El En SpA

MIL:ELN

Earnings Call Transcript 2020-Q1

[Operator]

Good afternoon. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the EL.En. First Quarter 2020 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Bianca Fersini of Polytems HIR, and please go ahead, madame.

[Unknown]

Good afternoon or good morning to everyone, and thank you for joining us. With me on the call, Andrea Cangioli, EL.En.'s Managing Director; and Enrico Romagnoli, EL.En.'s Chief Financial Officer and Investor Relator. Before we begin, please note that there is a remarks management makes on the conference call about future expectations, plans and prospects and forward-looking statement. Such a statement in this call, including those addressing to the company's beliefs, plans, objectives, estimates to our expectation of our possible future results or events are forward-looking statements.

Forward-looking statements involve known or unknown risks, including general economic and business conditions and the condition against the industry we operate and may be affected should our assumptions turn out to be inaccurate. Consequently, no forward-looking statements can be guaranteed and actual future results, performance or achievements may vary materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation about the contents nor to update the forward-looking statements to reflect events or circumstances that may arise after the date hereafter.

But let me introduce to the call, Andrea Cangioli. Go on, Andrea.

[Andrea Cangioli, executive]

Thank you, Bianca. Good afternoon, everybody, and thank you for joining this call after the release of our Q1 2020 financials. Frankly speaking, we are experiencing an unprecedented situation. The COVID-19 pandemic has deeply affected our operations and our markets. So we are, for this time, in a quite awkward situation in which the past months are not necessarily a reliable reference for the future, and also our current cases is probably deeply different from what our status will be in a few weeks. Though we only have vague ideas on what the normal -- the new normals would be.

Anyway, let's start from the comments about our first quarter financials. And after Enrico, who have given us the detailed introduction, I'll give you more color on the reasons behind the Q1 performance and on the current status of our operations and business. Thank you, Enrico. Please go ahead with the comments on the Q1 financials.

[Enrico Romagnoli, executive]

Thank you, Andrea, and good morning to everybody. As usual, I'm going to give you some details on our financials. The first quarters of 2020 closed with consolidated turnover of EUR 73 million, down 13% compared to the first quarter of last year. The gross margin stood at EUR 31.5 million, down 5.2% compared to EUR 33.2 million of March 2019 due to decrease in turnover. The impact on turnover increased from 39% to 43% on March 2020. And the increase is mainly due to the changes in sales mix with a decreasing turnover in the industrial sector that presents lower margin compared to the medical line.

It also should be noted that the income recorded in China for brands related to R&D activities in the quarter is higher than usual and amounted to 0.7% of turnover. Operating costs amounted to EUR 8.8 million, down compared to the EUR 9.9 million in March in 2019, even though the incidence on turnover remained almost unchanged around 20 -- 12%. And the savings derived mainly from the limitation to travel, from the cancellation of all sales and [ orders ] events as well as a reduction in the volume of activities.

Staff costs equal to EUR 15.7 million, is broadly unchanged compared to March 2019, with the incidence of turnover increasing from 15.7% to 21.5% at March 2020. Reduction in labor cost as a result of government and income support measures, such as the adoption of Cassa Integrazione in Italy, is much important in the second quarter, while in the first one, they had a very limited impact.

EBITDAs was EUR 7.1 million, down 7.8% on the EUR 7.7 million of the first quarter 2019 and with an impact on sales of 9.7%. Amortization and other accrual increased to the important investment made in 2019 and the provision for bad debt increased, too, compared to the first quarter 2019 to represent, in the most balanced way, the possible deterioration of some credit positions. In Q1, even though the total amount of fixed cost decreased in total value, the impact on sales increased from 33% to 37%. For this reason, EBIT decreased from EUR 5.7 million to EUR 4.5 million with an impact on sales of 6.2%. The tax in the quarter was EUR 4.7 million, with a positive effect of ForEx and a negative contribution of associated companies.

In terms of net financial position, we had a positive balance of EUR 27.4 million compared to the EUR 61.4 million of last year. As for EUR 20 million, cash was used in the purchase of an important minority stake in Penta Laser (Wenzhou) in the month of January, an increase in net working capital led to an absorption of liquidity of approximately EUR 18.5 million, mainly due to the increase in value of inventories. The amount of investment in fixed asset was around EUR 3.2 million, down from -- on the first quarter of 2019.

Investment in the expansion of production structures are in fact less than the previous year since most of the new structures are completed or in completion phase. There was a decrease in overall turnover of 15% with the medical sector growing by 7% and industrial sector with a strong contraction. We noted the double-digit growth in aesthetic and services segment, a remarkable result given the circumstances.

In the beauty sector, we had an excellent performance in the Japanese market, one of the market least affected by the COVID effect in the first 3 months. The physiotherapy sector is down, hit before by other and a drop in demand, while the surgery segment is stable. The service maintained a growth rate of over 10%, thanks to the full-risk maintenance contract and upgrades sold in the Japanese market and to the sales of optical fiber for our laser application.

The turnover of the industrial sector shows an overall decrease of 43%, recording contraction between 30% and 50% in all the main segments. In general, the extent of the quarterly drop in the turnover is proportional to the length of the downtime that each activity has undergone. Larger in the cutting sector, which suffered the stop in China and then in Italy, revealed a relatively more contained in the other segment with activities outside of China, which stopped only during the month of March.

Looking to the distribution of revenue by geographical areas, the effects of COVID have actually blocked the sales in China for more than 2 months, and this is the reason of the drop we see in industrial sector outside of the Europe. The median is the drop in sales in Italy, where the market in the American industrial sector were completed blocked in March. European area, on the other hand, recovered excellently with a trend in line with pre-COVID forecast. Thanks to the possibility of delivering to distributors after the end of March given that the lockdown in Europe became effective in April. Andrea, please go ahead.

[Andrea Cangioli, executive]

Thank you, Enrico. Thank you, Enrico, very much. Okay. So what we get from the Q1 financials is basically a dreadful quarter for our industrial business and a good quarter in our medical business. And sales or operations are quite diversified in terms of areas and market segments, we need to go to deeper detail in order to have a better clue of what actually happened and to have an idea of what is happening now and will possibly happen in the next month.

First of all, the first phase of the year, 2019 had just closed with record results all over the board, growth and earnings over expectation and the only business with a slowdown in the second half of 2019 had been laser metal casting in China. In the very first day of 2020, order bookings were excellent in all of our businesses, from surgical to aesthetics from Brazil to the U.S. In China, they were very good, in line with our projected growth for the year. And you know that we count on the growth of our Chinese industrial business to the point that we decided to liquidate our main minority shareholder in order to improve our ability to grow on the market.

Incidentally, this meant a EUR 20 million investment that quite ironically in the short-term view of this month. According to the purchase agreement, it was wired to China on January 15 at the beginning of 2020 Spring Festival break, which at the end, turned to be a very, very long break for China.

The term lockdown was not yet popular at the time, not popular at the time, but the city of Wenzhou was subjected -- excuse me, but the city of Wuhan was subjected to a very strict one. And subsequently, also other cities where the virus had spread were forced to severe restriction as mobility was within China.

Our 3 factories based in Wuhan, Wenzhou and Lin Yi were shut down. Most of our employees were forced to stay home for a very long time. Since our business presence in China originated from Wuhan, and we moved workers from Wuhan to Wenzhou and Lin Yi in the past years, the spring festival caused most of our people in the epidemic center of Wuhan. We had only one infected employee, thanks God, that healed right after.

But we had to spend a very long hold of our operations and of our sales activity. The factories in Wenzhou and were down for over a month. When after this February, Wenzhou and Lin Yi could reopen their activities, only a small number of employees could actually work, being several of them locked in Wuhan, where the restriction were lifted towards the end of March only.

So this is the reason why we booked a 70% revenue drop quarter-on-quarter in Q1 2020, which is worse than what happened on an average in China. As the pandemic started moving westwards, Italy was the first country to be severely affected. In our industrial laser business, especially in the laser metal cutting, we were having a record quarter. The restriction hits our industrial laser business from the very first steps. Since they prohibited, in fact, business traveling and for this reason, we could not proceed to finalize the installation of several systems that we had shipped to customers all over the country.

With great dismay of our customers too, that we wanted our system to accommodate their increasing demand, customers had to postpone the acquisition even though they did not cancel a single purchase order. When the restriction became even tighter towards the end of March, we had to completely stop production.

The overall effect on Cutlite Penta, the company in Italy that handles the laser cutting business, was a 3% revenue reduction on Q1 2019, which says it all about what the quarter could have been in standard conditions. Other business segments within our industrial sector experienced a slowdown beginning from the month of March since the demand softened, experiencing reduced order acquisition volumes and request to suspend order delivery.

The pandemic, and we're still talking about industrial business finally reached Brazil and caused the suspension of several orders for laser cutting system we had in-house, shutting down the strong recovery trend that we initiated in 2019. What happened in our medical business was completely different.

First of all, our presence in China is not as significant in terms of revenue and in the industrial business. Therefore, we initially had close to no impact from the Chinese lockdown. Business was excellent for the 2 full months in January and February. With the pandemic shifting to Europe and Italy, the effect was different depending upon the area and the distribution channel. Where we run direct distribution, the effects of the lockdowns were immediate and drastic. The medical aesthetic network in Italy, Renaissance by Deka; and the professional aesthetic business network in Italy, Esthelogue; and the medical and certain distribution in France were halted during the very first day of March. The distribution in medical aesthetics in Germany was materially slowed down. At the same time, our worldwide distributors maintained a very strong demand level. Therefore, our factories could work full-time and full throttle for our export customers. Only our Quanta System plants in Lombardy in the very center of the current pandemic, voluntarily decided to stop production for 2 weeks in order to protect its workers and their family.

International slowdown in demand showed up in the second half of March only when the pandemic forced to lockdown all other western countries, including last and not least for us, the U.S.A. and demand slowdown meant for us the requests to suspend deliveries of booked orders, even though we did not book -- we did not register any order cancellation, but we have seen a very slow order acquisition in this period.

Our Japanese direct distribution was very marginally affected by the COVID in Q1 since the mild restrictions enforced by the central government in certain areas actually took place in April only. Finally, with respect to the various market segments, the most resilient turns out to be the surgical segment, especially urology, which is less affected by its nature, then the medical aesthetic worsened by the pandemic.

During the lockdown periods, we were forced by law and by demand to drop -- by the demand drop to close down or reduce the activities in our factory. We allowed people to work remotely from home, what in Italy is now called smart working, which, in fact, for certain activities, was very smart. I mean, on the sales and marketing side, since traveling is banned, we took advantages of -- never before, of the capabilities of web marketing with web TV and webinars catalyzing the attention of hundreds of customers and potential customers.

Since congress has then surged where -- that -- where we traditionally were doing -- where not -- we're doing it are canceled. We launched new products on the web and held training fashion webinars on several topics related to our system. We feel this experience was very positive and the current web marketing will be a more substantial part of our marketing offer in the future.

The profit-and-loss benefits, short-term, of the travel ban and congress' cancellation, especially in the medical aesthetic sector where the sales and marketing costs represent a large share of our expense were marked. Of course, the benefit on the P&L is short term since we will be missing the benefit on order booking sales. On the bookings and on sales of our usual expenses marketing activity. But as I was saying, we could consider a more comprehensive web approach with limited traveling in the future too.

The factories that have been up and running in this phase have first and foremost adopted the work organization to protect the health and grant the safety of our employees. All the protection measure requested by the authorities had been proactively adopted. Temperature measurement when entering the buildings; limited [ space desk ] in the office in order to grant minimal distance; remote working, as said; continuous cleaning and thorough sanitization when needed.

To reduce cost and preserve cash, we were forced to adopt the so-called salary integration fund, Cassa Integrazione, in all of our transfers in Italy, in France and to a certain extent in Germany, too. The behavior of our employees has been excellent. I'd like to thank them for the dedication, tenacity and also the patience showed in this crucial situation.

Before getting to an overview of the current status of our business, and also on the cash management side, we feel the group is solid enough to manage this downturn . Of course, the impact of such sudden and widespread downturn will have an effect on our profits and already had an effect on net working capital since all our manufacturing facilities were organized and ready to sustain increased production level in the coming months.

Therefore, inventory levels were high as of the end of March, which is causing an anticipation of the cash outflows for the purchase of raw materials that we will have to fund for a certain period until production and sales level will absorb this excess inventory again. Under this point of view, out of the EUR 18.5 million of net working capital increase in the period, EUR 11 million are related to the Chinese company in the metal laser cutting business. And as the pandemic wave hit the different -- in different times and in waves, our worldwide business, we are now having a variety of different situations as over the time, the restrictions are lifted.

First of all, let me account going where EL.En. started in China. The impact was sharp and tough. But the good news here is that the recovery appears to be strong. What needs to be considered is that the virus affected severely only a small part of China if you want a relatively marginal area for China's economy. Unfortunately, the most vital part to us.

And therefore, China and its internal markets are back to business relatively easily. In Q1, we had to bear a heavier impact than our competitors based in other areas of the country. For instance, hands laser is based in Shenzhen and they had the chance to return to work earlier than we could.

Currently, our order acquisition and production level are back to normal. I mean what we see is that we have a gap in the first quarter, but we are doing fine now. It is difficult to tell if this gap is going to stay. It's just this gap of revenue and profit is what will live at the end of the year or if in the next month, we are going to be able to make up for the revenue and profit loss of Q1.

The overall impression is that China is better set to a rapid recovery than the rest of the western countries. Our laser cutting business in Europe, mainly Cutlite Penta business, once allowed to run its business again with production and on field service and installation, looks quite healthy and somehow like we are seeing in China. The market is robust and as it was 3 months ago before the gap opened.

An interesting effect of the pandemic is that we benefited of a few orders for Plexiglas cutting system as the acrylic protection panels and windows adoption is widespread in offices and shops, including businesses class in order to protect operators and customers. On the same line,

Ot-las is supporting its customers in adapting their systems to leave the cutting for protective masks. A task that is very well performed with our labor market system for large surfaces. The demand for laser marketing system for identification, the business of a company basis based in Torre Annunziata close in Naples. And this Phase II is on the other side, still soft. Also as the effect of a stronger tie to certain of our customers to the verticals of automotive that are still trying.

To close the industrial marketing overview, after the host, demand for new power to laser sources is promising, also due to the continued improvement that our R&D has brought to our technology and its light range is appealing. Brazil remains a market with great potential in metal casting. But as the COVID wave moved from east to west, the latest news tells us that they are still under a severe phase of the pandemic impact.

Our medical business, as we have seen, had a very good Q1 -- have a good Q1. In April and May, until today, our direct markets in Italy, France and Germany were still closed, therefore, direct sales revenues were close to 0. Shipment to worldwide distributors were performing in the period, but the overall revenue level was low. We maintained a decent sales volumes to our customers in the surgical market and in Far East since the pandemic seems to be better overcome in those areas.

Today is the reopening day in Italy. Following similar milestone days in Europe and others that will come worldwide. It is very difficult to know how the market demand will move. At the micro level of our customer in professional aesthetics and medical aesthetics in Italy, we note a great desire to be back to normal.

Our customers, medical doctors and duty partners are pressed by their own customers that can't wait to start getting ready for the comeback of social life and for the summer time body exposure. The large picture sees us very confident in the recovery of our markets based on the determinant of their expected long-term growth and based on our strength and ability to take advantage of a -- of such expected demand.

Of course, it is impossible for us at the time being to have a clear view on the time that we believed to reinstate the pre-COVID levels of demand. We do not know how the normal life will be in this transition phase from the pandemic to the normal life once the pandemic should be overcome or will disappear. We don't know how the pandemic will change our life to a new normal that could present significant threat as well as significant opportunities for our business.

During this lockdown period, we reduced our activity volume, but kept all our vital branches, not only alive, but lively. Research and development, marketing, regulatory continued all the preparation work needed for our organization to be effectively in condition to take advantage of the recovery whenever and in which other form, it will materialize.

The scenarios we can depict for the near future are still very uncertain. Therefore, we are not releasing a guidance for the moment. We will be back to our custom guidance release as soon as the trend of the business for the future months will be, if not more stable, at least dependent on business trends and not on the unprecedented and unpredictable effects of the pandemic. Thank you for your attention.

[Operator]

Excuse me, this is the operator. Are you ready for the question-and-answer session?

[Andrea Cangioli, executive]

Yes. I am done. We are done. Yes, please. Thank you.

[Operator]

[Operator Instructions] The first question is from François Robillard of Intermonte.

[François Robillard, analyst]

First of all, I hope you're all well. And first question is on -- so you mentioned bad debt getting higher in the first quarter. And can you give us some more color on the impact of this bad debt increase in Q1? And how it trend going forward in April and May?

Then on plastic cutting, you mentioned some opportunities already in the short-term in Italy, if I understood correctly. Can you give us more detail with something material? And in terms of marginally compared to your usual business? What can we expect from it, if it's material, of course?

Then on -- in China -- on Chinese recovery, if you just come back to this point. You mentioned that your production and order intake is back to normal. And can you -- according to you to some negative evolutions going forward, maybe in the international or your other industrial orders going to China and, therefore, on your order book, if you can give us some visibility, you mentioned that no order had been canceled. Is that true across all of your segments?

[Andrea Cangioli, executive]

Okay. Let me start from bad debt. Our bad debt, we are -- we have a situation in very, very fast evolution. So we applied our allowances for bad debt in a more generous way. So they were wider then than in the past. Also taking into consideration what could happen in the next -- in the coming months.

Of course, we have certain sectors, we are suffering, and they are highest in which customers, and they have to postpone deliveries, they also have to postpone payments. It's nothing that in the moment, can be exactly defined maybe Rico can give you the details of the numbers, but there's nothing specific there are certain markets in which we decided to have special allowances in China and in Europe.

[Enrico Romagnoli, executive]

On March, we are, as for income...

[Andrea Cangioli, executive]

We know. Anyway, Rico, yes. Go ahead. Go ahead.

[Enrico Romagnoli, executive]

On Q1 2020, the bad debt increased compared to the first quarter of the last year of EUR 0.5 million differential in terms of the impact on profit and loss. In Q1, we had EUR 0.6 million of bad debt compared to EUR 0.1 million of first quarter of last year.

Of course, this kind of provision are made on the assumption of continuity of our business and of the businesses of our customers in which we strongly believe because otherwise, the provision should have been completely different, but the assumption here is that we are in face of an interruption of a certain period that -- then that will cost us in terms of P&L, that would cost us financially, but that did not materially [ award ].

Otherwise, we would have different provisions. In plastic cutting, I mean we sold a few units. I believe we sold a handful of units. It's not a material effect overall. Still, it's interesting that in this phase, we could sell more of these units that we were normally selling given the fact that lately, our sales activity has been mainly concentrated on metal cutting.

The future in China, I'm sorry I cannot give you any more details. I spent quite a long time in explaining to you what's going on in April, in May, with respect to -- but we are not releasing any guidance, and therefore, we cannot give you any further detail. I mean, we can say, and I confirm, that what we are seeing in China is extremely encouraging in terms of return of life to normality.

And this is true, a little bit over the board. I mean, restaurants were opened in Shanghai for a long time. People were moving within the cities quite freely and also the only person -- the only talent manager that we allow, where we succeeded in repositioning in China because there's only one could fly.

The other one is still in Italy because they cannot fly back to China now, is experiencing very, very proactive environment, is moving around the various cities of China by plane or by car. And you've seen a very, very strong recovery after this month of [ COVID ]. And that's for the answers.

[Operator]

The next question is from Andrea Bonfa of Banca Akros.

[Andrea Bonfa, analyst]

My question, Andrea, is related to the profitability, we shall expect the profitability that we shall expect in the Q2. I mean, the first quarter was, I believe, better than my expectation and I think the market, because also the gross margin was very much surprised. But the -- given the -- again, your mix, it might be the other way around in Q2, if you can maybe elaborate on that.

And the second question is actually a more qualitative one. I mean, from your observation point, I mean, what is your sensation in terms of perception of the gravity of this pandemic across the various country? Because my sensation again is that from Italy and from Milano, particularly, we got the situation to be worsened than what it might be, especially in the aesthetical sector.

I don't know if it's unclear. But just and what you sense across the globe from the various market? Because on -- from our -- and we have a standpoint, I would say the aesthetical sector will do -- or should experience a very slow recovery. Now maybe that's not the case in other countries. First, your thoughts on this will be helpful.

[Andrea Cangioli, executive]

Thank you. Thank you, Andrea. Yes, you're right. Gross margin in Q1 was a very positive surprise. But actually, it is something that comes from the math. The weight of our higher-margin sales in medical was much higher than the past. And also and on the industrial, we were missing the lower-margin part, which is the Chinese part. And the ratio of medical to industrial was 60% to 40% in 2019 and was 73.3% to 26.7% in 2020. So this is the reason for the margin increase and the very good profitability.

And actually, if you take the medical business, we had an excellent profitability also because we benefited of all these sale revenues almost in full in the 3 months with reduced expense because we have no expense for congresses and traveling. So the profitability of medical was excellent in Q1.

In Q2, this -- we know that this will be completely inverted because China, entering May and June, we expect good months. In the industrial business, in May and in June, we expect very, very good months. While in the medical, we know that April and May has been -- or will be very slow.

June, I mean, it's hard to give a projection now because June will be heavily dependent on how the reopening will be in the market. And this ties to the first question answer to the third -- to the second question. Yes. I believe that we will have some markets there that will recover very fast also in aesthetics because the countries that have been less affected and that we'll be able to more rapidly go back to normal life, which includes services to people, which includes going to their physician, which includes going to the medical staff to the medical doctors, steadily increases, will recover more quickly.

It is true what you said. In Italy, we had the sensation that the growth on the esthetic market could be a very, very strong one. Now we have to see, I mean, today, in Tuscany at least, the aesthetics centers are reopening. Most of Italy, they are reopening. I know that women, we know we still not have activity in this month, are struggling to go back to have themselves treated, and their hair made again and everything.

So I know that the demand from the [ base ] is extremely strong. Of course, this is not enough for us because we need the confidence to be reinstated. We need we need the confidence to be reinstated in our customers in order for them to invest again. But I'm telling you, we'll see at the end of the quarter, how many -- we are delivering systems here in Italy in the aesthetics today in these weeks and also in the medical aesthetics.

So we see from demand -- we see some demand. It will be, I'm sure, on the slower in return to normality than it has been in China for industrial business and maybe also slower than it looks like it's been in the industrial laser business. It will be slower. It will be a slower recovery. But the times are not so negative in the very last day.

[Operator]

[Operator Instructions]

The next question is a follow-up from François Robillard of Intermonte.

[François Robillard, analyst]

Sorry. Sorry. Can you hear me?

[Andrea Cangioli, executive]

Yes.

[François Robillard, analyst]

Just a quick one on labor costs. So you mentioned Cassa Integrazione in Italy. What kind of fixed cost reduction we can expect on staff costs for Q2?

[Enrico Romagnoli, executive]

Also this, I cannot answer for several reasons. That the main reason is that we are 50% through the quarter, and if demand will pick up again, we'll have people working in full force as we have in industrial. If demand will keep smooth here, we'll have to keep people home for a little bit longer.

Of course, this cost reduction is impacting the Italian factories. The Italian factories only. There will be a reduction. We had -- and but -- and sorry, I don't have the number yet. Of course, it will be significant if you take it business-by-business. For instance, if we take the company, Esthelogue, which actually didn't work for 6 weeks, the employee costs should be about a 20% of the normal cost for this first 7 weeks of the quarter.

But probably in the second half, they will work full-time because now that the institutions have reopened, we have to support them and to make sure we make our presence felt by everybody in order to try to recover with sales and distribution. For other companies, the impact on cost will be much lower because we continue to work, we continue to produce to a certain extent. And overall, so I expect a reduction of cost, but not a 50% reduction on personnel cost.

[Operator]

[Operator Instructions] Gentlemen, there are no more questions registered this time.

[Andrea Cangioli, executive]

Okay. So I'd like to thank everybody for being [ vigilant ]. Enrico, I believe we have a short-term, let's say, schedule for next meeting since in about 10 days from us, the STAR -- the virtual STAR conference is coming up. Isn't it?

[Enrico Romagnoli, executive]

Yes. It we will be -- we have the STAR conference on the 26 and 27 of May. So in 10 days, we can meet again.

[Andrea Cangioli, executive]

Thank you, Bianca, and thank you, everybody. So I'm looking forward to meeting you in face even through -- even though virtually attendance from now. Bye-bye.

[Unknown]

Thank you so much to everybody. Bye. Bye-bye.

[Enrico Romagnoli, executive]

Bye-bye.

[Andrea Cangioli, executive]

Enrico?

[Enrico Romagnoli, executive]

Hey?

[Andrea Cangioli, executive]

Okay. [Foreign Language]

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your [ phone lines.] Thank you.