Earnings Call Transcript - PRSO Q2 2022

Operator, Operator

Good afternoon, and welcome to Peraso Inc.'s Second Quarter 2022 Conference Call. I would now like to turn the call over to Peraso's CFO, Jim Sullivan. Please proceed.

James Sullivan, CFO

Good afternoon, and thank you for joining today's conference call to discuss Peraso's second quarter 2022 financial results. I'm Jim Sullivan, CFO of Peraso. And joining me today is Ron Glibbery, our CEO. This afternoon, we issued a press release and related Form 8-K, which was filed with the SEC. The press release and Form 8-K are available on Peraso's website at www.perasoinc.com under the Investor Relations section. There is also a slide presentation that we will be using in conjunction with today's call that may be accessed through the webcast link on the IR website. As a reminder, comments made during today's conference call may include forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. Peraso advises caution and reliance on forward-looking statements. These statements include, without limitation, any projections of revenue, margins, expenses, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA, non-GAAP net loss, cash flows, or other financial items. Also, any statements concerning the expected development, performance and market share or competitive performance of our products or technologies. All forward-looking statements are based on information available to Peraso on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Peraso's actual results to differ materially from those implied by the forward-looking statements, including unexpected changes in the company's business. More detailed information about risk factors and additional risk factors are set forth in Peraso's public filings with the SEC. Peraso expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additionally, the company's press release and management's statements during this conference call will include discussions of certain measures and financial information in terms of GAAP and non-GAAP. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details. For those of you who are unable to listen to the entire call at this time, a recording will be available on the Investor Relations section of Peraso's website. Now I would like to turn the call over to our CEO, Ron Glibbery for his prepared remarks.

Ron Glibbery, CEO

Thank you, Jim. Good afternoon, and welcome to everyone joining us over the phone and by webcast. The timing of today's call couldn't be better as it provides a great opportunity to highlight several of the significant developments we've announced in recent weeks. Starting though with a brief overview of our revenue results for the quarter. Revenue in the second quarter increased 25% sequentially. That was up nearly 30% year-over-year. Growth in the quarter was driven by record product revenue and more specifically, the continued ramp of Peraso's mmWave ICs and modules for the fixed wireless access market. Turning first to our most recent news last week, we disclosed that Peraso entered into a technology license and patent assignment agreement with Intel Corporation. The agreements primarily include the transfer of certain memory-related assets related to our MoSys Stellar Packet Classification platform IP, which are not core to any of our existing lines of business. We anticipate the transaction to result in total gross proceeds to Peraso of up to $3.5 million, which will add nondilutive cash on the balance sheet and also contribute to a reduction of OpEx going forward. Additionally, as Intel introduces the licensed technology into the market, Peraso, as a gold Intel alliance partner stands to potentially benefit from additional design opportunities for our advanced memory products. It has been a long-standing belief that mmWave technology was fundamental to providing the necessary bandwidth capacity and speed for future generations of connectivity. As demand for wireless bandwidth continues to grow, we are seeing increasing recognition and buying across the industry that mmWave technology is the solution for incremental wireless bandwidth, faster access speeds, and more universal access in all geographies. Lastly, the chair of the U.S. FCC, Jessica Rosenworcel was quoted as saying, 'Current users have long surpassed the 253 megabit download/upload standard, which has remained unchanged since implemented in 2015.' Proposals to increase the U.S. broadband standard to 120 in the near term and 1 gigabit per second, 500 megabits per second in the longer term, with existing spectrum tapped out leading carriers such as Verizon are increasingly embracing mmWave technology to increase the speed, reach, and performance of their networks. MmWave is a global technology and solution in a growing number of large international carriers that begun deploying 5G mmWave equipment. As further evidence, the three largest telecom carriers in China recently connected formal collaboration to advance the broad use of mmWave technology, leveraging Peraso's field-proven mmWave technology and multiyear track record of commercial shipments of our 60 gigahertz solutions. In May, we introduced our 5G mmWave beamformer IC. As highlighted last quarter, we believe the 5G mmWave solution is the world's most highly integrated 5G beamformer IC, specifically designed to initially target end-user customer equipment in the 5G carrier market, our beamformer IC supports all FR2 5G NR mmWave bands. Additionally, our single IC solution integrates Peraso's patented architecture and advanced 5G antenna technology to provide dual-stream MIMO support with two independent 16-channel arrays for 32 total channels per device. I also want to emphasize that our ability to now target the end device market with this new 5G mmWave product represents meaningful expansion of Peraso's TAM by an estimated $1.5 billion in 2025. During the third quarter, we will demonstrate the evaluation modules based on our 5G mmWave beamformer IC at both Mobile World Congress, Las Vegas, and the European Microwave Conference in Milan. We've also made our 5G mmWave solution available for sampling to select customers and partners, and we are focused on building a pipeline of engagements for these products throughout the second half of the year. Turning to an update on the fixed wireless access market where Peraso continues to build on our established market position as a leading supplier of mmWave IC and module solutions for 60 gigahertz applications. The fixed wireless access market continues to demonstrate growing momentum regardless of the data points used to measure: number of service providers, number of subscribers, or total fixed wireless connections. Ericsson's Mobility Report published in June includes a series of supporting data highlighted by the forecast of over 100 million fixed wireless connections in 2022, which are then expected to double in 2027. Wells Fargo has predicted that fixed wireless access will account for 60% of net added connections, primarily taking share from what otherwise would be cable modem connections. Another compelling data point for the recent market traction, together, Verizon and T-Mobile reported more than 550,000 new fixed wireless customers in the second quarter alone. Further supporting the continuation of these current trends, the federally funded Rural Digital Opportunity Fund, RDOF is poised to provide $20 billion of retainer to incentivize deployment in broadband that work to access in rural communities across the U.S. As demonstrated by our solid revenue growth in the second quarter, we continue to make great progress running our existing tier 1 customers while also extending Peraso's leadership position in the fixed wireless market. As recently announced, in July, we received multiple purchase orders totaling $6.4 million for the combination of our mmWave IC and module products for the fixed wireless applications. Although we're not able to refer to them by name, I will say the collective orders came from two well-established leaders in fixed wireless access. Also notable is that a portion of the orders was for our newly introduced mmWave prospectus modules, which provide customers with comprehensive solutions that significantly reduce their time to market. Our prospective solutions also feature multi-gigabit access and Peraso's unique point-to-multipoint capability as well as superior range of nearly 10 times that of competing point-to-point solutions. We expect to begin initial fulfillment of these orders late in the third quarter with ongoing shipments through the first half of 2023. We believe these orders serve as strong validation of our mmWave technology and product roadmap as we continue to expand our pipeline of new customer engagements and work to secure additional design wins and orders in the coming quarters. With that, I'll pass the call back to our CFO, Jim Sullivan, to review the financials and provide our guidance for the third quarter.

James Sullivan, CFO

Thank you, Ron, and good afternoon, everyone. It's great to be speaking with you again today. During my comments, I will make several references to non-GAAP numbers. Unless otherwise indicated, referenced amounts exclude stock-based compensation expense, amortization of reported intangible assets, business combination transaction costs, and the change in fair value of warrant liability. These non-GAAP financial measures and the reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related current report on Form 8-K, which was filed with the SEC today. Now for our second quarter 2022 results. Total revenue was $4.3 million compared with $3.4 million in the first quarter of 2022 and $0.7 million during the same quarter a year ago. Product revenue from the sale of our integrated circuits and modules was $4.1 million compared with $3.2 million in the prior quarter and $0.6 million in the second quarter of 2021. The sequential and year-over-year growth was primarily driven by the continued ramp of shipments of our mmWave modules for the fixed wireless access market. Royalty and other revenue for the second quarter of 2022 was $0.2 million and comprised royalty revenues from licensees. Royalty and other revenue generally consists of our NRE services provided to mmWave customers and royalties related to our memory technology. GAAP gross margin was 34.7% in the second quarter compared with 42.8% in the prior quarter and 37.6% in the year ago quarter. On a non-GAAP basis, excluding amortization of reported intangible assets, gross margin for the second quarter was 43% compared with 53.3% in the first quarter of 2022 and 37.6% in the year ago quarter. The decrease in gross margin over the previous quarter primarily reflected increased volume shipments of our mmWave modules, which carry higher average selling prices, but lower gross margins than our IC products. Product gross margin was 32.1% in the second quarter compared with 39.2% in the prior quarter and 27.1% in the second quarter of 2021. As we progress through 2022 and into next year, our corporate gross margin target continues to approximate 50%. We expect revenue growth will contribute to higher levels of scale and enable us to capture additional production cost reductions on our mmWave modules while also realizing benefits from anticipated ongoing sales of our high-margin memory IC products. More generally, I would also add that in the immediate term, we are continuing to see and navigate some of the same inflationary costs in the supply chain that have been cited broadly by other companies across the industry. We've experienced increased prices from our suppliers due to supply chain disruption, inflation or a mix of both. And for certain products, we have increased prices to our customers to mitigate the impacts. Although to date, in 2022, the impacts of these price increases have been minimal. We have and continue to experience longer lead times for certain components used to manufacture our products and therefore, have increased lead times for our customers. GAAP operating expenses for the second quarter were $8.5 million compared with $8.2 million in the prior quarter and $4.7 million in the year ago period. Total operating expenses for the second quarter of 2022 on a non-GAAP basis, which excludes stock-based compensation and amortization of reportable intangible assets were $6.6 million compared with $6.9 million in the prior quarter and $2.8 million in the same quarter a year ago. GAAP net loss for the second quarter of 2022 was $7 million or a loss of $0.33 per share compared with a net loss of $6.8 million or $0.34 per share in the prior quarter and a net loss of $5.4 million or loss per share of $1.03 in the same quarter a year ago. On a non-GAAP basis, net loss for the second quarter of 2022 was $4.8 million or a loss of $0.23 per share, which excludes stock-based compensation and amortization of reported intangibles. This compared with non-GAAP net loss of $5.1 million or a loss per share of $0.25 in the prior quarter and a net loss of $3.5 million or a loss per share of $0.68 in the same quarter a year ago. The weighted average number of basic and diluted shares outstanding for purposes of calculating both GAAP and non-GAAP EPS for the second quarter of 2022 was 21.6 million shares. In terms of adjusted EBITDA, which we define as GAAP net income or losses reported, excluding stock-based compensation, amortization of reported intangibles, interest expense, depreciation and amortization, and the provision for income taxes. Adjusted EBITDA for the second quarter of 2022 was negative $4.5 million compared with negative $4.3 million in the prior quarter and negative $2.5 million in the prior year period. Turning to the balance sheet. As of June 30, 2022, our cash and investments balance was $6 million compared with $12.2 million on March 31, 2022. The burn of $6.2 million for the second quarter of 2022 was primarily attributable to the negative EBITDA of $4.5 million, payment of $0.6 million of tape-out related costs for our 5G beamformer chip, which were expensed in the first quarter of 2022, and timing of collection of $1.1 million of accounts receivables that were immediately received after the end of the quarter. As Ron previously highlighted, subsequent to quarter end, we completed a technology license and patent assignment agreement with Intel, involving certain non-core memory-related assets related to a MoSys Stellar Packet Classification platform IP. The transaction is expected to result in total gross proceeds to approximately $3.5 million, of which just over $3 million is payable immediately, with the remaining $0.4 million of consideration expected to be received within no more than 6 months from the closing date. In addition to serving as a nondilutive source of capital that adds cash to the balance sheet. In connection with the agreement, four Peraso employees have accepted employment with Intel, and we've also terminated the services of six full-time equivalent consultants. Collectively, these actions and the elimination of certain associated overhead costs are anticipated to contribute to a $2.7 million annualized reduction in our run rate operating expenses. I would also reemphasize that all of the IP and patents included as part of the agreement were non-core, and the associated technology was non-revenue-generating. As Ron discussed, entering the third quarter, we have significant backlog that extends well into the first half of 2023, which positions us for growth. The company expects total net revenue for the third quarter of 2022 to be in the range of $4.3 million to $4.5 million. This concludes our prepared remarks, and we will now open the call to questions. Operator, please initiate the Q&A session.

Operator, Operator

The first question is from David Williams with Benchmark.

David Williams, Analyst

Congrats on the progress, you guys are definitely gaining a lot of momentum here. And forgive me if I missed something, I’ve got a couple of calls in the background, so I'm a little confused, but just forgive me if I ask something ridiculous. But I guess, first, I wanted to ask, you talked a little bit about this on the call, but just kind of the CapEx deployment of the fixed wireless facts there. What you're seeing and what your thoughts are? It sounds like there's a lot of activity going on there, lots of subscribers been added, but generally it seems like we are really in early stages, and how do you think about that trend as we move forward maybe in the next 6 to 12 months.

Ron Glibbery, CEO

So thanks, David, for being on the call and asking that question. If you look at the second quarter results of Verizon and T-Mobile, they had 560,000 subscribers; there was very significant momentum and actually it took many of the subscribers away from the cable-modem business. So I think we are part of this overall trend. What we are seeing is the idea that in the fixed wireless market, there is obviously a lot of unhappy people with the recurrent internet situation, and we happen to be tapping into that. From our perspective, we had a great second quarter, our bookings for July I think reflected that trend at $6.4 million. As Jim mentioned, we had great momentum going into Q3, Q4, and into Q1. From our perspective on the fixed wireless side, we just think that there is a broad trend in fixed wireless growth. We certainly saw it with big carriers, and we are seeing it in our bookings, so we think we are really just at the beginning of that wave.

David Williams, Analyst

That was fantastic color. And I've heard recently a couple of folks that have spoken about the fixed wireless access and kind of needing to be the very first in line to sign up for that in the neighborhood or in your area because it just can't support the significant bandwidth. I guess, it sounds like maybe the mmWave and your 32 channels, it sounds like you might be able to help resolve some of that bottleneck. Is that fair to say, or is that a problem elsewhere perhaps?

Ron Glibbery, CEO

We have approximately 3 gigabits per second of bandwidth on our prospectus chipset, allowing us to support point-to-multipoint connections. While multiple users sharing this bandwidth may reduce individual speeds, peak performance can still reach gigabit levels. Although actual usage tends to be in the hundreds of megabits per second, we are capable of meeting that demand. The advantages of mmWave technology enable us to deliver very high data rates, and we are actively utilizing this potential. Currently, there are several factors at play, including the FCC's push to increase speeds to over 100 megabits per second, the capabilities of mmWave to provide such data rates, and the growing demand from users who are looking to upgrade from 10 or 20 megabits per second to over 100 megabits per second. These issues are converging, creating significant opportunities for us.

David Williams, Analyst

Jim, regarding the Intel agreement, what impact does it have on our existing noncore lines of business? There are operational expenses and possibly a sales aspect involved. It seems to strengthen our balance sheet and help manage some costs. What additional benefits do you foresee from the Intel partnership, and how do you view potential similar agreements?

James Sullivan, CFO

Yes. No, great question, David. Obviously, first off, it’s a nondilutive source of capital for the company. If you look back and look at the company, it has had a track record. The advantage of being an IP-rich fabless company. When we joined the companies together here back in December, really pursuing an IP play was not on the agenda. Our R&D dollars are going towards our mmWave product efforts and new module products, and obviously, now the 5G beamformer chip, which we're very excited about. So number one, a great way to monetize some technology. Two, on the business side, we have memory IC products. At this stage, as others in the industry have, I would say, curtailed their roadmap of high-performance memory products, we've found some new life for our products. Having this technology in the hands of Intel going forward could lead to additional opportunities for our memory chips because they are optimized to run on our silicon. So stay tuned there; we'll see how that plays out. Obviously, as I said, putting cash on the balance sheet is always a good thing. But last, we estimate this takes out about $2.7 million of OpEx, non-GAAP OpEx. So we'll see a benefit immediately here to our financials, let's call it, in the first full third quarter of that savings. And obviously, we're pleased that the team members who worked very hard on that technology and built something that Intel valued, were glad to see them join Intel in various capacities. As far as the accounting for the transaction, we've got to work through that with our auditors for the third quarter here. So stay tuned. Our guidance number does not assume any revenue from that transaction. It's just purely our products and some of our royalties, etc. But I think it was just a win-win, and we continue to evaluate other opportunities, particularly as Ron said, this was technology that had been non-revenue generating. We were quite pleased. The company has always had a track record of being open to these types of transactions.

David Williams, Analyst

Yes, you all have done a great job driving that intellectual property and creating valuable assets, which is excellent for monetization. I have one last question regarding the balance sheet. You’ve announced several impressive revenue deals and the Intel deal, and it seems like you have a lot of momentum in the business. I’m curious about your thoughts on the balance sheet and your comfort level with working capital and cash. Has this momentum affected your capabilities in any way? It seems like you've really gained speed over the last few quarters. I know it might be hard to articulate, but how do you view your balance sheet and your plans to keep driving this momentum forward?

James Sullivan, CFO

Yes, I’d like to share some thoughts, and then I’ll let Ron provide additional insights after I finish. We are actively seeking nondilutive transactions to raise capital. Our inventory levels have increased, which is essential given the current challenges in the supply chain. We have not encountered any delays on the memory side in delivering parts on time. For the mmWave, the delays have been minimal, perhaps just a week or two, and the customer hasn't been a factor in that, so we've been fortunate. By maintaining our inventory, we've also strengthened our long-term customer relationships. We haven't had any discussions with our customers about our balance sheet yet, but we will be looking at it carefully for future opportunities. The Intel deal will provide short-term benefits while also opening up avenues for growth. Currently, the capital markets are difficult, and we are still in the early phases of presenting our story. We just completed a business combination at the end of 2021 and are focused on demonstrating our progress. We are starting to see an upward trend, as evidenced by the press release from last week. Ron emphasized that we have a solid backlog, which allows us to plan effectively at least through the first quarter of 2023. Ron, would you like to add anything?

Ron Glibbery, CEO

I think you hit the key, Jim. And so, David, again, to your point, I mean, July, with the bookings we had in July, $6.4 million. Of course, that was on top of all the existing backlog we had already. The timing is terrific for us because now it gives us visibility well into 2023, even to the second quarter of 2023. So that's kind of a reasonably important position to be in, not to mention from a design win perspective, we keep racking them up. For example, we've just booked an order last week from a customer who actually got first samples in June. So it was really the quickest design sampling to early production order in our history at Peraso. All those things combined bode well for showing up the balance sheet over the next several months.

David Williams, Analyst

Best of luck to you. You've got a phenomenal story and I think mmWave is going to be a very large driver here going forward in the next couple of quarters. So congrats and looking forward to seeing the continued progress.

Operator, Operator

We have a question coming from Kevin Liu with K. Liu & Company.

Kevin Liu, Analyst

My congrats on your progress as well. Maybe if we could just start with the $6 million plus in orders you booked during July. I know you can't share the specific customer names, but can you talk a little bit more about whether these were new or existing customers to you guys? And then how should we think about kind of the revenue contribution over the course of this year versus next year?

Ron Glibbery, CEO

Sure, I can speak to that, Jim. Thank you very much for joining the call today, Kevin. Much appreciated. So the way you can think about it is those were existing customers, two different classes. One customer is an equipment supplier and another customer is actually a service provider. It's quite interesting because from my perspective, I think we have shared in the past that we're actually seeing service providers now making their own equipment in some cases because it helps their overall business model. It was nice to see orders from both because it implies both sides of the equation are healthy. In terms of the rest of this year, I would say certainly, it will constitute the bulk of our business on the fixed wireless side. But look, as someone who believes in focus, I think by concentrating on these accounts, it's allowed us to be successful. We have a direct line into both of these R&D organizations. Any issues that come up, we immediately are on top of. That's paying off now in terms of business because we've really paid our dues with these customers. Frankly, they're doing very well from a deployment perspective. Starting now in the third quarter and certainly into the fourth quarter, we really plan to expand our customer base because we have the beauty of our module product. The modules really allow us to engage new customers quickly. By the way, that was the other news we had in the second quarter: we brought on a deal with Richardson for the distribution of our modules. This is yet another confluence that's working in a positive vein for Peraso; we've got module products that provide a turnkey solution. So look, the $6.4 million in orders was concentrated on a couple of customers, but now that the modules are fleshed out and working well, we really see that pushing out to a much more substantial customer base over the rest of the year.

Kevin Liu, Analyst

And I know you're also bringing a lot of products to market to support kind of licensed 5G mmWave spectrum. You talked about some of that sampling beginning in this current quarter. Maybe if you could provide a little bit more detail around just the number of partners that you expect to be testing those solutions by year-end? And how do you think about when you get more material revenue contribution from those folks that may move forward?

Ron Glibbery, CEO

Well, the 5G story, we announced the silicon at the start of Q2. We're continually thrilled with this silicon. We will be showing it at the European Microwave and also at Mobile World Congress in Las Vegas. In terms of the number of customers, it won't be limited to customers but will be a waterfall. So we'll focus on the 20% of the customers that provide 80% of the revenue. That's how you can see that rolling out over the rest of this year. I think frankly, the great news on 5G is going to be in a wave in June. Obviously, we've seen Verizon continues to support mmWave. They just announced four new cities supporting mmWave. We're seeing very strong continued support from Japan. Now we've been told that in China, the three top carriers are focused on really collaborating to make sure mmWave is deployed. We're seeing it as a global deployment. From our perspective, over the next 6 months, you can see us really engaging on a selective basis, targeting the customers who will provide the most back in terms of revenue.

Kevin Liu, Analyst

And it sounds like you guys are still fairly confident in getting to a higher gross margin target by year-end. Could you just talk about some of the assumptions underlying that, whether it's predicated on just continued ramp on the mmWave side? Or what sort of operational improvements or cost inflation easing do you see contributing to that?

Ron Glibbery, CEO

There are some nuts and bolts stuff in there. So for example, this fundamental yield test time; we are going to see some price increases commensurate with the price increases we're seeing. Certainly, as the volumes go up, that gets prices down. It's really the traditional vectors that you can see on increasing margins. We definitely have quite a few vectors in place. I think all of those things are being looked at and executed upon simultaneously. So we feel quite good. I can just give you one example. In our test facility, we're doubling the capacity. That will reduce our test time, which leads directly to reduced margins. We're doing those kinds of things and it's an array of strategies we're undertaking to increase our gross margins. We're really looking over the next 18 months, not just over the next 6.

Kevin Liu, Analyst

And just lastly for me, it sounds like much of the cost savings from this Intel agreement are going to flow through in the near-term. Do you expect that to remain the case for the remainder of the year? Or do you plan to reinvest some of those savings as you make your way into '23?

James Sullivan, CFO

Right now, we would go ahead, Ron. Maybe the CEO and CFO have different perspectives. I don't think I'll be there. I'm being facetious. It's been a long day already. From my perspective, we plan to take advantage of those savings and reduce our operating expenses across our memory mmWave businesses. As Ron mentioned, our 5G beamformer chip is ready for sampling. We have reduced some expenditures related to that now that we have a chip we're comfortable sampling. We incurred tape-out expenses for that in the first quarter. We had some minor follow-on items this quarter, but we intend to utilize the operating expense savings.

Ron Glibbery, CEO

Yes, Jim, the only thing I was going to say, and I completely agree, but I just wanted to point out that the bulk of our R&D dollars is now towards wireless. So I guess one reason behind this decision on licensing this technology is that the $2.7 million is a pure reduction as Jim said, but it also allows us to focus on wireless and not dilute that between wireless and memory. That's where we've ended up here. So yes, we're going towards cost savings.

Operator, Operator

We have no further questions in queue. I'd like to turn the call back to management for closing remarks.

Ron Glibbery, CEO

Well, I'll jump in with that, Jim. So just for everyone on the call, I hope that our enthusiasm for fixed wireless and mmWave and our module strategy is all coming through because I think Q2 really saw the confluence of all those strategic matters. The $6.4 million in bookings in July factors in a positive way. I was really thrilled last week with the order we got, which is the combination of early sampling in the May-June timeframe. I think that really shows the benefit of our module strategy. Our 5G chips continue to show success, just like we see in 60 gigahertz modules. So stay tuned for that, but we really plan to recreate the success we're seeing in 60 gigahertz in the 5G bands. From Peraso's perspective, we appreciate everyone dialing in today and listening to our story. We're just really at the early stages here, and we hope to see continued growth over the next several quarters. Jim, any further comments?

James Sullivan, CFO

No, I think you summarized it well, Ron. I appreciate everyone's time, and we look forward to speaking to you in about 3 months' time.

Operator, Operator

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect. Have a wonderful day. Thank you for your participation.