Ipg Photonics Corp Q3 FY2024 Earnings Call

Good morning, and welcome to IPG Photonics Third Quarter 2024 Conference Call. Today's call is being recorded and webcast. At this time, I'd like to turn the call over to Eugene Fedotoff, IPG's Senior Director, Investor Relations for introductions. Please go ahead with your conference.

Thank you, and good morning, everyone. With me today is IPG Photonics CEO, Dr. Mark Gitin; and Senior Vice President and CFO, Tim Mammen. Let me remind you that statements made during the course of this call that discuss management's or the company's intentions, expectations or predictions of the future are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to differ materially from those projected in such forward-looking statements. These risks and uncertainties are detailed in IPG Photonics' Form 10-K for the period ended December 31, 2023 and our reports on file with the Securities and Exchange Commission. Copies of these filings may be obtained by visiting the Investors section of IPG's website or the SEC's website directly. Any forward-looking statements made on this call are the company's expectations or predictions as of today, October 29, 2024, and the company assumes no obligation to publicly release any updates or revisions to any such statements. For additional details on our reported results, please refer to the earnings press release, earnings call presentation and the financial data workbook posted on our Investor Relations website. We will also post these prepared remarks on our website after this call. With that, I'll now turn the call over to Mark.

Thank you, Gene, and good morning, everyone. Our third quarter revenue came in at the high end of our guidance, adjusted for the sale of our Russian operations in August. Adjusted earnings per share also came in at the top end of the guidance. We continue to focus on what we can control while navigating a demand environment that has remained muted. Since joining in June, I have focused on diving deep into key aspects of IPG's business and strategy. We're making good progress executing on our key initiatives, and I'm even more excited about our future opportunities than when I first joined. I'll share a few highlights. I will start with the sale of our Russian operations. As I mentioned on our last call, our team has done a tremendous job since the start of the war in Ukraine, executing flawlessly to serve the needs of our customers by quickly rebuilding our manufacturing infrastructure to ensure we did not miss a single shipment. This was not an easy task. This quarter, we were finally able to completely exit Russia with the sale of our operations in the country. With this transition now in the rearview mirror, we are focusing on optimizing our global manufacturing footprint to drive better efficiency while ensuring enough capacity for an uptick in demand in future quarters. In addition, we are working to decrease the cost of our products with a new generation of laser diodes that will also enable a significant reduction in the form factor of our high-power fiber lasers. Our second highlight is our announcement today that we signed an agreement to acquire cleanLASER, a leader in laser cleaning systems based in Germany. IPG has a strong track record of driving the usage of lasers in new applications and solutions, and this remains a key part of our growth and differentiation strategy. This tuck-in acquisition advances our capabilities in the large and attractive cleaning market where we see a lot of opportunities. It will enable us to expand the use of labor more quickly in this area. The acquisition highlights our focus on long-term growth. I'll talk more about how cleanLASER fits into the IPG business shortly. My review of the business confirms the strength of our product pipeline, technical know-how, and future market opportunities. We have work to do to execute on these opportunities, and we're going to be investing in a number of key areas. We will make sure we're allocating resources to capitalize on high-value programs in areas such as medical, cleaning, and micromachining, and also strengthening the organization to ensure that we are optimized to execute on these opportunities. We have a robust product pipeline that presents attractive opportunities to drive differentiation around lasers and systems and to deliver complete solutions, process know-how, and world-class support to our customers. All of this cannot be easily replicated by competitors. Our focus will remain on providing a high level of service and support, maximizing uptime and lowering the total cost of ownership for our customers. On the organization front, we need to get stronger to ensure we are executing at a high level. This includes how we drive decisions and efficiency throughout the organization and our go-to-market approach. We will be making some investments here, and I'll provide more color on future calls. But the main theme is that we are going to be stronger operators and more formidable competitors as we exit the current demand downturn. Because of the prolonged down cycle in the industrial market that we're facing, we need to make sure that we're managing with agility as we invest for the long-term. Over the past few months, we've achieved additional cost efficiencies with implemented cost avoidance initiatives and more recently executed a targeted headcount reduction. We expect to reallocate these savings to opportunities that will drive long-term growth for IPG. I'll have more to share on all the initiatives underway in the coming months. But for now, let me make it clear that we are moving purposefully and operating with agility as we put IPG in a strong position both for demand recovery and for long-term growth opportunities in our industry. And we are starting this from a solid foundation with great products, customer relationships, strong cash flow generation, and one of the industry's best balance sheets, including $1 billion in cash and no debt. Let's now turn to the current business environment. Overall demand continues to bounce along the bottom. Customer conversations indicate a cautious spending environment across many markets, driven by economic and political uncertainty and reduced end-market demand in the key areas of general manufacturing and e-mobility. Our fourth quarter guidance reflects a continuation of this trend, and we currently don't have any visibility into an improved demand environment. Turning to our key applications. In welding, revenue decreased modestly year-over-year primarily due to lower demand for e-mobility in China. Despite the year-over-year comparison remaining negative, it's important to note that welding sales have been relatively stable over the last three quarters and that there are several good signs of progress for IPG. We're winning business with some large global customers in the EV and general automotive applications and driving further adoption of our welding solutions. Our real-time weld monitoring system is gaining acceptance with automotive and non-automotive customers where weld quality is critical for safe performance of their products. Additionally, EV sales improved sequentially, which demonstrates we are gaining market share in EV applications despite a downturn in battery capacity installations. I'm also encouraged to see growth in our welding system sales with both automated systems and handheld posting better year-over-year results. Welding systems for medical device manufacturing are gaining traction around the world, and we're seeing strong demand for our solutions in this market. We're having great conversations with important customers that indicate a favorable longer-term adoption curve, and we're well positioned for further gains. Overall, across welding applications, we continue to focus on the total solution for customers by providing best-in-class lasers in-line, real-time weld monitoring and full automation to solve customers' manufacturing challenges. In cutting, sales declined significantly year-over-year, primarily in Europe and the U.S. as flat sheet cutting remains weak. Amid an environment of weaker manufacturing PMI, our customers have not resumed normal purchasing activities, although some of them have made progress working down inventories. On a positive note, I continue to be enthusiastic about our opportunities in the growth areas where fiber lasers can replace incumbent technologies. That's the reason behind the cleanLASER acquisition as we look to increase our penetration into industrial cleaning applications. Cleaning is an important opportunity because traditional cleaning applications often rely on high levels of environmentally unfriendly consumables such as acids and abrasives that must be disposed of. The processes may also involve high water consumption. By contrast, laser cleaning systems are environmentally friendly with limited or no process waste and have a compelling total cost of ownership. cleanLASER has a strong foothold in Europe as a long-time leader in the cleaning space. We have a wide array of customers in industries such as automotive, aerospace, medical, food, and other markets. This is a great example of a targeted and prudent approach to M&A activity. We've known the cleanLASER team and have supplied our laser sources to them for a number of years. Our businesses are complementary in many ways, bringing together our respective strong customer bases in North America and Europe as well as product and technology synergies. We believe that together, we can help accelerate the adoption of laser systems and industrial cleaning. Tim will provide some more details on the structure of the deal and its financial impact. I want to emphasize, I'm extremely excited about a number of products and technologies in development. While it's too early to share the details, I believe these products can provide significant differentiation for IPG in medical micromachining and advanced applications, all of which provide large and attractive market opportunities for us. Moving to our outlook. Our third quarter book-to-bill was 1, excluding Russian sales. As I mentioned earlier, we continue to believe that we are bouncing along the bottom of this demand cycle. Across our geographies, we've seen some stability in demand in China, offset by continued macro uncertainty in Europe and the U.S. We have limited visibility beyond the current quarter but are remaining hopeful for more stability in 2025. With that, I will now turn the call over to Tim.

Thank you, Mark, and good morning, everyone. My comments will generally follow the earnings call presentation available on our Investor Relations website. We'll start with the financial review on Slide 5. Revenue in the third quarter was $233 million, a decline of 23% year-over-year and down 8% sequentially when adjusted for Russian revenue, which was $7 million in the quarter. Revenue came in at the top of our guidance. Foreign currency did not have a significant impact on revenue this quarter. Revenue from materials processing applications decreased 22% year-over-year mainly due to lower cutting sales, while revenue from other applications fell 28% because of fluctuations in medical and advanced application sales. GAAP gross margin was 23.2%, a drop of over 20 percentage points year-over-year primarily due to excess inventory provisions, which accounted for a 12.8 percentage point headwind to GAAP gross margin this quarter. Adjusted gross margin was 36%, exceeding the midpoint of our guidance. Furthermore, reduced absorption of manufacturing costs from lower revenue and our ongoing efforts to adjust inventory lowered gross margin by 660 basis points. These negative effects on gross margin were partly counterbalanced by decreased import duty and shipping costs and a further $5 million reduction in sequential manufacturing expenses. Most of the increase in inventory provisions was tied to excess quantities of strategic electronic and diode components. The provision for electronic components was driven by significant supply chain issues over the past several years, leading to considerable purchases as a strategic backlog. Given the business slowdown and our unsuccessful attempts to sell this electronic inventory in the secondary market, the realizable value of these items is now uncertain. The provision for excess diode components stems from transitioning from the current generation to a more cost-effective high-power platform, which will happen over the next 12 to 15 months. Our analysis indicates that we will not consume all the existing inventory. Operating expenses were at the low end of our expectations due to the sale of our Russian business and our focus on operational efficiencies. Currency translation had a minor impact on revenue and gross profit this quarter, approximately $1 million. Currency transaction losses negatively affected operating income by $1 million or $0.02 per share. GAAP operating loss was $253 million, which included a $198 million loss from the sale of assets related to our Russian operations and $27 million in asset impairment charges due to recent EU trade controls that limited our operations in Belarus. We are currently assessing strategic options regarding this business. Consequently, we reported a net loss of $234 million or $5.33 per diluted share. Excluding the loss on the sale of assets, asset impairment charges, and excess inventory provisions, our adjusted EPS was $0.29 in the third quarter, at the top of our guidance. We have provided a reconciliation to adjusted net income and adjusted earnings per share in the press release and earnings call presentation. Moving to revenue performance by region on Slide 6, sales in North America decreased 20% year-over-year due to lower sales in cutting applications and a decline in medical revenue. Our medical orders from a large customer can vary significantly quarter-over-quarter due to their inventory management, contributing to this revenue unevenness. Other applications performed better with growth in welding and marking. EV investment is delayed in the region, but traditional automotive investments appear to be recovering slightly. In Europe, sales decreased 29% compared to the previous year due to lower sales in cutting applications. Large cutting OEM customers continue to manage their inventories with low order rates as economic conditions in Europe remain weak and industrial demand is subdued. In China, revenue decreased 27% year-over-year because of lower sales in cutting and welding applications stemming from reduced demand in general industrial and e-mobility markets, which was somewhat offset by growth in 3D printing applications. Cutting sales have also been affected by a tough competitive environment. Moving to a summary of our balance sheet and cash flow on Slide 7, we finished the quarter with cash, cash equivalents, and short-term investments of $1 billion and no debt. Cash generated from operations was $66 million, while capital expenditures totaled $23 million during the quarter. We continue to generate cash from our inventory as we manage our working capital investments. The proceeds from the divestiture of our Russian operations resulted in a net cash outflow of $25 million. We spent $74 million on share repurchases in the third quarter and $286 million year-to-date. While maintaining a strong balance sheet, we have returned a significant amount of capital to shareholders through share repurchases since the start of 2021. As noted earlier, we signed a definitive agreement to acquire cleanLASER for around $75 million. Moving to our outlook on Slide 9 for the fourth quarter of 2024, we anticipate revenue between $210 million and $240 million. This revenue guidance range is similar to the previous quarter but reflects a $10 million increase in the range when adjusted for Russian sales. The estimated gross margin for the fourth quarter is between 35% and 38%. We expect to deliver earnings per diluted share in the range of $0.05 to $0.35, with about 44 million diluted common shares outstanding. I will provide additional guidance on the financial impact of the divestitures and acquisitions. The sale of our Russian operations is projected to reduce our revenue by approximately $40 million annually but should have a neutral impact on operating income as the business was operating close to breakeven after restructuring. Our total operating expenses will decrease as a result of the sale, although the reduction will be partly offset by our annual merit increase. Additionally, we will continue investing in research and development and sales and marketing to support technology development and enhance collaboration with customers. The upcoming acquisition of cleanLASER is expected to close in the fourth quarter, subject to regulatory approvals, and is not included in our guidance. We project this acquisition to add around $30 million to revenue in the first year and it will be approximately neutral to GAAP operating income due to accruals for earnouts based on future growth and profitability targets. As highlighted in the safe harbor section of today's earnings press release, our guidance is based on current market conditions and expectations, assumes the exchange rates referenced, and is subject to the risks detailed in the safe harbor and the company's SEC reports. With that, we would be happy to take your questions.

Thank you. We will now begin the question-and-answer session. Our first question is from Ruben Roy from Stifel. Your line is now live.

Thank you. Hi, Mark and Tim. Thanks for taking the questions. I wanted to start, Mark, with maybe drilling into the comment on no visibility of an improved demand environment a bit in the context within the context of the book-to-bill getting back to one here. Maybe you could talk about linearity of bookings or geography of the improvement from last quarter on the bookings front to this quarter sort of how you're thinking about that, maybe just in a little bit more specificity on either geographies or in markets, applications, et cetera.

Sure, Ruben. It's great to talk to you, and I look forward to seeing you next week in Chicago. As we’ve noted, things have been stabilizing. Our book-to-bill ratio is now at one, indicating some stabilization. In the cutting area, we've been affected by macro trends, particularly in China. In the industrial markets, PMIs are still down, which is impacting the sector, primarily in Europe and North America. However, we’re seeing a strong comeback in the welding sector, which is exciting for us. We're making good progress and winning business in various areas, particularly in electric vehicles and general automotive, on a global scale. Although the overall electric vehicle market is still under pressure, we are gaining market share in these specific areas. We're really excited about our progress in welding, and those gains are occurring worldwide.

Very helpful, Mark. Thank you.

Looking ahead, we've noticed a slight increase in bookings in North America, which is positive. Europe remained stable, while China also showed stability. Japan performed a bit weaker than expected, but this was balanced out by stronger results in Korea. Overall, medical buildings were a bit softer, but we anticipate a strong quarter for medical revenue as we move into Q4. Our outlook is encouraging in that area. In general, there's stability across the board, but we aren't seeing much momentum. Regarding linearity, the current environment is challenging. Bookings were concentrated towards the end of the quarter, partially due to a typical slowdown in Europe and other regions during August. There hasn't been a strong influx of orders at the start of the quarter, so we are still facing some difficulties, which is why we believe we are just managing to stay at the bottom.

Very helpful. Thanks for the detail, guys. As a follow-up, Mark made the comment that there's some investments coming. And Tim, you talked about some recent development programs as you're collaborating with customers, et cetera. It seems like a good time to invest as we are in this down cycle. But will there be any implications that we should think about in terms of OpEx maybe beyond Q4?

Our guidance for Q4 reflects the positive impact from Russia, but this is counterbalanced by an increase in expenses due to merit raises. Looking ahead to next year, we will continue with our annual operating plan process. However, I anticipate that overall expenses for next year will be slightly higher than this year, as we plan to continue investing in R&D, sales efforts, and building customer relationships. We've also conducted an analysis of our spending compared to others in the industry, and we are aligned with both the median and average. We are conscious of maintaining fiscal discipline. Mark, please provide further details.

Yes. I mean, again, excited about some of these areas. We've been doubling down in some of the R&D areas where we see key areas of growth. I mentioned welding. That's an area that we're continuing to focus on. Of course, cleaning application that now with the combination with cleanLASER is exciting, and some of the micro material processing. So again, really nice areas to focus in, and then being able to make some improvements in the organization also to continue to get better. As Tim mentioned, some work in the go-to-market improvements and some investments in sales and service and those pieces that will continue to make us stronger. But again, we're doing that, as Tim mentioned in a very disciplined way. And you saw that we took some costs out of the organization as I talked in the prepared remarks, and we'll be reallocating that to cover some of these areas and allow these additional investments.

Got it. And just one last one, guys, just so I have this straight. Tim, the transition to the high-power diodes that are more cost-effective over the next 12 to 15 months, nice to see the progress there. Can you remind me what percentage of revenue we're talking about? I think last time we talked, as you were saying, somewhere around 35%, 45%. Is that accurate?

So the transition really those diodes are going to benefit the high power lasers over time. We're going to continue using the existing lasers on some applications, which are less price sensitive, and we'll initially roll out the newer devices on some of the cutting applications, for example, which will enable us to go-to-market a bit more aggressively and pass some of the cost benefit on to our customers in a limited way. I'd say on total, I mean, high power is still, I think about 40% of total sales and cutting is about 25% of the total revenue, most of which is in the high power spectrum. So Initially, it will be that 25% level of revenue. And then ultimately, as we transition completely through the existing generation should be benefiting up to 40-plus percent of the cost of sales.

Excellent. Thank you very much. See you guys next week.

Yes, sure. Thanks, Ruben.

Thank you. The next question today is coming from Jim Ricchiuti from Needham & Company. Your line is now live.

Thanks. Could you provide an idea of how significant your cleaning business will become after acquiring CleanLASER? I understand it has been a relatively small segment so far, but that information could be useful.

Hi, Jim, this is Mark. Great to talk to you again. So we don't break out the cleaning business, but it's in the range of tens of millions of dollars. And as we've mentioned, CleanLASER is adding about $30 million. Very excited about the area. This is a great area, because this is a place where we can really drive the adoptions together with CleanLASER to drive the adoption of cleaning in the industrial cleaning markets, which is a tremendously large market. And again, it's just as we've done in Welding, it's really moving us from allowing us to penetrate non-laser markets with laser, and we see large opportunities for growth in that area.

Got it. And Mark, you've had the opportunity now to evaluate strategies established some new objectives to the business. I'm wondering, you talked a little bit about R&D and the pipeline, and we'll hear more about that, I'm assuming, as you said. But I'm wondering whether M&A is going to play a greater role in the future plans of IPG.

Yes. Thank you very much, Jim. We have an excellent strategy focused on R&D, strong technologies, and effective programs, which are our main investment areas. However, if we encounter a promising M&A opportunity that allows us to access the market better or quicker, we are open to pursuing it, as demonstrated with cleanLASER. Our primary focus will always be on internal programs and their growth, but we are definitely willing to consider M&A when it is advantageous. This serves as a good example of that approach.

Thank you. I have one last question, Tim. You've provided some parameters in the past regarding gross margins at higher revenue levels. There have been many changes within the business over the past year. I'm curious if you could give us an update on how we should consider gross margins as revenues begin to recover.

Yes, Jim, I believe the model's performance remains consistent. The gross profit from our products remains strong and relatively stable from quarter to quarter, with minor fluctuations based on product mix. The focus should be on addressing any under-absorption. If we can sustain a strong gross margin, driven by improved pricing and manufacturing efficiencies, along with favorable market pricing, we can start to recover some of the under-absorption we've experienced, which was 660 basis points. Bringing that down to a more typical level will help us reach gross margins of 42% or 43%. As revenue flows from the model are robust, once we exceed $250 million in revenue, we should see positive momentum. Approaching the $250 million to $300 million range, I expect gross margins to exceed 40%, maintaining our previous trajectory. Additionally, managing our inventories will support this effort. We've made progress this quarter, particularly with the disposal of our Russian operations and the provisions we've set. As inventory levels decrease and days on hand decline, we anticipate a reduction in the inventory provisions, which should normalize to around 1.5% or 1%, down from the 3% to 3.5% we've been experiencing.

Got it. Thanks very much.

Thank you. Next question is coming from Keith Housum from Northcoast Research. Your line is now live.

Good morning, gentlemen. Mark, maybe you can remind us how important Belarus is to the company now. And I think you mentioned that you guys are going through an analysis there about perhaps next steps based on what's happening with some of the regulations out there. But just to give some more color on what you're thinking there?

Yes, absolutely. Thank you for the question. Belarus was simply a supply source for the organization. Over a year ago, we recognized the potential issues and arranged for other sources to take over those supply lines. We have implemented alternative outsourcing that fulfills those needs. Therefore, there is no risk to the business or supply, and we are currently evaluating strategic options moving forward, but there has been no impact on the business.

Got you. I appreciate it. And Mark, you've been there a few months now. Obviously, you've got a lot of things that you're looking at in terms of investments and strategies. I guess, in your mind, what are the top two or three strategies that you're focused on now, I guess, until the end of the year?

Certainly. First and foremost, I want to highlight that IPG is an outstanding company. This is not about making changes but rather about building on a solid foundation. IPG has an impressive team and substantial expertise in lasers, components, systems, and applications. As I mentioned last quarter, the depth of process knowledge within the company is remarkable. This knowledge enables us to undertake initiatives like CleanLASER, where we can substitute existing technologies with laser solutions, just as we've done in welding. These areas present significant growth potential for the business. We have a strong brand presence in the market and excellent relationships. Additionally, as Tim pointed out, we possess a robust balance sheet with $1 billion in cash and no debt. We are identifying numerous exciting growth opportunities and distinct offerings across various applications. Some of these, such as Medical, Cleaning, Welding, and Micromachining, have been discussed earlier, and we are eager about them. To create long-term value, we must improve in two key areas: sharpening our focus on high-value R&D programs and enhancing the organization's ability to execute more effectively. We plan to make targeted additions in certain areas and will continue to invest incrementally, which Tim also mentioned, and we'll elaborate on these efforts in future calls. We are approaching this strategically, managing with agility, and focusing on what we can control. We've already implemented manufacturing efficiencies and targeted headcount reductions, with more opportunities available. Overall, we are highly confident in our ability to generate long-term value based on our solid foundation, which includes vital technologies and application process expertise, providing significant growth prospects in distinct applications. Lastly, as Tim discussed, we have the industry’s best balance sheet, cash generation capabilities, and leverage through our business model. Collectively, these elements represent key areas where we are investing to propel the company forward.

If I can squeeze in one more here. The cleanLASER acquisition. One, it sounds like it's more of a systems acquisition as opposed to being laser-driven specifically. Is this perhaps a little bit more openness for the organization to move further into systems and not just the laser component?

We need to focus on each of these areas, particularly in driving adoption in non-laser markets. For instance, with cleanLASER, while it's about lasers, it's crucial to comprehend the process to provide effective solutions for customers. As we gain insight into that process, we can develop improved lasers that align with it, such as those with the appropriate energy and power profiles that can scan quickly for efficient cleaning. Our aim is to integrate these components to create a cohesive solution. We will supply lasers across various markets similarly to how we do in Welding and Cutting, offering components, subsystems, and systems as required. The focus is on adoption and targeting the right value points across our portfolio.

All right. Thank you.

Thank you. Our next question is from Mark Miller from Benchmark. Your line is now live.

China has recently announced more stimulus programs. I'm just wondering, do you think that will have a beneficial impact on IPG? And if so, when?

I believe stimulus programs could have an impact, particularly in the electric vehicle sector. In China, we're noticing that the adoption of electric vehicles is accelerating. Currently, more than half of all vehicles are electric. This stimulus might direct funds towards the automotive sector and potentially continue to boost adoption, which could influence some factories where electric vehicle battery capacity has been somewhat stagnant. Tim, do you have any additional insights on this?

Not specifically, I think we have to watch the PMI data out there, which has continued to be relatively weak. It's not really bad, but I think some of the key indicators are the things towards to see whether that stimulus is creating a bit of momentum in the economy. I think for us, the benefit is that we've seen a more stable business environment over the last couple of quarters. And if we can then build on that with some of that stimulus coming as a bit of a tailwind, it potentially is August was some slightly improved performance. I think we're still the Chinese economy still put a lot of challenges behind it. So let's see how much benefit that stimulus can have. But we've got a stable business out there at the moment.

Yes. We've seen some uptick in areas like 3D printing, where our single-mode lasers are such an important part. So that's an area, again, it's an industrial piece. It's one particular segment. But as Tim said, hard to pull that to understand that across the whole economy at this point.

A formal point on that is we've heard that actually some of the utilization of some of the largest battery manufacturers have started to pick up meaningfully. So that could be a catalyst coming into some point in the futures for a pickup in that demand. And I think our total EV sales in China was slightly up quarter-over-quarter. So that's another slightly positive viewpoint.

Israel mentioned that they are planning to implement a laser-based defense system to counter missiles and drones. I was curious if you have any active development contracts or projects in that area.

Yes, I can't provide specific details, but we do supply to the overall market. Our single-mode lasers are high performance and have been important globally, being used in those applications, but that’s all I can share at this time.

So you still have ongoing programs there.

We're still selling lasers into that market. It's not a huge business for us today, but we do have irons in the fire.

Thank you.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you for joining us this morning and for your continued interest in IPG. We'll be participating in a number of investor events this quarter and we are looking forward to speaking with you soon again. Have a great day, everyone.

Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.