Array Technologies, Inc. Q3 FY2021 Earnings Call

Greetings, ladies and gentlemen, and welcome to Array Technologies Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. It is now my pleasure to introduce your host, Cody Mueller. Thank you. You may begin.

Good evening. And thank you for joining us on today's conference call to discuss Array Technologies, Third Quarter 2021 results. Slides for today's presentation are available on the Investor Relations section of our website, arraytechinc.com. During this conference call, management will make forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect because of other factors discussed in today's earnings press release, the comments made during this conference call, or in our latest reports and filings with the Securities and Exchange Commission, which can be found on our website, arraytechinc.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's third quarter press release for definitional information and reconciliations of historical non-GAAP measures to comparable GAAP financial measures. With that, let me turn the call over to Jim Fusaro, Array Technologies CEO.

Thanks, Cody. And good evening, everyone. Thank you for joining our third quarter earnings call. In addition to Cody, I'm joined by Nipul Patel, our Chief Financial Officer, and Brad Forth, our Board Chairman. I'll start off today by providing an update on our business. Then I'll turn it over to Nipul to cover our third quarter financials, and then Brad will discuss our acquisition of STI. Turning to page 5 of the slides, today, there are a couple of major themes that work in our business. First, the supply chain issues impacting everyone in the solar business are continuing. Panels are still hard to get, and both ocean and overland freight is incredibly constrained. The result is project delays and higher shipping costs for suppliers like us. The good news is that we're seeing both suppliers and customers adapt to this new environment. Prices are starting to stabilize, albeit at higher levels. Our suppliers are charging us more, and we are charging our customers more. Everyone is recognizing that longer lead times are required for everything. We're not sure how long it will take for our business to return to what it was like, but we do feel the situation is stabilizing and we are optimistic that we're getting to a place where there will be fewer supply chain-related surprises. Now importantly, despite the supply chain challenges and higher prices, demand for solar has only grown stronger. We have not had a single customer cancel an order, and all of them are reporting rapidly growing project pipelines in every geography. U.S. demand remains extraordinarily strong, and we think there is additional upside if President Biden's plans for renewable energy pass Congress. We continue to monitor this very closely, both the direct pay option for the ITC and the 10% ITC adder for domestic content. The former could be a massive accelerant for the solar industry, similar to when the original cash grant program was implemented. The latter could be an accelerant for Array specifically because we're able to source up to 90% of our building materials domestically, something we do not believe our major competitors are able to do. The strength of the market, as well as our continued share gains, are reflected in our order book, which was over $1 billion for the first time in the company's history at the end of the third quarter. That achievement is important because it comes on the heels of redesigning our quoting and procurement processes during the second quarter. Our new process, which was a change for both our customers and suppliers, has derisked our margins without impacting demand for our products. Most importantly, the orders we have been booking are at and sometimes above the gross margins that we have achieved historically. That, combined with the fact that we're rapidly burning off the legacy orders that we booked at lower prices, gives me the confidence to say that we have turned the corner on margins and are on our path to get our profitability back to where it was in 2020. Finally, we told you when we partnered with Blackstone a few months ago that their capital was part of our plan to go on the offensive during this period of disruption. You can see we have been doing that organically, as evidenced by our order book, and now also through M&A with our acquisition of STI. We will talk a lot more about the deal later in our presentation, but I'll say now that I could not be more excited about the transaction. Making STI part of Array is a game-changer for our international expansion strategy, which is going to pay dividends for us next year. Together, we see north of $200 million in EBITDA next year, and that's before any synergies. Now I will turn to page 6 and talk a little bit more about our growth in the third quarter and our order book. Revenues for the third quarter of 2021 were $192 million, up 38% relative to last year. That was slightly below our internal forecast, as we had a few shipments to customers that were delayed due to logistics issues. Demand during the quarter was extraordinarily strong, representing our third consecutive quarter with more than $300 million in new bookings. As of September 30th, we had over $1 billion in executed contracts and awarded orders, up 35% versus the same time last year, and a new record for the company. The year-over-year growth is even more significant when you take into account the changes in composition of the order book from last year to this year. Last year, $124 million of the $744 million were orders that customers placed to qualify for the ITC before it stepped down. In other words, we got some orders earlier last year than we would have in a normal year, which increased our backlog. This year, there are no ITC related orders in our backlog. The takeaway is that the growth in our order book is even more significant than the 35%. Because we have no ITC orders this year, every order we have represents near-term projects. That indicates that the organic demand we are seeing is tremendous. Coupling that with what STI has in their order book, we're entering the fourth quarter with $1.4 billion in orders. To put that in context, that is 60% more than what we generated in revenues for all of 2020. Moving to page 7, we have outlined a picture of what our gross margin should look like in the fourth quarter and next year based on the orders we have in hand. Because our new quoting and procurement process closely matches the prices we agree with our customers to the prices we agree with our suppliers, we have a very good sense of what our gross margin will be on each order we ship. The blue bars in the graph show you how our gross margin evolved throughout this year. We saw our margins decline steadily as we worked off legacy orders where we had agreed prices with customers prior to the run-up in commodities. The gold bar shows you where gross margins are trending based on the order book and current delivery schedules. Our gross margins go up after the third quarter because, in each subsequent quarter, the percentage of legacy orders with lower prices becomes a smaller percentage of our total shipments, and correspondingly, the orders we booked under the new system become a larger percentage of our shipments. The takeaway is that we expect to be back to our historical high-teens to twenties margins by the second half of next year, with incremental improvement beginning in the fourth quarter and continuing throughout next year. Now, importantly, there are still some risks to that, mostly related to any delays in shipping our legacy backlog. Those orders dilute our margins, so the faster we bring them off, the better our margins will be and vice versa. Also, any further increases in freight costs pose another risk. But I feel very good about our ability to deliver these numbers. With that, I'll turn it over to Nipul.

Thanks, Jim. Turning to slide 9, revenues for the second quarter increased 38% to $192.1 million compared to $139.5 million for the prior-year period. As Jim mentioned, the increase was driven by continued strong demand for our products, but also reflects a favorable comparison to the third quarter of last year, which had lower shipments due to the pull forward of orders into the first half of 2020 related to the ITC step-down. It's also important to note that we had approximately $40 million in shipments scheduled for this quarter, where due to supplier delays or logistics unavailability, we were unable to ship prior to the end of the quarter. Gross profit decreased to $9.3 million from $26.7 million in the prior-year period, driven primarily by the majority of our shipments being legacy lower-priced orders, coupled with higher input costs for commodities and logistics to fulfill those orders. Gross margin decreased from 19.2% to 4.8%, driven by this high concentration of contracts signed prior to our change in process. Going forward, legacy orders will constitute fewer and fewer of our shipments, which should result in higher gross margins. Operating expenses decreased to $25.4 million compared to $31.8 million during the same period last year. The decrease was driven primarily by a $12.7 million reduction in contingent consideration expense. This expense represented earn-out payments we had to our founder, which have now ceased. Excluding contingent consideration expense, operating expenses increased approximately $6 million, reflecting higher costs associated with being a public company, as well as increased headcount to support our growth. Net loss attributable to common shareholders was $31 million compared to a net loss of $7.2 million during the same period in the prior year, with basic and diluted loss per share at negative $0.24 compared to a basic and diluted loss per share of negative $0.06 during the same period in the prior year. It is important to note here that our net loss attributable to common shareholders was impacted by $5.5 million in preferred dividends this quarter, with no comparable dividends last year. Adjusted EBITDA decreased to a loss of $500,000 compared to earnings of $16.6 million for the prior-year period. Adjusted net income decreased to a loss of $9.8 million compared to income of $12.4 million during the same period last year, with adjusted basic and diluted net loss per share at $0.07 compared to income per share of $0.10 during the same period last year. Again, here we have the impact of the $5.5 million in preferred dividends in the third quarter of this year. Finally, our free cash flow for the period was -$32.8 million versus +$21.1 million for the same period in the prior year. The use of cash during the quarter was primarily driven by investments in inventory as we increased our safety stock to protect ourselves against supplier delays and logistics issues in preparation for the ramp-up in shipments we're expecting going into next year. Now, turning to our outlook on slide 10, during our second quarter call, we reinitiated guidance and I wanted to provide an update on where we see ourselves within the range that we provided based on current market conditions. As Jim mentioned, the macro environment continues to be challenging. Shipping costs are up, supply chains remain extraordinarily stressed, and labor markets are tight. Those challenges are manifesting in project delays. Sometimes materials are simply not available to begin construction, sometimes customers are changing panel vendors midstream, which requires design changes that take time to implement, and sometimes EPC capacity is not available. Sometimes customers are simply choosing to wait because they think prices will move lower, although that is rare. We took all of that into account when we provided our guidance range. The low-end anticipated the challenges we saw in the market continuing or even getting worse, while the high-end assumed some level of relief. Unfortunately, we are increasingly seeing the former scenario. So while we will meet our guidance, we currently expect to come in at the lower end of the range for revenues, adjusted EBITDA, and adjusted EPS. Now, I will turn it over to Brad to discuss in more detail the acquisition.

Thanks, Nipul. Turning to Slide 12, I'd like to provide an overview of STI know-how. STI is a leading European manufacturer of trackers. Founded in 1996, they began supplying trackers in 2002. They have over 12 gigawatts of trackers shipped and are headquartered in Pamplona, Spain, with manufacturing facilities in both Spain and Brazil. STI produces a dual-role tracker system that has one motor for every two rows. This low-cost architecture is well-suited to irregular terrain and regions with low wind and/or snow load requirements. STI enjoys leading positions in both Liberia and Latin America. It's a top-five global player, top-three player in Spain, and number one player in Brazil. It is currently owned by the founder's family and a Spanish private equity firm. As you can see on the right, this business had last twelve-month revenue of U.S. $413 million as of September 30th, with gross margins in the growth range of 30% and EBITDA of $45 million with EBITDA margins of 21%. They have a headcount of approximately 200 people and as of September 30th, had a backlog and awarded order value of approximately $416 million. Slide 13, we believe that this transaction provides a number of key benefits. It creates the largest solar tracker company in the world with leading positions in the United States, Latin America, and Europe. STI is the leading provider of trackers in Brazil, where it's significantly larger than the next closest competitor. It has long-standing relationships with many important global developers. STI provides reliable products with a dual-role architecture that is ideal for certain international markets. Additionally, we have the opportunity to drive incremental sales demand by offering Array DuraTrack products through STI's sales channels. Array and STI have very little overlap in terms of both geographies and customers, and the combined company is expected to generate approximately 30% of its revenues from projects outside of the United States in 2022. We expect the transaction to be margin and EPS accretive, with the combined businesses expected to generate over $200 million of adjusted EBITDA in 2022, and that's before any synergies. Lastly, the two companies will have over $750 million in combined purchasing, creating opportunities for cost savings. Turning to Slide 14, we are creating a global leader. Already we'll have unparalleled coverage of the largest markets for utility-scale solar outside of China and India. On the left, you see Array, the U.S. leader with over 30 GW shipped, providing a system with the lowest lifetime cost and currently with a $1 billion order book. Whereas STI is a Latin American leader and a top-five player in Europe with 12 GW shipped or awarded that provides a system with low upfront cost in certain markets, and it has an order book of $416 million. So you put the two together, and you have a global leader with over 42 GW shipped and awarded, which is equivalent to 23% of the installed utility-scale capacity in North America, Europe, Latin America, and Australia. Array and STI will provide a full product suite to meet customer needs and will collectively enjoy an order book of $1.4 billion. Slide 15, as I mentioned, Array and STI Norland are highly complementary with almost no customer overlap. In terms of STI's position, it is the number one player in Brazil, significantly larger than any other participants. It's a top-three player in Spain and in other parts of Latin America, but in the U.S., Array is the leader, with STI having a very limited presence. As you can see on the right, it enjoys relationships with many important international customers. As you will see on Slide 16, STI Norland has delivered industry-leading growth and margins to the international market. Its revenue has gone from EUR 104.7 million in 2019 to almost 200 million last year. This corresponds to 13.1 million of adjusted EBITDA in 2019 to 42.5 million in 2020, and the company is expecting significant growth in 2021. Thus, we have incentivized them to deliver with an earnout structure. They will start receiving additional purchase price consideration to the extent that their adjusted EBITDA exceeds EUR 47 million in 2021 to a cap of 60.89 million. The revenue range roughly corresponds to those EBITDA figures. Lastly, STI's geographic mix is roughly a 60-40 split between Brazil and other international markets.

Thanks, Brad. Turning to slide 19, I'll provide a brief summary of the terms of the transaction. We are acquiring STI for EUR570 million, subject to certain adjustments based on the amount of cash, debt, and certain other items that STI has. The consideration is a combination of cash and stock. The final purchase price will be determined at closing, but we currently expect the cash component will be approximately EUR 351 million, which is $407 million at current FX rates, and we will issue 13.9 million shares of Array common stock for the seller. The shareholders of STI will also be eligible for an earn-out of up to EUR 55 million in cash depending on the amount of EBITDA that STI generates in 2021. The amount of the earn-out is determined by taking the difference between the actual EBITDA that STI generates and EUR 47 million and multiplying by four, with a maximum payout cap of EUR 55 million. The earn-out payment, if any is made, will not be paid until sometime in Q2 2022 after the 2021 audit is completed. We are locking up the Array stock that sellers will be receiving in the transaction for a period of 6 months with one exception. If at any time after three months from the closing date, our stock is up more than 20% and stays there for 10 business days, we are obligated to file a registration statement covering 20% of the shares the sellers received in the deal. The other 80% stays locked up for the remainder of the six-month period. Importantly, it's a very small amount of stock that the sellers are getting. There are three of them, and the largest of the three will be less than a 5% shareholder in Array. The closing of the transaction occurs 10 days after we receive any required regulatory approvals, but not earlier than January 11, 2022. We currently expect the acquisition will close sometime in Q1 2022.

Thanks, Nipul. I'll wrap up by saying I'm incredibly excited about the road ahead for Array. We have successfully adapted our business model to the current environment and demonstrated that we can generate bookings in line with our historical gross margins. The domestic supply chain we have built is helping us take market share and position us to be an even bigger winner as U.S. content evolves into a competitive differentiator. With our acquisition of STI Norland, we are now equally well-positioned to accelerate our international growth. We continue to build a great company, and I am more confident than ever that we will emerge from the current environment even stronger than we were before. And with that, Operator, please open the line for questions.

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. One moment please while we poll for questions. Our first question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.

Hey, guys, good afternoon. Thanks for taking the questions, and congrats on this STI announcement. My first question was on the STI Norland business. The margins, 30% growth, pretty impressive. Can you speak to what's been able to drive them to those margin levels which seem far superior to yours and also your peers? How sustainable is that? What's driving it? And then what sort of synergies could you maybe see over time, and could those drive the core Array business to get to those margin levels as well?

Hey, Brian, it's Nipul. How are you? Yes, we're really excited about the STI deal, and I think the reason we're excited is their margin profile. They have a very good local supply chain in the regions that they operate. As you know, with our business, it's really important to have a built-up supply chain locally because of logistics costs and better pricing power when you have a local supply chain. So that's the reason we have that. Brazil is a good market where they have a strong local content. We think that that's going to help as we increase our business over time.

Okay, and any thoughts, just high-level, around potential synergies?

Right now, from a synergy perspective, we know that the two businesses together will have great purchasing power, as mentioned. So we think those are the key synergies we're looking at initially.

Okay. Fair enough. And then just a second question, and I'll pass it on. You mentioned the Build Back Better budget bill. I think there's differing interpretations around the steel content requirements to qualify for the domestic content added bonus on the tax credit. Could you guys articulate what your current understanding is of the requirements needed to qualify for the bonus ITC? Do you need to have U.S. steel in trackers in order to qualify for domestic content, or are you able to do that with panels and other hardware that don't necessarily represent the U.S. steel content? And then, assuming you do need U.S. steel and trackers using U.S. steel, and this deal moves forward as written, would you anticipate that helps you on the volume demand side? Would you potentially see better margins and pricing for your products here domestically? Just wondering what the implications might be if that does go through. Thanks, guys.

Hey, Brian. It's Nipul again. I think the way the legislation is written, it helps us because of our U.S. supply chain and that we can pull up to 90%. From a content perspective, we think that a tracker itself will likely not do it, but we will definitely be part of it and help the developer get to that content level to participate in the tax credit. So, from that perspective, we do feel that we have an advantage there. As for the longer-term, we think yes, it is a competitive advantage that can help us overall and drive better margins if we are the primary company that can drive with the U.S. supply chain. So, we think that helps us.

Okay. Fair enough. I guess maybe just a follow-on to that, Nipul. With the tracker being roughly 10% of the BOM, you couldn't fulfill the entire domestic content requirement threshold with just U.S. trackers. But is it your understanding that you need to have the tracker and the panel to aggregate above the domestic content threshold, or could you do it with other components? I guess that's just a sort of clarification that we're hoping to get there.

Hey, Brian, it's Jim. It's really the owners' responsibility upon the developer owner of the asset and how they get there. So certainly, we provide an advantage of up to the 10% that you mentioned today. Where they get the balance is really up to them, so to the extent they source panels, U.S. or elsewhere, inverters, or whatever else makes up the balance of the system, is really going to be up to them. That's outside of our control as we interpret it today.

Okay. Fair enough. Thanks, guys.

Thank you. Our next question comes from the line of Mark Strouse with JPMorgan. Please proceed with your question.

Yes. Thank you very much for taking my questions. And thanks for all the detail on STI; it's very helpful. One thing I didn't see, though. Can you just give a bit more color on what their manufacturing footprint looks like? Is there any change to your capex-light model going forward?

Hey, Mark, with respect to the capex, no change going forward. They have a manufacturing presence in Brazil, as well as in Spain. Those are their two primary locations, with no overlap with us. We think that's another excellent opportunity for us to move forward with and continue our go-to-market strategy.

Okay. And then can you just talk about how this deal came about? Was it shopped or just any color there would be helpful?

Yeah. Great question. This is something that management, Brad, and the balance of the board work on all the time. I'll start off with some of the key tenets that we look for within M&A, which include growth, value creation, how to build that portfolio, extending our global reach, advancing technology, and, most importantly, a cultural fit. As we went through our pipeline, which we've told you in the past was fairly robust, when it came to STI Norland, it checked the boxes, and we saw this as an excellent fit for us.

Okay. Very helpful. I'll take the rest offline. Thanks.

Thank you. Our next question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question.

Thank you very much. You briefly mentioned the product synergies, but it appears that you are focusing on different development sites for the two products within the combined entity. Could you discuss the cross-selling opportunities you are already observing with the merger of the two companies?

Yes, Colin. If you were to look at what they do extremely well, it's in regions where there's low wind. They have a design architecture that we like in their tandem configuration. If you look at how they structure some of their technologies surrounding their control algorithms and what we do, it's really nice bookends if you were to look at tandem versus our 32-row connectivity, and how they design for low wind and how we design for high wind. So we see the two winds coming together and really capturing significant share going forward. That's what we talked about regarding some of the technology synergies.

I'll take the rest offline and just scan the comments for a single question.

Thank you. Our next question comes from the line of Philip Shen with ROTH. Please proceed with your question.

Hey, guys, thanks for taking my questions. Great job on the strong bookings. Clearly, you're winning share here. I think some of the key drivers are your better-priced steel and localized manufacturing, allowing for that more reliable delivery times. Can you talk through how long you think your advantage on that U.S. deal and the localized manufacturing footprint will last? How is your competition responding, and how long do you think that lead is?

Hey, Phil, it's Jim. We certainly intend to continue our lead with domestic supply. We run 90% or up to 90% of our bill of materials through the U.S.; that's substantial volume. We've got longstanding relationships. It will take our competitors time to build those relationships and to build out volume to get the necessary tooling, and to design in. I'll leave it to them to answer, but it's our intent to maintain that advantage and continue to build out and strengthen our U.S. supply chain by bringing in additional volumes through this acquisition. More to come.

Thank you, Jim. Regarding the revenue cadence for 2022, I would like to know more about it, especially considering some delays in projects due to limited module availability. I recall you presented a slide during the IPO addressing this. Is there any update on that revenue rhythm? Additionally, concerning the margin slide, how conservative do you believe your margin estimates are for upcoming periods? Thank you.

Yeah. Hey, Philip. It's Nipul. So as far as the cadence on revenue, because there's not an ITC step-down, we think of that as more linear in 2022. Of course, as we've talked about in the past, Q2 and Q3 tend to be a little bit higher quarters due to seasonality in the build seasons in North America. Regarding your question on the gross margin slide we showed, we think there's still some things out there as far as headwinds that we're facing. So we think the ramp we have shown is probably a good view of the short-term, but of course, we're going to look to over-drive what we've shown here. This is what we see right now.

Thank you. As a reminder, ladies and gentlemen, we ask that you please limit yourself to one question. Our next question comes from the line of Maheep Mandloi with Credit Suisse. Please proceed with your question.

Hey, thanks for taking these questions. Just looking at the $200 million guidance and backing in north of $68 million EBITDA composition from STI, it seems like the core business and that isn't the $120-$140 million range. Is that the right way to think about it? Just wanted to square that with prior assumptions for EBITDA generation and a raised core business. Thanks.

Yeah, generally speaking, we can provide a better view of the total 2022 outlook in the Q4 call as we've mentioned. But as we look at it today, that's our view of the combined business, the $200 million of EBITDA.

Thank you. Our next question comes from the line of Joseph Osha with Guggenheim Partners. Please proceed with your question.

Hello everyone and thanks for taking the question. As you look out into 2022 and that margin guidance that you provided at the gross margin level, to what extent does that depend on passing material price increases through to you and customers? I'm trying to understand the extent to which those increases are locked in versus not locked in. Thank you.

Hey Joe, it's Nipul. The material cost increases aren't really an impact on what we've stated here because of what we stated in Q2 regarding our change in our procurement and contracting process. As you recall, we locked in the commodity costs aspect of the bill of material once we've been awarded the order, which was new to our process, and that locks-in about over 80% of the costs of what we have for that order. So that's not really what impacts that. There are obviously other costs, such as logistics costs that could vary, and that could potentially change. But we don't expect by a material amount.

Thank you. Our next question comes from the line of Tristan Richardson with Truist Securities. Please proceed with your question.

Hi. Good evening, guys. Appreciate all the comments and clarity on how you see margins trending, especially as legacy procurement projects are delivered. Just thinking about some of the macro dynamics you guys outlined. Does the trajectory of margins assume that some of those macro conditions abate in 2022, or is this a trajectory assuming things stay the way they are today?

Yes. Hey, Tristan, it's Nipul. The way we've modeled it and shown it here is really the status quo. We can only really look to see where we are at today, and with their new contracting process, we've really derisked ourselves for a lot of that volatility that we faced earlier in the year.

Thank you. Our next question comes from the line of Kashy Harrison with Piper Sandler. Please proceed with your question.

Good evening, everyone, and thanks for taking the question. I was wondering if you guys could dig a little bit deeper into the combined $1.4 billion order book. How much of that order book relates to 2022? And then just any thoughts on the cadence there in terms of the pacing. July had about $135 million, which would be maybe $500 million on a quarterly run rate. So has there been any slowdown in that pacing since July? Really any thoughts on the awarded orders? Thanks.

Yeah. Hey, Kash, it's Nipul. Generally speaking, of the order books that we've shown, about 70% to 75% of that is really related to 2022. We feel really good about the momentum going into 2022. As for bookings, Q4 is typically a lower booking quarter. Obviously, this year, with the strong demand we're seeing, that may be higher, but historically, it’s been a slower booking quarter.

Thank you. Our next question comes from the line of Moses Sutton with Barclays. Please proceed with your question.

Hi, thanks for taking my questions. On the $350 million in new orders, first, just want to confirm that's of course pre-STI, so that's the rate-based business. And then the $350 million, how much of that is for 2022? Any thoughts on the cadence there in terms of the pacing? July had about $135 million which would be maybe $500 million on a quarterly run rate. So have you seen any slowdown in that pacing since July? Any thoughts there on the awarded orders?

Yes, sure. Hey, it's Nipul again. The $350 million of it, that's almost all of it, is in 2022. Our quoting activity remains very high, and we continue to have big orders booked throughout the quarter. So we still see that momentum carrying forward. No, that would be our adjusted EBITDA that we're showing.

Thank you. Ladies and gentlemen, at this time, there are no further questions. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.