Axt Inc Q4 FY2024 Earnings Call

Good afternoon, everyone, and welcome to AXT's Fourth Quarter 2024 Financial Conference Call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fischer, Chief Financial Officer. Tim Bettles, Vice President of Business Development, will also join the Q&A portion of the call. My name is Prilla, and I will be your conference operator today. I will now turn the conference over to Leslie Green, Investor Relations for AXT. You may begin.

Thank you, Prilla, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the company, market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions, including trade tariffs and import and export restrictions, our ability to increase orders in succeeding quarters, to control costs and expenses, to improve manufacturing yields and efficiencies, or to utilize our manufacturing capacity. We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual events or results to differ materially. In addition to the matters just listed, these uncertainties and risks include, but are not limited to, the financial performance of our partially owned supply chain companies, increased environmental regulations in China, and COVID-19 and other outbreaks of contagious disease. In addition to the factors just mentioned or that may be discussed in this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. This call will be available on our website at axt.com through February 20, 2026. Also, I want to note that shortly following the close of the market today, we issued a press release reporting financial results for the fourth quarter and fiscal 2024. This information is available on the Investor Relations portion of our website at axt.com. I would now like to turn the call over to Gary Fischer for a review of our fourth quarter 2024 results.

Thank you, Leslie, and good afternoon to everyone. Revenue for the fourth quarter of 2024 was $25.1 million compared with $23.6 million in the third quarter of 2024 and $20.4 million in the fourth quarter of 2023. To break down our Q4 '24 revenue for you by product category, indium phosphide was $9.1 million, reflecting continued demand from data center applications including AI as well as passive optical networks. Gallium arsenide was $5.4 million, germanium substrates were $1.6 million, and finally, revenue from our consolidated raw material joint venture companies in Q4 was $9.0 million based on continued healthy demand. In the fourth quarter of 2024, revenue from Asia Pacific was 79%, Europe was 11%, and North America was 10%. The top 5 customers generated approximately 36% of total revenue and one customer was over the 10% level. Non-GAAP gross margin in the fourth quarter was 17.9% compared with 24.3% in Q3 of 2024 and 23.2% in Q4 of 2023. For those who prefer to track results on a GAAP basis, gross margin in the fourth quarter was 17.6% compared with 24.0% in Q3 and 22.6% in Q4 of 2023. The decline in gross margin is primarily the result of lower benefits from our recycling program in the quarter as well as lower ingot starts and crystal growth which resulted in under-absorption of our manufacturing overhead, but which also enabled us to reduce the inventory. Moving to operating expenses, total non-GAAP operating expense in Q4 was $9.9 million compared with $9.0 million in Q3 of 2024 and $7.5 million in Q4 of 2023. On a GAAP basis, total operating expense in Q4 was $10.6 million compared with $9.1 million in Q3 and $8.2 million in Q4 of 2023. The increase in OpEx in Q4 was primarily the result of an increase in legal expenses as well as an increase in R&D expenses related to investment in low EPD gallium arsenide crystal growth for the wireless market. We also continue to invest in the development of our 6-inch indium phosphide for a variety of applications. Our non-GAAP operating loss for the fourth quarter of 2024 was $5.4 million compared with a non-GAAP operating loss in Q3 of 2024 of $2.6 million and a non-GAAP operating loss of $2.7 million in Q4 2023. For reference, our GAAP operating line for the fourth quarter of 2024 was a loss of $6.2 million compared with an operating loss of $3.4 million in Q3 and an operating loss of $3.6 million in Q4 2023. Nonoperating other income and expense and other items below the operating line for the fourth quarter of 2024 was a net gain of $1.1 million. The details can be seen in the P&L included in our press release today. For Q4 2024, we had a non-GAAP net loss of $4.3 million or $0.10 per share compared with a non-GAAP net loss of $2.1 million or $0.05 per share in the third quarter of 2024. Non-GAAP net loss in Q4 of 2023 was $2.8 million or $0.07 per share. On a GAAP basis, net loss in Q4 was $5.1 million or $0.12 per share. By comparison, net loss was $2.9 million or $0.07 per share in the third quarter of 2024 and the GAAP net loss in Q4 of 2023 was $3.6 million or $0.09 per share. The weighted average basic shares outstanding in Q4 was $43.4 million. Cash, cash equivalents and investments decreased by $5.0 million to $33.8 million as of December 31. By comparison, at September 30, it was $38.8 million. The decrease is mostly balance sheet related as over $3 million of the total loss was made up from noncash depreciation and stock compensation. The biggest balance sheet item was that we reduced our loan balance by $6.8 million. Depreciation and amortization in the fourth quarter was $2.2 million. Total stock compensation was $0.8 million. Net inventory was down a bit over $1 million in the fourth quarter to $85.1 million, down from the peak by $6.6 million, and we are working to bring it down further. Finished goods make up less than $3 million, and that is a positive. This concludes our discussion of the quarterly financials. For the fiscal year 2024 in total, revenue was $99.4 million, up from $75.8 million in fiscal year 2023 and reflecting growth in every revenue category across our portfolio. This is a 31% increase in revenue and underscores the improvement we are seeing in our business with major market trends driving the adoption of new technologies, a recovery in the global demand environment, and our own success in winning share at strategic customers. Gross margin for the fiscal year 2024 on a non-GAAP basis was 24.3%, up from 18.1% for fiscal 2023. GAAP gross margin for 2024 was 24% of revenue, up from 17.6% for fiscal year 2023. Net loss for the fiscal year 2024 on a non-GAAP basis improved to $8.5 million or $0.20 per diluted share compared to the net loss of $14.3 million or $0.34 per share for fiscal year 2023. GAAP net loss for the fiscal year 2024 was $11.6 million or $0.27 per diluted share, up from a net loss of $17.9 million or $0.42 per share for fiscal year 2023. Turning to our plan to list our subsidiary Tongmei in China on the STAR Market in Shanghai, we have continued to keep our IPO application current. Tongmei remains in process as part of a much more selective and smaller group of prospective listings than a few years ago. We continue to think that Tongmei is a good IPO candidate, and we will keep you informed of any updates. With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets.

Thank you, Gary. While Q4 gross margin and net loss fell short of our expectation, our improvement in 2024 over the previous year was significant. We delivered a 31% increase in fiscal year revenue, a 6% improvement in non-GAAP gross margin, and a 40% improvement in non-GAAP net loss. Over the last 12 months, we have aggressively advanced the technical specifications of our material to help our global customer base solve complex next-generation connectivity challenges. More and more, the materials we supply are being used in highly sophisticated applications such as high-speed interconnects, where our breakthroughs in delivering extremely low EPDs are showing tremendous value to device performance. 2024 marked a very meaningful year of revenue growth into the cloud and data center infrastructure market as well as our successful penetration of the wireless handset market, particularly in China. We have also expanded our portfolio of our raw material companies, creating a unique valuable supply chain and laying the groundwork for incremental revenue opportunities in new markets such as pBN. And finally, we brought to market both 8-inch gallium arsenide and 6-inch indium phosphide substrates, driving new innovation into our development capabilities that we can translate into better performance and higher yield across our product families. As we look ahead to 2025, while there are some new challenges, we see a number of exciting opportunities created by both industry trends and company-specific opportunities. Now first to challenges. As many of you may know, on February 4, the Chinese government imposed trade restrictions on the export of indium phosphide material. Similar to the 2023 restriction on gallium arsenide substrates, these regulations explicitly seek to restrict the export of material used for military applications. Therefore, we are now undertaking an export permit process for indium phosphide similar to what we have been working through with gallium arsenide over the last two years. The good news is that it is an organized and efficient process that we're very familiar with, and we believe that we have similar success; we will have similar success. We are already working with our customers outside of China to prepare applications on their behalf and expect to be able to submit our first application in early March. In our experience, we typically hear back on initial applications within 40 to 45 business days, and repeat applications are often processed faster. As such, we expect to see a delay in a portion of our indium phosphide revenue in Q1 as we begin this process. For reference, in 2024, about 40% of our indium phosphide revenue came from China, and about 60% came from the rest of the world. In Q1, we expect the impact on our revenue line of approximately $4 million to $5 million in delayed sales. This said, we don't believe that any of our indium phosphide sales go to military applications, so we feel we are in a good position to realize sales once we can navigate the permit process. Now, challenges aside, let's turn to the key business opportunities and growth drivers for 2025. In cloud and data center connectivity, customers are pushing the boundary of high-speed optical interconnects to support the growth of AI adoptions. Recent algorithmic improvements have shown the potential to deliver AI applications with better returns on investment for AI infrastructure providers worldwide. These innovations can enable increased adoption and broader use case for AI globally. Within this use case, we have several new and emerging opportunities. First, the industry is beginning its transition from VCSEL lasers to speeds of 50-gig per lane to 100-gig per lane and higher. Not only are these high-speed VCSELs opening up new opportunities for us with gallium arsenide, they have also created a greenfield market opportunity for high-speed indium phosphide-based photodetectors in 400 and 800-gig multimode optical interconnects. We saw indium phosphide orders relating to this application throughout 2024, which we believe will continue to grow in 2025. Our R&D investments have allowed us to deliver significant innovation on extremely low EPD ion diode indium phosphide substrates for next-generation EML lasers for 800-gig and 1.6T pluggable transceivers. EPD refers to the defect density of a material and is a critical specification in device reliability. I'm extremely proud of our team for their breakthrough achievement. I believe AXT leads the industry in low EPD ion diode material. We're currently in the qualification path of a major supplier for deployment in 2026. Initial feedback from our customers suggests that our low-EPD characteristics are translating to highly valuable performance and reliability advantages over competing material. We continue to work with a number of customers worldwide and are also seeing exciting opportunities with next-generation silicon photonics devices for 800-gig and 1.6T pluggable transceivers for medium to long-distance transmission. For example, we saw growth in demand with increased orders in Q3 and Q4 from one of our largest U.S. silicon photonics customers. We also believe that Chinese datacenters are preparing for broader adoption of optical technology, which we view as an emerging opportunity. It is worthwhile to note that we are actively working with customers on their roadmap for co-packaged optics and view this as a major opportunity. One of the hardest challenges for this emerging technology to overcome will be the reliability at scale, which is where low EPD wafers make a critical difference. We believe that our ability to provide extremely low EPD substrates will help customers solve this challenge when the industry moves toward widespread adoption in the years to come. In addition to datacenter and AI applications, we see a second exciting opportunity in 2025 for our gallium arsenide substrates in HPT devices for the wireless market. Just two years ago, our market share was virtually zero. Today, with cost and performance breakthroughs as well as strong relationship building with one of our largest Asian-based epi providers, we now have about 10% of the overall market with particular strength in China. Expanding and accelerating our growth in this market is a key focus for us in 2025. With the availability of our 8-inch gallium arsenide substrates as well as process improvements we can apply to our 6-inch line, we feel confident we can be extremely competitive in this market and continue to grow our market share. As the third growth driver for 2025, we see opportunities in the continued recovery of the global demand environment on applications such as passive optical networks, high-power industrial lasers, particularly in China as well as LEDs for a wide variety of use cases, including lighting, display, horticulture, and automotive. We do see the demand environment improving incrementally and inventory relatively low. And finally, we have not talked as much in recent quarters about our raw material joint ventures. I do want to note that we have continued to invest in expanding our capability and build an enviable portfolio, which today includes gallium, arsenic, pBN crucibles, quartz, indium, rare phosphorus, and germanium. The strategic value of this material is not only that we can more cost-effectively supply all our critical material needed to manufacture a product, but also, we benefit from additional revenue streams generated by our joint ventures through the sales of this product on the open market. In 2024, our consolidated joint venture generated almost $32 million in revenue, up 12% from the prior year. We're working to expand this opportunity in 2025 through the development of new markets and continue the valuable recycling effort that also contributes to our gross margin performance. In summary, 2024 was a year of recovery and growth for our business. One of the things that I'm most proud of is the relentless innovation spirit of our team this year in taking on highly complex material science challenges for our customers and delivering results that the industry would have considered impossible just a few short time ago. These advances will enable an entirely new generation of devices capable of bringing such wonders as AI to the world. What we have built and continue to build for our customers and shareholders is an incredibly valuable company that can serve the most cutting-edge requirements through our leading technology, unique supply chain, and world-class manufacturing. I want to say a special thanks to our team and their families for a productive 2024. And to our customers and shareholders, I want to thank you for your partnership. We have work to do on your behalf, and we are deeply committed to delivering further improvement in 2025. With that, I will turn the call back to Gary for our first quarter guidance.

Thank you, Morris. In keeping with our comments today, we expect Q1 revenue to be in the range of $18.0 million and $20.0 million. This takes into consideration growth in gallium arsenide substrates, but that's offset by the impact from the indium phosphide trade restrictions and a modest decrease in raw material revenues. We therefore expect our non-GAAP net loss will be in the range of $0.13 to $0.15 and GAAP net loss will be in the range of $0.15 to $0.17. Share count will be approximately 43.5 million shares. This concludes our prepared comments. We can now answer any of your questions.

And your first question comes from Richard Shannon with Craig-Hallum. Please go ahead.

Okay, guys, thanks for taking my questions. Maybe kind of a two-part question looking back into the fourth quarter here and understanding the dynamics and how long they may continue here. Obviously, a little disappointed on the gross margins and OpEx here. With gross margins I think you said some lesser benefits from recycling along with lower ingot starts here that limited absorption here, and it sounds like you are trying to trim inventory lower. To what degree are we going to see this below kind of recent trends here? When should it come up here? And then also on the OpEx here, I think that you said you were spending a little bit more R&D for indium phosphide for wireless. Maybe you can indicate how long investments will continue there as well.

Well, it's a fairly complex question. Gary, do you want to take a first crack at it?

Yes. What was the first question in short?

Gross margins are slightly lower here due to a couple of factors, and I'm curious about how long this trend will persist beyond the fourth quarter.

We expect gross margins to be low again in Q1 due to reduced indium phosphide sales resulting from export restrictions. After Q1, we anticipate them recovering to at least the mid-20s, which aligns with our targets. We believe we can gradually increase them quarter by quarter.

Yes. I think to answer the question about the R&D activities, yes, we have taken quite a bit of effort in both 6-inch indium phosphide development, and also, we're leveraging our 8-inch Crystacomm knowledge we learned on 8-inch and applying that technology to our 6-inch line, which takes us quite a bit of development effort. But I think it's on the tail end of that effort. We should start to enjoy the benefit of better yield and better performance on the 6-inch line with the knowledge we have on 8-inch.

Let's discuss indium phosphide. It seems like there is significant activity related to datacenters. Could you provide more details on where the greater opportunities are coming from, such as lasers or photodetectors? I recall you mentioned a substantial revenue opportunity that could emerge in 2026. More information on that would be appreciated, Morris. Thank you.

Tim, would you like to address that question? Although I can respond, Tim is likely more in tune with the opportunity we should have in 2026 regarding low ion diode EPD for the EML. Right, Tim?

Yes. Yes, right. What we've seen in '24 is we've seen growth both on the photodetector side and the laser side of it. On the photodetector side, we've got this greenfield opportunity, which we've talked about in the past, where the high-speed VCSELs running at 100-gig per lane now need to move over to an indium phosphide-based photodetector. Obviously, the world is seeing a lot of growth in the gallium arsenide VCSEL-based transceivers for us, and we're enjoying that, too. But this greenfield opportunity has opened up for the indium phosphide side of it. We're also seeing a really healthy increase in the datacenter laser side of it. And as you probably know, we're focused more on the silicon photonics side and the EML side than we are on the more traditional DML-based applications. We're not participating that heavily in the DML side of it. And you'll see more growth coming through 2025 as the industry moves to the EML and the silicon photonics market. One of the interesting things as well that Morris mentioned was this new application on low EPD ion diodes. We're definitely seeing, I think, some new opportunities coming up there with a number of different customers. It's something to keep an eye on for next-generation EMLs. I think we'll see some growth through there in '25 and into '26. So yes, I think we're going to see some healthy growth rates on, again, both lasers and detectors in 2025.

Let me add a few points. EML refers to a laser-based device that utilizes an indium phosphide modulator on the chip to control the on and off performance of the module. Most lasers require low EPD, and traditionally, lasers are produced using sulfatope to enhance the lattice, which helps lower the defect density to under 100 per square centimeter. Lasers are highly sensitive to defect density and EPDs. However, when working with ion diode material, there’s a drawback since it lacks lattice hardening, resulting in an EPD in the thousands. The appeal of using ion diodes lies in their shorter transient time, allowing for faster modulation and improved response times. Nonetheless, achieving a lower EPD is crucial for ensuring device reliability. We are confident in our ability to reduce EPDs more effectively than our competitors, and our customers are finding this advantageous for EML development.

Okay, thanks for all that detail, Morris. I'm going to ask one more question and jump out of line here. And that's related to China and the tariffs and export controls. You had some prepared remarks that were very helpful here. It sounds like you expect the experience of the permitting or licensing process to be similar to what you saw in gallium arsenide. And while you're obviously seeing a bit of a dip here while the length of that process kind of unfolds here, but I guess I just want to make sure that you're not expecting any issues. And maybe looking back to your experience in gallium arsenide, did you have any that you would expect to be better or worse than when we get to indium phosphide?

Yes. Tim, again, you're the honcho on developing exports, so can you answer that question, Tim, for me?

Yes, I can. We fully recognize the geopolitical complexities involved. The controls on indium phosphide aim to prevent the export of these materials for military uses. When China implemented similar controls on gallium arsenide, the focus was also on military applications. However, we don't see any of our major customers using indium phosphide for military purposes. Our primary Tier 1 customers utilize it mainly for data communication. Given the genuine restrictions concerning military items, we believe that obtaining permits for nonmilitary customers and applications shouldn't pose significant challenges. We are confident in our ability to secure the necessary permits for these applications.

Okay, I appreciate all that detail, guys. I will jump in the line. Thank you.

Thanks, Richard.

And your next question comes from the line of Charles Shi with Needham. Please go ahead.

Hi. Good afternoon. The question is this. It looks like you're going to see, I think if I heard you right, $4 million to $5 million impact from the new licensing requirement in Q1. Given that you do, you seem to expect 45 days-ish to get the licenses, are those lost sales in Q1? You think you can make it up in Q2? But at the same time, the originally scheduled shipment in Q2, could that be further pushed out into Q3? I think the essence of this question is, do you think you can get back to let's say $25 million revenue per quarter in Q2 or even run a little bit above that? Because I would think you do need to get back, get the shipment originally scheduled in Q1, out as soon as you can. Any color on Q2 would be helpful. Thank you.

Sure. Yes, Charles, my answer to that is, I think these, if we can get the permit, delivering our product is no problem. I think if I were the customer with a restriction on, a customer probably wants to build some buffer, so they could increase the Q2 delivery, given that could be temporary. And I think if we have it perfectly developed and none of our customers, let's say, got barred from getting a license, I would say Q2 and Q3 could be strong quarters.

Maybe another question. I think that the opportunity in wireless, you talked about a couple of years ago it's a zero market share, but now you are seeing that could be a very strong potential growth opportunity this year. Might if you talk a little bit more about what's the sizing of that opportunity and what's the shape of that ramp into that opportunity? Is it you expect it more in the second half this year, a little bit more next year? Or give us any quantitative insights. I would really appreciate that. Thank you.

Sure, Charles. The HBT market is well recognized, with an estimated value of around $80 million to $100 million annually. Two years ago, we had virtually no market share, but now we hold about 10%. Our goal is to increase that by another 30% this year. We've learned significant process improvements from our 8-inch experience, which we are applying to our 6-inch line. This knowledge should help us reduce costs, enhance yields, and strengthen our relationships with customers, allowing us to capture more market share. Additionally, I'm optimistic that the rise of AI in smartphones will lead to increased market activity in the next year or two. If we can align with that trend, the HBT market could experience even faster growth.

Our next question comes from the line of Tim Savageaux with Northland Capital Markets. Please go ahead.

Hi. Good afternoon. I just wanted to quickly follow up on that answer, Morris. Was the market share target of 10% going to 30% by '25? I just want to confirm what the target is for the HBT market.

I believe I was referring to the fact that if we have a 10% market share, increasing it by 30% means it could go to about 13% or 14%.

Okay. Glad I asked that one.

We wish it was the other way, but that's just how it is.

You had a strong quarter in indium phosphide, the strongest in many quarters, and a solid year overall. I believe you grew 44% or 45% in indium phosphide in calendar '24. Considering the current conditions in the AI optical market, there are reports of shortages in EML lasers and increased activity in silicon photonics. From a market perspective, do you expect that growth to accelerate regardless of any restrictions? How do you view your outlook for '25 in indium phosphide compared to '24, excluding the restrictions?

Yes. I think this is a very good question. Actually, this is a topic that Tim and I, my Tim and I, have constant discussion about. We buy market reports, and obviously as a CEO, I expect the market to grow very strongly. But Tim also has the responsibility to deliver revenue, so he's tempered my expectations down, so maybe I should have Tim answer that question. Tim?

Yes, sure. This is a very dynamic market at the moment. It is more difficult to try and place a real number on where we go. Right now, as we put our numbers together, we're looking at growth from 2024 to 2025 in the region of 20% kind of range. But of course, as I say, it is a dynamic market. And as silicon photonics and EML gains more adoption, we could very well see some increases there. I'll also make another note as we look at this market. There's a strong development trend in China for EML and silicon photonics as well. Not only are we seeing this in the normal players, but a lot of the laser detector manufacturers in China that have historically focused on the GPON market are now taking a look at the EML silicon photonics market. They also want to enter into that market. So back to it, I've got a 20% year-over-year growth kind of figure in there, but it is dynamic, and we could see additional growth coming up.

Yes, I agree.

Got it. Regarding the export restrictions, particularly with gallium arsenide as an example, there was a slight decline after those were announced in Q3 of 2023, but it rebounded strongly over the next three quarters. Although this question has been previously raised, if you can obtain the necessary permits in a similar manner, can we anticipate a similar recovery? Is it feasible for you to return to the strong Q4 levels that were reported in Q2 or Q3?

I believe that if you compare gallium arsenide to indium phosphide, we rank third in gallium arsenide globally, and we hold a relatively small market share. However, in indium phosphide, we are likely either first or second. Furthermore, indium phosphide is not a material that can easily be replaced. We collaborate with our customers for about 18 months to two years to meet their specifications, and we pay attention to the details of their requirements to ensure we can deliver. We currently have the capacity and the orders in place. Once we obtain the necessary permits, I believe we can deliver quickly and potentially make up for what we've missed, and even more. However, the situation is complicated by geopolitical tensions. While I don't want to speculate, I think our recovery in indium phosphide could be better than what we might see in gallium arsenide.

Great. Thanks very much.

And your next question comes from Dave Kang with B. Riley. Please go ahead.

Thank you. Good afternoon. First question is regarding germanium. What's the plan here? Are you continuing to run this business? Or any thought of monetizing?

Germanium is a good topic to discuss. There's significant potential for low orbit satellite opportunities in China, and the demand is very strong. However, raw material prices have surged from about $1,600 to nearly $3,500 per kilogram, which has greatly impacted our cost of goods sold. We don’t see this as an immediate growth opportunity, but we will consider entering the market once the raw material prices fall to a level that allows us to be profitable.

Got it. And just wanted to dig in a little bit more on indium phosphide. Is it possible, I'm not sure you have the answer, but since you talked about photo detectors versus silicon photonics, what's the rough mix between those two?

It's hard to say the mix. I think the photodetectors, Tim, what was the photodetector revenue we got from the VCSEL? It was around $5 million last year, right?

Yes. I want to say that it's not quite 50/50. I want to say that we're seeing a little bit more on the laser side of the business. I'm talking about the datacenter on the EML and the silicon photonics side. I want to say that we're looking at somewhere in the region of like a 60/40, maybe even a 65/35 split, in favor of laser versus detector.

Yes, I think it will be challenging to distinguish between a detector and a laser. Many of the substrates we provide don't specify what detector they are using. While some markets for the VCSEL pair indicate they are for detectors, most do not provide that information.

And I am showing no further questions at this time. I would like to turn it back to Dr. Morris Young for closing remarks.

Thank you for participating in our conference call. As always, feel free to contact me, Gary Fischer or Leslie Green if you would like to set up a call. We look forward to speaking with you in the near future.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.