a lot and I guess first question is just on the service provider market, just to understand, make sure I heard the comments right? It sounds like you're saying all of 24 calendar expects to be weak. There is cable getting better at the end of the year. I'm first of all. Did I hear that right? And secondly, did your expectations change in the last three months ago, has the carrier south and telecoms have gotten more pushed out or was that consistent with three months ago?
Oleg Khaykin
Well, so again, I'm going to say, look, the reality is I don't know what the second half is going to look like from service providers. We know the demand will be somewhat stronger in the June quarter. It's always stronger and beyond that, I just think I mean, clearly correct. It's not getting any worse. It's getting a little better, but you know, I would still prefer to think of it as a flat to slightly recovering and as the kind of modus operandi, because I think they're still pretty weak. But, you know, the point is we are seeing it's coming in, but it's not as dramatic as I would have liked to see. Now the area that is stronger is the cable. In fact, we were expecting cable to start spending and coming in in the first half of calendar year. But as you probably know, there were some delays driven by technology readiness in. Am I deploying the GA architecture by some of the vendors and assigned to the and the ramp is being pushed back one or two quarters. So we know it's coming. We're already seeing some orders, but despite that, we were expecting in the March quarter got pushed out. That's why we are guiding March quarter flat to slightly down. It was going to be slightly up in the absence of that slowdown. I mean, with the story this way, I feel a lot better about the environment in which we're operating than we were even a quarter or two quarters ago. I just don't want to get ahead of our skis on service provider recovery because when I see it, I believe it's I mean, it's so I think there's still got a lot of balance sheet issues that need to address it before they really start spending as significant. I think that's probably as an abundance of caution. I mean, do I feel better about what's going on the answer's yes. Am I seeing big dollars coming in? The answer is no. And now one thing is what we do see interesting is we're seeing pretty good traction on our service enablement products with the new architecture, AI apps, which drive OpEx reduction and things like a capital avoidance so that there we are seeing a pretty good traction both on the instrumentation particularly with fiber deployment. I think there is a pause and that may at least last six months, maybe towards the second half of the year, things will get better. But at this point. I think it's my crystal ball is telling me I'm not seeing anything dramatic changes.
Michael Genovese
Understan. Understand. Great.
Ilan Daskal
Next quarter.
Michael Genovese
Next question on this 800 G. fiber lab and production. Sounds very, very interesting. And I think you've probably had either two or three quarters of sort of measurable revenues there. So I assume that that is increasing and any color you can give us on that, and I'm not sure whether you would answer this question, but sort of how much of any that represents either now or what it could be in the future would be would be very helpful for us.
Oleg Khaykin
I mean, there are 11 production business, I would say on any the key if I think about the we have our network enablement and the FC. So network came on was about 87%. I'd say our level production is up. I think it's but it also includes wireless is about 40%. So and have that as a fiber lab and then kind of compute, high-performance computing is roughly half of that, right? So maybe at 20%.
And then now with the storage, a building a slowdown. We saw the computing and storage was weaker. I mean, all of that business really kind of bottomed out around the June quarter. But what's really been driving the recovery of that business is DRAM and fiber production and the fiber lab demand. And it's driven by 408 hundred gig products, right? So I think. So what I'd say is it's now, Rick, it's so recovered, first of all, its recovery and continue to grow. I think the on the same of players who are building telecom modules. And now more recently on the AIN.s of a data center modules are buying the equipment I've been trying to ascertain like for so many million ports. How much equipment is being bought. And I think we're probably not there in terms of truly understanding how the CapEx spend is linked to that because it's still early in the game but exactly same for equipment that they use on the coherent telecom module line. They're using it also on building VM as the data center modules for the I. applications.
Michael Genovese
Yes, it sounds like going forward that will be interesting to try to figure that out that that relationship. Can we to get an update on that?
Okay. Last question for me. I'm sorry, to take so much time on, but I'd like Ascom line of question, which is can you just help me understand the because the revenues were pretty good for the quarter, the earnings were good. Revenue guidance is good. I'm just still not seeing the reason why the EPS guidance is lower. So could you explain that to me?
Ilan Daskal
Thanks for the question. So Hum, as you know, you know, Astellas fiscal quarter cedar not from a seasonality perspective is usually kind of lower than the second quarter. So if you think about it on a consecutive basis.
Then also when you have kind of the beginning of the calendar year, there are some incremental costs, you know, associated, you know, with employee related and that that kind of drives kind of in terms of the OpEx. But again, as Oleg mentioned earlier, you know, the traditional seasonality when you think about it is kind of, you know, it's kind of building up really nicely. You know, when you think about, you know, the rest of the year, including, you know, the first quarter yesterday.
Oleg Khaykin
So at a statutory cost accrual that happens in the first quarter of the calendar year and down on the OSPV. eight, you notice there's a lower margin because some cyclicality of a 3D sensing the second half of the fiscal year is a much lower utilization. So there's more under-absorption in that respect. Now that said, the anti-counterfeiting is coming back. So it's offset some of it, but not all. And then last quarter, the 3D sensing was quite strong.
Michael Genovese
So great. Thanks so much for all the answers for the question, Tycho.
Ilan Daskal
Thank you.
Operator
Your next question comes from the line of Tim Savageaux from Northland Capital. Your line is open. Tim, your line is open.
Tim Savageaux
Okay. I figured out Good afternoon. Would like can you remind us of your lead times in service provider fiber test.
Oleg Khaykin
And you know, generally if we get an order say within two months, we can turnaround. So it's up. It's always in a quarter for less now, except for some things like in IBCM as some products are very quick, like, for example, fiber scope and things like that. Other products, like when you're buying a whole for you have a mems switches and things like that. If we have them in inventory, we can turn it around within, I'd say, two to three.
Tim Savageaux
And where would you assess your service provider customer inventories to be with your product here and it's all just-in-time, right? And I guess the reason I ask it is that throughout the early part of reports here from both some of your bigger peers, Corning, IKEA as well as some of the bigger service providers. We have seen some early indications of project base kind of increases and plans for 24. I'm just trying to reconcile what's been a pretty consistent drumbeat here and with what we're hearing from you. And I think there could be you typically you lead these things, but I don't know. Might you lag at this point because of the lead times?
Oleg Khaykin
I wonder now I don't know if they are not seeing some of the same things I don't think we are going to have once they decide when they tell these guys are going to do a project, they may sell it to them before they choose us first once they're ready to start building and they just place an order. And within them two months, they get their equipment.
It's pretty quick.
Tim Savageaux
Makes sense. I'll pass it along.
Operator
Your next question comes from the line of Alex Henderson from Needham & Company. Your line is open.
Alex Henderson
Could you give us a little bit more granularity on the size of the 3D sensing in the quarter is the expectation for 3D sensing in the March quarter?
Oleg Khaykin
Well, so generally, Alex, 3D sensing half of the annual demand comes in in the September and December quarter sorry, two thirds comes in in the September and December quarter and one-third comes in March and down and the June quarter. So I'll say we ran right around $20 million, $25 million in the quarter. And so in the quarter, you're looking at what, 10 to $10 million and this quarter, I think you've got a March quarter, maybe a little more than 10, but I mean, you see public safety.
Yes, Mr. Chang, yes, it's about it's around it. It's gem plus minus. So $1.5 million.
Alex Henderson
Can you give us an update on the plant in Phoenix? It's now fully operational. All the benefits of the cost improvement are in the mechanics of the kind of fitting business at this point? Is that correct?
Oleg Khaykin
Yes. So what we're seeing now, so that's when you know where people are running out of inventory and so you start seeing a lot of unforecasted spot orders popping up like hurry up and ship as soon as you can. So we're starting to see more and more of these type of things popping up there not big orders, but it's telling us, you know, the inventory starting to deplete itself in the channel. So in the March quarter, we're expecting a little bit stronger demand from what we were thinking maybe even three months ago. So that's actually helping us to offset some of the 3D sensing decline quarter on quarter.
Ilan Daskal
Generally, it is fully operational and we still have, you know, more capacity in oh four for additional growth there. So it's not, you know, in terms of utilization, it's not yet there in terms of the availability that we can get fully operational, but not fully yet, not flow a during, of course, Alex, let me give you a correction.
Oleg Khaykin
Actually. 3d sensing is going to be closer about $16 million in this quarter, one, 16 of.
Alex Henderson
Perfect. Thanks.
Oleg Khaykin
Yes, I think you know, at the end of end of year.
Alex Henderson
So going back to the some split on the 800 gig products, just to be clear. So the ratio of parts to equipment is quite low, right? I mean, we're talking about double digit port per kind of ratio. Would there I assume that this is predominantly going into the production side of it is not going into the field deployment and you're talking about how many products can go through a test and measurement process in any given period, but that's a sampling process. So the ratio it's very, very high relative to the total number of ports that go across that equipment.
Oleg Khaykin
Right. Well, I mean it varies, right. So when you start production, you tend to do a lot more test. So you have a lower number of ports per, let's say, million of equipment as you get with experience curve, you start a new feel comfortable you start IDI. decontenting, the test, so you spend less time on the tester. So yes, the equipment predominantly goes into the production line. I mean, you have all these factories in China and other places that are building these modules. So when they start, they generally use more intensive testing and then as they get more comfortable, they start reducing and doing more of the sample testing or less extensive testing per module. So that's why it's continuously moving on target. So I mean, in one case with kind of a dealer one project, we have gauged, it came on at about $0.4 per module of our CapEx for module of capacity. So if you're doing a port, you need about $0.4 investment per port on the capacity Reliance, you build the, let's say, M. million 0.5 m. units. I'm a week align so you probably I mean, I think it works out to about $0.4, so about $300,000 for that capacity that you've got to invest. I mean, if it's only one data point than other people do it differently. So they spend more I mean, it's still very early to tell.
Alex Henderson
Yes. So we've already seen very significant ramp in productions of both and we link and InfiniBand products going into the AI clusters. What I can tell you, we really haven't seen any meaningful contribution from that at this point. So should we then think that as we move into the second and third phase of production ramping that the sampling rates actually go up and therefore we shouldn't be looking at the rate of growth in AI. is the primary driver of the overall demand curve as opposed to the sampling percentage?
Oleg Khaykin
Well, I wouldn't go I wouldn't go that far because I remember when would the first thing they did is they are redeployed the same lines that were built, building telecom coherent. Our business has dropped quite significantly as they redeploy those assets to the IMAI. data centers and them, you know, and I just when you also think about it, if you're just doing some alignment or let's say, InfiniBand, you're putting on photonic integrated circuit, aligning with the processor that is really more semiconductor packaging. We actually building the actual module with lasers and everything else. That's where you tend to use more of our optical test equipment.
Alex Henderson
Yes, just going back to the telcom piece for a second item, there's obviously a very large inventory glut out there of telecom equipment that has to be absorbed it. Has there been any build in inventory in your product areas or is that just simply that didn't happen because they weren't constrained as much on that type of product.
Oleg Khaykin
So we have no inventory in the channel. I mean pretty much the orders kind of got turned off at a December quarter of calendar 2020 to see if anything a lot of the inventory in the field is getting long in the tooth. And we know that there is a lot of wear and tear and there needs to be a replacement coming up. So we actually are already seeing signs that people say, hey, I will need to replace. I mean, what would be the terms, what will be the lead times so in that respect, people will kind of sweat the assets. They will swap the assets they will cannibalize and then they'll have to do a wholesale replacement. So when I say kind of flattish 2024 or likely, I just think am I just don't think I know they need to do it. I just don't know if they can afford a massive replacement, but still a there's a could be a good chance that in the second half, and we'll see more and more of these type of things popping up. But I don't have that kind of visibility beyond six months prior to making sure. Thanks.
Operator
Your next question comes from the line of Meta Marshall from Morgan Stanley. Your line is open.
Oleg Khaykin
Great.
Meta Marshall
Thanks. And Oleg, you mentioned kind of you are more encouraged about cable spending and kind of earlier in the year. Just wanted to get a sense. Is that boxes for Dato is that just their networks are running hotter? Just given some of the comments you just had to Alex, just kind of what is the trigger to that investment?
Oleg Khaykin
And then on the flip side since you kind of think that wireless may take a little bit longer, just what do you think should be kind of the early signs of wireless resuming things so on if I look at so cable right first, I think the we know is going to be happening and it was actually we were expecting some of the orders start popping up in the March quarter and then accelerating into June from what we've heard. And I'm not going to name any names, but there's been a delay in some of the core technology development by leading infrastructure providers. So I think that is being pushed by one to two quarters in terms of getting the software ready and everything is working. So I think that's where we are with cable. But I do see actually cable happening this year.
On the I'm sorry, your second part of your question, just on the wireless side or the wireless?
Meta Marshall
Yes. So the wireless, you know him well, we all know you've seen the Ericsson, Nokia, Samsung and all the deployments with T-Mobile, Verizon, AT&T. So that has slowed down so the area where we are seeing less is on kind of the field equipment, analog, IDM and people who are sales related to deployment, will we continue to see a CapEx being spent spent on product development. So no, we have not seen significant decline in the R&D CapEx for 5G. And now we are seeing some of the elements of 6G popping up, it is just the.
Oleg Khaykin
Yes, generally, I think the wireless infrastructure is a bit more muted in terms of aggressiveness, I would say, in Europe and North America. Now that said India is doing pretty well, but it's obviously I wish the margins were better easier. But I think clearly the demand is for it. Now India is one of the few bright spots for infrastructure deployments.
Meta Marshall
Great. Thank you, sir.
Operator
Your next question comes from the line of Ruben Roy from Stifel. Your line is open.
Ruben Roy
Yes, thank you. I'll like I just had a couple of quick questions really following us. I think you talked about a little bit of this in answer to the prior questions, but just in terms of service provider, it sounded to me like you're saying that you are having conversations, right? So last quarter, I think you've talked about not seeing anybody commits. I would imagine that that's still the case but also with some of the service providers still figuring out their budgets for this year. Is that giving you a little bit of Bob, I wouldn't call it hope, but the sort of visibility, I guess, into thinking that you can still turn out and what should be sort of a normal seasonal year, meaning June up and then September a little bit down like usual, is that driving that or any further detail in our conversations?
Oleg Khaykin
So I think this year, I mean, I don't want to jump too far ahead, but actually September may actually be stronger this year than normal because the cable is maybe happening in September as it gets pushed, right? So but generally, I say what we see from service providers there is a very healthy churns business, things go bad and just replacements and things like that. What generally drive the OEM like another, like, I say, 20% more, which makes a big difference is whenever they are doing build-outs or upgrades to their networks. And right now, what I don't see, I mean, at least at this time in terms of the turns business. It's like orders coming in and they get released and there's no problem. So the ongoing business is going pretty well. People maintaining their network. So just keeping things running what I'm not seeing yet is the people doing some big step functions and expanding capacity or upgrading their network for extending the network. Some of these projects are a little bit more. I mean, we know they are being planned and others plans for that. I just don't know when they're going to decide to pull at the record and launch it and I just kind of looking at the general environment in the telecom sector, I think they prefer it for every quarter. They don't do it. They just can't in a bank more cash and retire more debt. So I think one one, if I were kind of just looking at the from competitive approach as cable guys start upgrading their networks, I think some of the service providers will see a need to get back to extending their networks. So I think no, I just don't I don't want to be at Kilroy, but I just don't see a clear cash burning hole in the service provider's pocket. So they need to go and start digging in laying new fiber aggressively starting deployment. The area where we do see a fairly good momentum, but it's on a much smaller like an order of magnitude, smaller scale. Are these Tier two, Tier three, primarily private equity funded fiber operators who are laying fiber in anticipation of data centers coming to the area or service providers, extending 5G networks to the area for the finally needing a fiber to extend their network into some of these rural communities. So that is one piece that is ongoing. But in of itself, an order of magnitude, smaller amount of volume than somebody like AT&T, Verizon or British Telecom or Deutsche Telekom would spend on an annualized basis.
Ruben Roy
Right, Dan, thanks for all that detail like. And then just a quick follow-up for you on. I might have missed this on the balance sheet discussion is, are you where you need to be then on leverage? And do you expect to come back into the markets to repurchase in the near term?
I'm going to miss that hasn't happened yet.
Ilan Daskal
So probably for the next quarter or two, you know, Tom will be focused more obviously on the retiring of the convert and you know, it continues. The overall, you know, buyback continues to be part of our capital allocation model, right? I mean we are not deviating from the overall strategy, but probably on the buyback for the next one to two quarters? You know, we'll we'll be more muted about it.
Oleg Khaykin
We just decided to bank some cash so we can retire as a whole converts in a way it's a synthetic cash share buyback because you're avoiding dilution down the road.
Ruben Roy
Right, right. Got it.
Oleg Khaykin
Okay.
Ruben Roy
Well, thank you very much and look, thank you.
Operator
There are no further questions at this time. I will now turn the call back over to a larger scale for some final closing remarks.
Ilan Daskal
Great. Thank you, operator. This concludes our earnings call for today, and thank you, everyone, for joining today's call.
Operator
This concludes today's conference call. Thank you for your participation. You may now disconnect.
