Vishay Intertechnology Inc Q2 FY2021 Earnings Call

Ladies and gentlemen, thank you for standing by, and welcome to the Vishay Q2 2021 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Peter Henrici. Thank you, please go ahead, sir.

Thank you, Ashley. Good morning, and welcome to Vishay Intertechnology's Second Quarter 2021 Conference Call. With me today are Dr. Gerald Paul, Vishay's President and Chief Executive Officer; and Lori Lipcaman, our Executive Vice President and Chief Financial Officer. As usual, we'll start today's call with the CFO, who will review Vishay's second quarter 2021 financial results. Dr. Gerald Paul will then give an overview of our business and discuss operational performance as well as segment results in more detail. Finally, we'll reserve time for questions and answers. This call is being webcast from the Investor Relations section of our website at ir.vishay.com. The replay for this call will be publicly available for approximately 30 days. You should be aware that in today's conference call, we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. For a discussion of factors that could cause results to differ, please see today's press release and Vishay's Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. In addition, during this call, we may refer to adjusted or other financial measures that are not prepared according to generally accepted accounting principles. We use non-GAAP measures because we believe they provide useful information about the operating performance of our businesses and should be considered by investors in conjunction with GAAP measures that we also provide. On the Investor Relations section of our website, you can find the presentation of the second quarter 2021 financial information containing some of the operational metrics Dr. Paul will be discussing. Now, I turn the call over to Chief Financial Officer, Lori Lipcaman.

Thank you, Peter. Good morning, everyone. I am sure that most of you have had a chance to review our earnings press release. I will focus on some highlights and key metrics. Vishay reported revenues for Q2 of $819 million, a quarterly record. Our EPS was $0.64 for the quarter. Adjusted EPS was $0.61 for the quarter. The only reconciling items between GAAP EPS and adjusted EPS are tax-related. There were no reconciling items impacting gross or operating margins. Revenues in the quarter were $819 million, up by 7.1% from the previous quarter and up by 40.8% compared to the prior year. Gross margin was 28%. Operating margin was 15.3%. There were no reconciling items to arrive at adjusted operating margin. EPS was $0.64. Adjusted EPS was $0.61. EBITDA was $163 million or 19.9%. There were no reconciling items to arrive at adjusted EBITDA. Reconciling versus the prior quarter, operating income for Q2 2021 compared to operating income for the prior quarter, based on $54 million higher sales or $55 million higher excluding exchange rate impacts, operating income increased by $28 million to $125 million in Q2 2021 from $97 million in Q1 2021. The main elements were: average selling prices had a positive impact of $8 million, representing a 1.0% ASP increase. The volume increased with a positive impact of $22 million, equivalent to a 6.1% increase in volume; variable costs remained flat in total; cost reductions and volume-related efficiencies offset increases in materials, services, and metal prices; fixed costs remained flat in total, in line with our guidance. Reconciling versus prior year, operating income for Q2 2021 compared to adjusted operating income in Q2 2020 based on $237 million higher sales or $215 million excluding exchange rate impacts, adjusted operating income increased by $84 million to $125 million in Q2 2021 from $42 million in Q2 2020. The main elements were: average selling prices had a negative impact of $2 million, representing a 0.3% ASP decline; volume increased with a positive impact of $101 million, representing a 36.4% increase; variable costs decreased with a positive impact of $6 million, primarily due to volume-related increased manufacturing efficiencies and cost reduction efforts, which more than offset higher metal prices, annual wage increases, and higher tariffs; fixed costs increased with a negative impact of $19 million, primarily due to annual wage increases and higher incentive compensation, partially offset by our restructuring programs. Inventory impacts had a positive impact of $5 million. Exchange rates had a negative impact of $6 million. Selling, general, and administrative expenses for the quarter were $104 million, in line with expectations. For Q3 2021, our expectations are approximately $104 million of SG&A expenses. For the full year, our expectations are approximately $420 million at the exchange rates of Q2. The debt shown on the face of the balance sheet at quarter end is comprised of the convertible notes due 2025 net of debt issuance costs. There were no amounts outstanding on our revolving credit facility at the end of the quarter. However, we did use the revolver from time to time during Q2 to meet short-term financing needs and expect to continue to do so in the future. No principal payments are due until 2025, and the revolving credit facility expires in June 2024. We had total liquidity of $1.6 billion at quarter end. Cash and short-term investments comprised $856 million, and there were no amounts outstanding on our $750 million credit facility. Total shares outstanding at quarter end were 145 million. The expected share count for EPS purposes for Q3 2021 is approximately 145.5 million. Our convertible debt repurchase activity over the past three years, together with the adoption of the new convertible debt standard, significantly reduces the variability of our EPS share count. Our U.S. GAAP tax rate year-to-date was approximately 19%, which mathematically yields a rate of 20% for Q2. We recorded benefits of $3.9 million for the quarter and $8.3 million year-to-date due to changes in tax regulations. Our normalized effective tax rate, which excludes the unusual tax items, was approximately 24% for the quarter and 23% for the year-to-date periods. We expect our normalized effective tax rate for the full year 2021 to be between 22% and 24%. Our consolidated effective tax rate is based on an assumed level and mix of income among our various taxing jurisdictions. A shift in income could result in significantly different results. Also, a significant change in U.S. tax laws or regulations could result in significantly different results. Cash from operations for the quarter was $117 million. Capital expenditures for the quarter were $32 million. Free cash for the quarter was $85 million. For the trailing 12 months, cash from operations was $365 million. Capital expenditures were $135 million, split approximately for expansion, $86 million; for cost reduction, $9 million; for maintenance of business, $40 million. Free cash generation for the trailing 12-month period was $230 million. The trailing 12-month period includes $30 million cash taxes paid for both the 2020 and 2021 installment of the U.S. tax reform transition tax. The 2020 installment was paid in Q3 2020, whereas the 2021 installment was paid in Q2. Vishay has consistently generated in excess of $100 million cash flows from operations in each of the past 26 years and greater than $200 million for the past 19 years. Backlog at the end of Q2 was $2.050 billion or 7.5 months of sales. Inventories increased quarter-over-quarter by $31 million, excluding exchange rate impacts. Days of inventory outstanding were 76 days. Days of sales outstanding for the quarter were 43 days. Days payables outstanding for the quarter were 33 days, resulting in a cash conversion cycle of 86 days.

Thank you, Lori, and good morning, everybody. Also in the second quarter, the steep upturn of our business visible since October of last year continued. We keep ramping up critical manufacturing capacities, increasing revenues and profits further. Quite excellent plant efficiencies, the impact of price increases, and our traditional discipline in fixed costs support the financial results. Vishay, in the second quarter, achieved a gross margin of 28% of sales, an operating margin of 15.3% of sales, earnings per share of $0.64, and adjusted earnings per share of $0.61. We, in the second quarter, generated $85 million of free cash, and we do expect another solid year of cash generation. The economic environment for the electronics business continues to be exceptional with sales and backlogs at a historical high. Virtually all markets currently are in excellent shape, and supply chains continue to be rather depleted. Despite all efforts to expand manufacturing capacities quickly, lead times for many product lines have stretched out rapidly and massively. Price pressure presently is very low, and selected price increases are being implemented, partially required to offset increased costs for metals and transportation. Commenting on the regions. We see a continued strong performance in Asia and in the Americas. Europe is somewhat lagging due to temporary supply problems in the automotive sector caused by a lack of integrated circuits. The Industrial segment drives demand in all the regions. Distribution in all hemispheres continues to be extremely hungry for product. Talking about distribution, global distribution continues to get overwhelmed with orders. We see a record high since at least 15 years. POS in the second quarter was 5% over the prior quarter and a remarkable 45% over the prior year. After massive increases in the first quarter, POS increased further in all regions, by 3% in the Americas, by 6% in Asia, and by 5% in Europe. Global distribution inventory has stabilized on very low, partially critically low levels. Inventory turns of global distribution increased to quite extreme 4.4 from 4.3 in the prior quarter; in the Americas, the 2.1, after 1.9 in Q1 and 1.4 in prior year; in Asia, 7.4 turns after 6.7 in Q1 and 4.1 in prior year; 4.6 turns in Europe after 4.4 in Q1 and 3.0 in prior year. Talking about the various industry segments we serve. Automotive continues strong globally with OEMs continuing to struggle for replenishing vehicle inventory. The increase of the electronic content clearly accelerates. There are some temporary supply problems leading to some artificial slowdown of the industry. We still expect previously forecasted growth of 10% versus the prior year in terms of vehicles. We see exceptional growth in the industrial sectors, which indicates an ongoing broad global upturn. Factory automation and accelerated residential development, governmental investments in power generation and transmission systems, as well as alternative energy systems are driving the demand. Markets for computer and peripheral equipment are holding up well. 5G base station equipment continues to show promising growth in telecom. Military spending continues reasonably strong. Commercial aerospace is showing first signs of recovery. The medical sector stabilized on a high level, and consumer market sectors continue to show growth, driven by high rates of home construction, traditional television, and gaming. Coming to the business development for Vishay. Due to high orders and backlogs and based on the continued increase of manufacturing capacities, Q2 sales, excluding exchange rate impacts, came in at a record and above the midpoint of our guidance. We achieved sales of $819 million versus $765 million in the prior quarter and $582 million in the prior year. Excluding exchange rate effects, sales in Q2 were up by $55 million or by 7% versus the prior quarter and up by $215 million or 36% versus the prior year. Book-to-bill in the second quarter remained on a very high level of 1.38 after 1.67 in the prior quarter; 1.41 for distribution after 1.89 in quarter 1; 1.34 for OEMs after 1.41; 1.41 for semiconductors after 1.86 in Q1; 1.35 for passives after 1.50 in quarter 1; 1.33 for the Americas after 1.42 in the first quarter; 1.29 for Asia after 1.86 in Q1; 1.54 for Europe after 1.62 in Q1. Backlog in the second quarter climbed to another record high of 7.5 months after 6.8 months in Q1; 8.4 months in semis after 7.7 months in quarter 1; and 6.7 months in passives after 5.9 months last quarter. There is practically no price decline. In fact, there are some increases quarter-over-quarter. Vis-à-vis the prior quarter, we saw a price increase of 1.0% and versus the prior year, a slight loss of 0.3%. In semis, these numbers were an increase of 1.5% versus the prior quarter and a slight decrease of 0.7% versus the prior year. For passives, price increases were 0.4% versus the prior quarter and 0.1% versus the prior year. Some highlights of operations. Thanks to continued excellent plant efficiencies and despite still high transportation and metal costs, contributive margin in the second quarter improved further, returning to traditional levels. SG&A costs in the second quarter came in at $104 million, according to expectations when excluding exchange rate effects. Manufacturing fixed costs in the second quarter came in at $141 million, again according to expectation without exchange rate effects. Total employment at the end of the second quarter was 22,500, 2% up from the prior quarter at 22,060. Excluding exchange rate impacts, inventories in the quarter increased by $31 million, $11 million in raw materials and $20 million in work in process and finished goods. Inventory turns in the second quarter remained at a very high level of 4.8. Capital spending in Q2 was $32 million versus $25 million in the prior year, $20 million for expansion, $2 million for cost reduction, and $10 million for the maintenance of business. In view of the extremely high market demand, we are accelerating midterm expansion programs noticeably. We now expect for the year '21 CapEx of approximately $250 million. We generated, in the second quarter, cash from operations of $365 million on a trailing 12-month basis. We generated, in the second quarter, free cash of $230 million, again on a trailing 12-month basis. Despite increased CapEx, we also, for the current year, expect a solid generation of free cash, quite in line with our tradition. Let me come to our product lines, starting as always with resistors. With resistors, we enjoy a very strong position in the auto, industrial, military, and medical market segments. We offer virtually all resistor technologies and are globally known as a reliable and high-quality supplier of the broadest product range. Vishay's traditional and historically growing business has recovered completely from the pandemic, running at record levels now. Sales in the quarter were $195 million, up by $8 million or 4% versus the prior quarter and up by $47 million or 32% versus the prior year, all excluding exchange rate impacts. The book-to-bill ratio in the second quarter continued strong at 1.39 after 1.50 in the prior quarter. Backlog increased further to 6.6 months from 5.6 months in the prior quarter. Due to higher volume and quite excellent efficiencies in the plants, gross margin in the second quarter increased further to 30% of sales from 29% in the prior quarter. Inventory turns in the quarter remained at a very high level of 5.1. Selling prices are increasing, plus 0.5% versus the prior quarter and plus 0.6% versus the prior year. We are in the process of raising critical manufacturing capacities for resistor chips and for power wirewound substantially, opening also a new production site in China, and we expect a very successful year for resistors. Coming to inductors. This business consists of power inductors and mechanics. For years, this has been our fastest-growing business and represents one of the greatest success stories of Vishay. Exploiting the growing need for inductors in general, Vishay developed a platform of robust and efficient power inductors and leads the market technically. With magnetics, we are very well positioned in specialty businesses, demonstrating steady growth. Sales of inductors in the second quarter were $86 million, up by $2 million or 3% versus the prior quarter and up by $19 million or 29% versus the prior year, all excluding exchange rate effects. The book-to-bill ratio in the second quarter increased to 1.21 after 1.13 in the prior quarter. Backlog grew to 5.1 months from 4.5 in Q1. Gross margin reached a quite excellent level of 34% of sales after 33% in the first quarter. Inventory turns normalized to a level of 4.7, down from 5.1 in the first quarter. We see reduced price pressure with price increases of 0.8% versus the prior quarter and a decline of 2.2% versus the prior year. We are accelerating our next steps of capacity expansion for power inductors in order to get ahead of the demand curve. Capacitors. Our business with capacitors is based on a broad range of technologies with a strong position in American and European market niches. We enjoy increasing opportunities in the fields of power transmission and of electric cars, namely in Asia, especially in China. Sales in the second quarter were $120 million, 13% above the prior quarter and 36% above the prior year without exchange rate effects. The book-to-bill ratio in the second quarter remained at a high level of 1.37 after 1.73 in the prior quarter. Backlog increased to a record level of 7.7 months from 7.4 months in Q1. Gross margin in the quarter improved further to 24% of sales coming from 23% in Q1. Inventory turns in the quarter remained at 3.9. Selling prices are increasing, plus 0.2% versus the prior quarter, plus 1% versus the prior year. We also expect a good year for capacitors driven by large governmental projects in China, by our solid mill business, and by a very friendly business environment in general. Opto products. Vishay's business with Opto products consists of infrared emitters, receivers, sensors, and couplers. The business in 2020 experienced a significant recovery from disappointing results in prior years. Also in Opto, we see a strong acceleration of demand. Sales in the quarter were $76 million, 3% below the prior quarter but 47% above the prior year without exchange rate impacts. Book-to-bill in the second quarter remained at a very high level of 1.69 after 1.66 in the first quarter. Backlog continued to grow to an extreme high of 9.3 months after 7 months in Q1, partially due to COVID-related restrictions of manufacturing capacities in Malaysia. This is the only place we incurred such restrictions. Gross margin in the second quarter remained at an excellent level of 32% of sales after 33% in the first quarter. I think we can say that Opto is back to its historical profitability level. We see more normal inventory turns of 5.8 in the quarter after 6.4 in Q1. Also in the case of Opto, selling prices are going up, plus 1.7% in the prior quarter and plus 1.5% versus the prior year. We are in the process of modernizing and expanding the Heilbronn fab in Germany. Diodes. Diodes for Vishay represent a broad commodity business, where we are the largest supplier worldwide. Vishay offers virtually all technologies as well as the most complete product portfolio. The business has a very strong position in the automotive and industrial market segments and keeps growing steadily and profitably for years. The business has started to exceed pre-pandemic levels. Sales in the quarter were $175 million, up by $18 million or by 11% versus the prior quarter and up by $47 million or 36% versus the prior year without exchange rate effects. There's a continued strong book-to-bill ratio of 1.45 in the quarter after 1.85 in the first quarter. Backlog climbed to an extreme high of 8.9 months from 7.9 months in the prior quarter. Gross margin continued to improve to now 24% of sales as compared to 22% in Q1. Inventory turns were at 4.7 after 4.8 in the prior quarter. Also for diodes, selling prices are increasing by 1.7% versus the prior quarter and by 0.2% versus the prior year. We decided on a substantial expansion of our in-house fab capacity in Taipei, introducing at the same time the 8-inch technology relevant also, of course, for cost reduction. As expected, diodes with a return to normal volumes have reached pre-pandemic profitability levels. MOSFETs. Vishay is one of the market leaders in MOSFET transistors. With MOSFETs, we enjoy a strong and growing market position, in particular in automotive, which, in view of an increasing use of MOSFETs in automotive, will provide a successful future. Demand has reached extreme levels and increases further. Sales in the quarter were $168 million, a record level, 10% above the prior quarter and 39% above the prior year, excluding exchange rate effects. The book-to-bill ratio for MOSFETs in the quarter was 1.26 after 1.97 in the first quarter. Backlog remained at an extreme level of 7.9 months as compared to 7.8 in Q1. Due to a combination of higher volume, better prices, and even better efficiencies, gross margin in the quarter increased noticeably to 28% of sales, up from 24% in the prior quarter. Inventory turns in the quarter increased further to 5.0 from 4.7 in Q1. We see a decrease in price pressure. We have indeed price increases of prices vis-à-vis the prior quarter of 1.2% and a decrease of 2.5% versus the prior year, much lower than normal. MOSFETs remain key for Vishay's growth going forward. Let me summarize. Our industry and also Vishay continue to operate in a quite excellent economic environment. There is an unstoppable global trend towards electronification that makes our future promising. We are exploiting the present high demand to the best we can, but beyond this, we expect a midterm acceleration of electronification worldwide. We are preparing ourselves in terms of available machine capacities and will provide the capital required. While enjoying higher growth, we will definitely keep our feet on the ground in terms of fixed costs as we always did in the past. But we do plan to increase further our technical presence in the markets, and we will increase critical R&D resources. We will do our utmost to remain the same fair and service-oriented supplier close to our customers we are known for. The results for the third quarter look promising. We guide to a sales range between $810 million and $850 million at a gross margin of 28.3%, plus/minus 50 basis points.

Thank you, Dr. Paul. We will now open the call to questions. Ashley, please take the first question.

Dr. Paul, maybe a question for you first. One of your peers last week at an Analyst Day articulated they will deemphasize discrete products that could expand your TAM, I think, in excess of $500 million. Does your third quarter outlook include some initial benefit from that opportunity? And if not, what sort of engagements have you had that might allow you to gain a stronger foothold as your industry peer deemphasizes areas of overlap for you?

First of all, we live in times when the market opportunities do not really determine the sales level. At the moment, it is indeed the manufacturing capability that determines the sales level. This is really the case at the moment. It's not always so. But in this phase of our business, that's clearly the case. So really, it's manufacturing that determines the level. Of course, we are a broad liner, as you know, and we are also proud to be in practically all relevant market sectors present. And I think I said it, we are going to increase further our technical representation there. So we are going to add engineers in the field, which we have done a couple of times. It's not new. But we want to increase further in order to participate in all these various programs, in all these industry segments, but we are very well represented in automotive especially. I think we are very close to the pulse of the industry. And I think we are well positioned. So whatever happens will benefit with Vishay.

I appreciate that. For my follow-up question, you mentioned that you would be increasing spending on capacity expansion. This seems justified as your backlog for diodes and Opto products is approaching 9 months. Furthermore, you have nearly a record amount of cash on the balance sheet. In the last call, you also mentioned that you would be solidifying your capital allocation strategy around this time. I was hoping you could discuss that today, specifically regarding your plans for share buybacks and/or dividends, considering the significant cash reserves and a very promising outlook not just for the third quarter but for the interim period as well.

Okay. Well, first of all, this is not the answer to your question really, but just to lay the groundwork, this higher CapEx, which we are showing this year, is very likely to continue for a few years as a matter of effect. So we have to spend more capital exploiting the chances which we, I think, undoubtedly have in the future, undoubtedly. Concerning what you said, what we want to do with all the cash produced, which still will be left over, of course, no question. And you are not mistaken. We are indeed in the midst of a discussion how to return more to the shareholders as a matter of fact. A final decision has not been taken in which way we are going to do it. But the Board, in particular, will deal with that in a very foreseeable future. Cannot say more at this point in time.

My first question is on gross margins. Can you help us quantify the 150 basis points of improvement that you saw in the second quarter? How much of that was volumes? How much of that was mix or FX or commodity costs? If you can just help us quantify like what are the different impacts that you've had that helped the 150 basis points?

The biggest factor affecting us is always volume. Additionally, we achieved some efficiency gains that helped counterbalance the currently high costs in metals and transportation. These are the primary challenges we face. Price increases have also played a role, although our industry is generally characterized by declining prices. Our cost reductions need to outpace these declines, which they usually do, at least enough to balance it out. Once the pressure from price declines eases, we can see the announced improvements in cost reductions reflected in our performance. So, I believe the key aspects are volume, pricing, and efficiencies.

Yes, that makes sense, Dr. Paul. I just have a couple of quick follow-ups. In response to one of the prior questions, I believe you mentioned that capital expenditures should remain high over the next couple of years as you look to increase capacity and take advantage of that. You guided for $250 million for fiscal '21. Should we anticipate the same level in fiscal '22?

I would say on our base business, as a matter of fact, we would expect it to be on the same level. We have not finalized any budget in this case. But I would suspect if we didn't do any special project on top of everything, I believe the $250 million is a good guess for Vishay next year also.

Okay. Looking at this year, you've spent around $60 million on capital expenditures so far. The $250 million projection for the entire year indicates an increase in spending for the third and fourth quarters. When do you anticipate that capital expenditures will be completed and when will the additional capacity be available?

First of all, this is always a situation where, during the year, the CapEx is typically more concentrated at the end of the year, and we know the impact of that. It's consistent every year. However, I am confident that we will proceed with our spending. Regarding our capacity, we are indeed increasing it. I anticipate that we will enter the new year with a 5% higher capacity, and by the end of 2023, we expect to see a 15% to 18% increase in capacity.

Okay. That's helpful. Appreciate that. And just for my last question, if I can ask about price increases. It's encouraging, after many quarters, you've had sequential price increase this quarter. Do you think that can sustain in the September and the December quarter? Do you think prices continue to go up?

Yes, we do. We clearly do. I would suspect that what happened in Q2 will also happen in Q3 again.

And is that a response to cost increases, or is that because the end market demand is higher? Or both?

The possibility, of course, comes from the demand, but also is driven and required partially by higher costs, in particular on the metals and also on transportation as a matter of fact.

Dr. Paul, I wanted to ask about the strong distribution sales, both in the point of sale and sell-through in distribution. I guess one question is, it looks like distribution inventories are still lean, but do you have a sense of the distributor customers' inventories? Whether they're starting to build inventory or that's flushing through in terms of their end products?

Well, you know very well, Matt, we don't have a reporting there. So it's our impression at best. Inventory is very lean, as you indicated. So lean as I personally cannot really remember having seen it like that. Concerning the end customers, I can only give you our impression, of course, we are discussing that. Is there a hidden inventory built somewhere? And really, we don't see it. We don't see it. As a matter of fact, in automotive, in particular, we have 50% of everything through consignment stocks and the temptation to build in-house inventories, therefore, is much lower. But even in the other product lines, we are not under the impression that inventory builds at OEMs at this point.

Okay. And then I saw that your automotive segment was down roughly 5% sequentially, in line with some of your peers. Is that just a function of the issues you talked about in terms of production? And as you look into the rest of the year, do you see that picking up as sort of June marks the bottom, if you will, and you expect revenue there to pick up?

Well, this is a concern for us as well. We have had discussions with our large customers, and I want to reaffirm that the issue is solely the shortage of integrated circuits. The demand for cars remains strong, but lead times are lengthy, and customers are waiting for improved IC supply. It's that straightforward. We anticipate that all the cars currently on order will have to be manufactured once this shortage is resolved. However, I cannot specify when that will be. We had hoped for improvement during the second quarter, possibly into the third quarter, but there has been another delay. I would estimate that this situation will extend into at least the fourth quarter.

Okay. And just lastly, I'm concerning your commentary about book-to-bill and backlog. It looks like backlog in most of your product areas are at record highs, yet the book-to-bill is coming in a little bit. Is that just a function of the higher sales levels that you're at? Or is there anything to read into that?

I believe the lead times have reached a point where it is ineffective to add more orders, resulting in a book-to-bill ratio close to 2, ranging from 1.5 to 2. This is simply a consequence of fully utilized capacities, in my opinion. The business remains as strong as ever, although it may seem somewhat deceptive.

Thank you for joining us on today's call and for your interest in Vishay Intertechnology. This concludes our second quarter 2021 call.

That concludes today's conference. Thank you for your participation. You may disconnect.