Cohu Inc

NASDAQ:COHU

Earnings Call Transcript 2019-Q1

[Operator]

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Cohu, Incorporated’s First Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's presentation, Mr. Rich Yerganian, Vice President of Investor Relations. Sir, please begin.

[Richard Yerganian, Vice President of Investor Relations]

Thank you, Howard. Good afternoon, and welcome to our conference call to discuss Cohu's first quarter fiscal year 2019 results and second quarter outlook. I'm joined today by our President and CEO, Luis Müller; and our Vice President of Finance and CFO, Jeff Jones.

If you need a copy of our earnings release, you may access it from our website at www.cohu.com, or by contacting Cohu Investor Relations. There is also a slide presentation accompanying today's call that may be accessed through the webcast link on Cohu's website and is also posted as a PDF in the Investor Relations section. Replays of this call will be available via the same page after the call concludes.

For your information, Cohu will be participating in the following investor conferences: the B. Riley FBR Annual Investor Conference on May 22 in Los Angeles, California; Cowen's 47th Annual TMT Conference on May 30 in New York; and Baird's 2019 Global Consumer, Technology & Services Conference on June 6 in New York.

Now to the Safe Harbor. During the course of this conference call, we will make forward-looking statements reflecting management's current expectations concerning the Company's future business. These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes.

We encourage you to review the Forward-Looking Statements section of the slide presentation in the earnings release as well as Cohu's filings with the Securities and Exchange Commission, including the most recently filed Form 10-K, Form 10-Q and registration statement on Form S-4.

Our comments speak only as of today, May 6, 2019, and Cohu assumes no obligation to update these statements as a result of developments occurring after this call. Finally, during the call today, we will also discuss certain non-GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures.

Now I'd like to turn the call over to Luis Müller, Cohu's President and CEO. Luis?

[Luis Müller, President and Chief Executive Officer]

Thanks, Rich, and good afternoon, everyone, and thanks for joining us. On today's call, I will discuss the current business environment and share an update on the long-term vision for the Company and near-term integration synergies. Desktop utilization has bottomed at about 80%, but more importantly, OSAT utilization has started to rise again, reflecting strengthening conditions in mobility.

At the same time, several IDMs linked to automotive and industrial markets recorded a slight decline in desktop utilization in the first quarter. At 80%, we expect that customers will look to add capacity once they start to see their internal forecasts turn positive Market conditions appear to have stabilized in the first quarter, and we're forecasting some segments to start improving in Q2 and continue into the second half of the year.

And this is particularly true for mobility that has been weak since last fall. We have received volume handler orders in April for testing application processors, and we are expecting new demand for test and inspection of RF devices and test of LCD drivers later this quarter.

Additionally, we forecast new tester, handler and contactor demand in the third and fourth quarter to support a global communications infrastructure project where Cohu's platforms have been qualified to test a new generation of semiconductors. The continued strength in data center, cloud and AI is reflected in our recurring revenues as well as orders for PCB test equipment.

Now countering the strength, the consumer IoT, IoV and optoelectronics as well as the industrial markets lost momentum early this year. In the meantime, automotive that has been Cohu's largest market segment and a major contributor to our growth over the last three years, had an increase in system bookings in the first quarter.

While our customers forecast across these end markets are muted in the near-term, the fundamentals remained strong for increasing vehicle electrification, growth in automotive ADAS, increasing industrial automation and moreover the deployment of 5G communications that will have a significant positive impact in the industry.

Near-term, much of the 5G related business will come from building out the infrastructure and communications network over the next three years. We expect opportunities for test and inspection of 5G semiconductors going into mobile devices in 2020, and that should ramp into high volumes starting in 2021.

Using the deployment of the last standard as a reference, we expect 5G communications-related demand to expand for over five years. More importantly, 5G will extend beyond handsets to the automotive, industrial, consumer and data center markets by truly enabling autonomous vehicles, robotics, edge computing, a vast proliferation of sensing, communication, data processing capabilities and much more.

We expect that this would translate into a significant increase in semiconductor content across the industry, and Cohu is planning to be at the forefront of this wave, delivering the entire solution to customers, enabling time to yield and volume production. We're not just a handler, tester, contactor company. We are actually uniquely positioned to deliver best-in-class test and inspection solutions to our customers' challenges.

Now having defined and communicated the consolidated handler road map, we're now investing in next-generation platforms that will deliver improved customer value and when utilizing conjunction with our testers and interface products, a new generation vision capabilities for package inspection.

We are working with multiple customers on refining product specifications and believe these have the potential to add $15 million to $30 million a year of incremental revenue over the mid-term that we define as the next three to five years.

In parallel, we are focused on completing the integration of Cohu and Xcerra contractor manufacturing capabilities over the next six to nine months, which should deliver meaningful improvement in consolidated gross margin starting in 2020. This business is obviously not immune to the weakness in the automotive and industrial markets, but the impact of an industry-wide slowdown on contactor revenue is typically one-third of the impact on the capital equipment businesses.

Offsetting this weakness was the strength of our new high performance products that are becoming the reference solution for millimeter-wave, over-the-air and high-signal performance applications. We continue to model contactor revenue growth this year driven by our xWave solution and overall increase in contractor attachment rate with our handler sales.

We have the opportunity to grow our contactor business to upwards of $300 million over the long-term. The contractor business accounted for 19% of total sales in the first quarter and is a significant contributor to what we refer to as recurring revenue.

Our semiconductor test business represents approximately 20% to 25% of consolidated revenue. We are the leader in RF front-end module test and expect to derive substantial benefit from 5G deployment over the next few years. We are in the process of finalizing strategies to grow certain niche market positions into mainstream businesses where we can become successful as a platform solution to our customers. We expect a successful execution of these plans can generate $50 million to $100 million a year of incremental revenue over the mid-term.

Our PCB test business had a strong quarter driven by momentum in the server, networking and communications markets, consistent with our semiconductor businesses. While closely monitoring market conditions, we are very much focused on the things we can control.

Last quarter, we talked about achieving an annual run rate cost synergy of $20 million by end of this year. We made significant progress in this past quarter finalizing a restructuring plan in April for our Germany operation, which will deliver $10 million a year in cost synergies.

Combining this with the already achieved $9 million announced on the day of the transaction closed, announced plans to consolidate and close operations in California and Malaysia later this year, and going to a direct sales and support model for all semiconductor test products in China and Taiwan, we are now projecting to achieve $40 million in annual run rate cost synergies by the end of 2019.

This is a significant acceleration of our original plan and one that will progressively benefit the P&L as we move through this year. Jeff will share more details on these various cost synergies and how we model the business going forward at different revenue levels.

As mentioned, our focus is primarily on things we can control, like accelerating synergy savings, and developing best-in-class solutions for a test and inspection. I'm very optimistic about our future because I believe that Cohu is only a couple of quarters away from achieving a substantial transformation of the P&L that will drive increased profitability and cash flow generation. Furthermore, we have already aligned products and roadmaps to position Cohu to benefit from significant trends in 5G and secular expansion in automotive and industrial markets.

I'd like now to turn the call over to Jeff to review our first quarter results, explain our new business model and provide second quarter guidance.

[Jeffrey Jones]

Okay. Thanks, Luis. Today, I'll start by reviewing our Q1 results, which delivered higher than anticipated sales and gross margin due to a better than expected contribution from recurring revenue. We believe the first quarter represents the low point of the cycle, and as Luis indicated, we're gaining confidence for a stronger second half.

I'll also review our progress in accelerating our planned synergies from the acquisition of Xcerra and a significant milestone achieved that will have a beneficial impact on our business this year. Next, I'll review our business model for 2020 and beyond, including expected profitability at different revenue levels. Finally, I'll provide our second quarter guidance.

Please note that my comments that follow all refer to non-GAAP figures. For GAAP to non-GAAP reconciliations and disclosures, please see the accompany investor presentation. For Q1, the GAAP to non-GAAP adjustments include approximately $3.7 million of a stock-based compensation expense.

The GAAP to non-GAAP adjustments primarily driven by the Xcerra acquisition include $10 million of purchased intangible amortization expense, $7.3 million of inventory and property, plant and equipment step-up costs, and $1.8 million of restructuring costs, including $400,000 of inventory written off to cost of sales.

In Q1 2019, net cash impact of these items is approximately $2 million related primarily to employee severance. On Q1 revenue of $147.8 million, which we expect represents the bottom of this cycle. We generated non-GAAP operating income of $5.8 million or approximately 4% of sales.

After interest expense and a tax provision, Cohu had a non-GAAP EPS loss of $0.03. At roughly $148 million in sales and approximately $3 million of realized synergies in Q1, we generated $9.7 million or 6.6% of adjusted EBITDA.

Cohu delivered approximately $4.7 million of cash from operations during the first quarter and our cash balance was $160 million at the end of Q1. One customer and data center, cloud and AI accounted for 11% of Q1 sales.

No other customer accounted for 10% or more of sales in the quarter. Q1 gross margin was 41.5% and higher than our guidance of 40%, due primarily to favorable product mix because of higher recurring revenue.

Operating expenses were higher than forecasted primarily from sales commissions due to a change in customer mix and a loss on the sale of fixed assets in Japan that occurred near the end of Q1. The effective tax rate is not gainful of pretax levels near breakeven. As we've discussed previously, most of Cohu's operations and related profits are generated and taxed outside of the U.S.

Additionally, when the U.S. operation generates losses as it did in Q1, there is no tax benefit to offset the foreign tax expense because of our deferred tax asset valuation allowance. As a result, in Q1, we recorded tax expense on foreign profits without any benefit from the U.S. loss, driving our small non-GAAP pre-tax profit to an after tax loss.

Now turning to cost synergies and our business model, since the close of the Xcerra acquisition, we've been aggressively pursuing committed cost synergies. In April, we finalized the plan and began restructuring Xcerras's Rosenheim, Germany operation, essentially pulling forward cost synergies into 2019 ahead of the original target.

This restructuring is a major component of the second $20 million synergies we originally anticipated achieving in the three-year to five-year period. The result is that by the end of this calendar year, we expect to deliver $40 million in annual run rate cost synergies that will favorably impact the business model going into 2020. This annual cost synergy is split approximately $20 million in cost of goods sold and $20 million in operating expense savings.

We're now modeling the business at several revenue levels inclusive of the impact of the $40 million cost synergy that we expect to achieve when exiting this calendar year. And as a point of reference, the pro forma 2018 revenue for Cohu combined with Xcerra was approximately $778 million or about $194 million per quarter. The business model shows the opportunity for strong profit and cash generation at this revenue level once all synergy savings are in place.

Our long-term capital allocation strategy continues to be maintained approximately $125 million of cash on the balance sheet to support operations, capital expenditures and the dividend. Our plan is that cash generated in excess of $125 million will be used to paydown the debt of $357 million and deliver the Company subject to business conditions and the cash required to achieve the synergies and support an eventual business ramp.

For the balance of 2019, we're projecting cash payments of approximately $20 million in order to achieve the targeted synergies. Cohu's Board of Directors approved a quarterly cash dividend of $0.06 per share payable on July 26, 2019 to shareholders of record on June 14, 2019.

For second quarter 2019 guidance, we're expecting sales to be in the range of $150 million to $160 million. Revenue distribution is expected to be 92% semiconductor test and inspection, and 8% PCB test. Gross margin is expected to be approximately 40%. The lower gross margin quarter-over-quarter is due to projected lower margin handler product mix for the mobility market.

Operating expenses are expected to be approximately $54 million. The cost synergies of approximately $4 million or about $17 million on an annualized basis are included in the Q2 guidance. We expect adjusted EBITDA to be approximately 7% at the midpoint of guidance. And we're projecting the Q2 non-GAAP tax provision to be similar in total to the Q1 non-GAAP amount.

For modeling purposes, we expect a normalized effective tax rate of approximately 22% on revenue of $170 million or more and profits in line with the business model. The diluted share count for Q2 is expected to be approximately 41.5 million shares.

And that concludes our prepared remarks and now, we'll open the call to questions.

[Operator]

[Operator Instructions] Our first question or comment comes from the line of Tom Diffely from D.A. Davidson. Your line is open.

[Thomas Diffely, D.A. Davidson & Co.,]

Yes. Good afternoon. So first, a quick question on the Accelerated Cost Reduction program, when you actually went through the process of exploring that that increase the cost to you of doing those reductions?

[Luis Müller, President and Chief Executive Officer]

No. They're largely the same Tom, as we've been forecasting in previous quarters.

[Thomas Diffely, D.A. Davidson & Co.,]

Okay. And I guess, along the same lines, when you look at some of the programs that take longer to do, does that mean that the mid-term cost reduction is above $40 million now?

[Jeffrey Jones]

So we're taking a look at that and we do believe that there are some, I'd say single-digit million dollar opportunities available beyond $40 million, but for now as you can imagine, we're focused on ensuring that we achieve the cost synergies by the end of the year and then we're going to continue to monitor further opportunities over the mid-term.

[Thomas Diffely, D.A. Davidson & Co.,]

Okay. And just to clarify last quarter you said that there were two facilities you're closing, the Germany plant is the third facility then?

[Jeffrey Jones]

That would be the third, yes. The two that I mentioned previously would be Penang and then we have a facility in California as well.

[Luis Müller, President and Chief Executive Officer]

This is Luis, Tom. Just to clarify a little bit in Germany what we're doing is we're consolidating with the operation that Cohu already had in Germany. So we're closing a facility but we're not closing operations in Germany. We're just consolidating.

[Thomas Diffely, D.A. Davidson & Co.,]

Okay. That makes sense. And then looking at the business trends. It sounds like the mobility is getting a little stronger here. It's little unclear, were there crosscurrents in the automotive industry or do you see that clearly recovering at this point as well?

[Luis Müller, President and Chief Executive Officer]

There has been a bit of an uptick in the first quarter in the automotive orders I should say. But with that said, I think we look at automotive as increasing sort of step-by-step progressing through the year, but no, we don't see at a hockey stick improvement in automotive.

[Thomas Diffely, D.A. Davidson & Co.,]

Okay. And then finally, when you look at the contractor opportunity, does the acceleration of your cost cutting do anything either positive or negative to kind of the outlook for the contractor growth?

[Luis Müller, President and Chief Executive Officer]

In terms of profitability, yes, Tom. But I think you're probably referring to revenue synergies and the cost cutting won't have an impact on that. We have other strategies in place and we've talked about on prior calls, increasing the attach rate for the – let's call it the legacy Cohu handlers. So we're still pursuing those opportunities and we're still excited about those.

[Thomas Diffely, D.A. Davidson & Co.,]

Okay. Great. Well I look forward to modeling this new slicker model, so appreciate your…

[Jeffrey Jones]

Okay. All right. Thanks, Tom.

[Operator]

Thank you. Our next question or comment comes from the line of Brian Chin from Stifel. Your line is open.

[Brian Chin, Stifel, Nicolaus & Company]

Hi. Good afternoon. Thanks for letting us ask a few questions and congratulations on the hard work to kind of get to this point in terms of the cost model. That's actually my first question also following up on Tom's questions. Just to kind of rewind here to make sure that I or we are clear.

So as of the March earnings call, $20 million annualized savings by the end of this fiscal year, now you've upgraded that clearly to $40 million, $10 million of that is coming from the 8-K and the consolidation in Germany, so that's a $10 million and then there's another $10 million.

Can you again remind us what that additional incremental $10 million is? And then also looking at end of 2Q, end of 3Q, what kind of role you be in terms of getting to that $40 million annualized rate in the next few quarters? Thanks.

[Jeffrey Jones]

All right. Brian, this is Jeff. The additional $10 million that you're asking about in terms of going from up to the $40 million run rate really comes from gaining further clarity on the synergies that we had talked about previously related specifically to closures of the plants in California and Penang plus the cost savings going from a direct sales model in China and Taiwan. So it's more or less an update as we gain more clarity around those synergies that we're seeing an increase in the opportunity.

So now onto the second part of your question. So as we progressed through the quarter, let's start with Q2 – excuse me, progressed through the year, I'll start with Q2. We've baked in about $4 million, little over $4 million of synergies into the Q2 guidance. That grows to just about $7 million in Q3 and then we're projecting it to grow to $9 million to $9.5 million at the end of Q4. So that brings us very close to that 2020 run rate, if you will, of $10 million per quarter.

[Brian Chin, Stifel, Nicolaus & Company]

Got it. Okay. Very helpful. Thanks, Jeff. And that – the sort of the sensitivity revenue model that you have in the slides, that's based on – now that you hit those revenue levels before the end of the year that's based once you take full advantage of those cost synergies on a full run rate basis, right?

[Jeffrey Jones]

That's correct.

[Brian Chin, Stifel, Nicolaus & Company]

Okay. Great. And then also you're going back now to the business itself. You expressed, Luis, increased confidence in terms of second half visibility. I know you outlined some specific programs on your last earnings call, but just kind of curious in terms of those leading indicators maybe even leading utilization rates that you look into, could you maybe flush that out a little bit in terms of what you've seen improve? And even if you can talk whether you want to on a qualitative booking standpoint any particular market, but any color you can provide would be helpful? Thanks.

[Luis Müller, President and Chief Executive Officer]

Yes. Two perspectives here coming from two different angles, Brian. One of them is, if you look at utilization, it is actually ticking up at the OSATs, which essentially indicates an improvement in business, mainly driven by the fab-less guys related to mobility. At the same time, we do have projects associated with the mobility market, on the tester side that are projected to yield some results starting in third quarter and going into the fourth quarter.

We have seen here a ramp in orders for handlers into mobility – for the mobility market already in April. And we have some activities also associated with 5G infrastructure that are due to a ramp in the third quarter. So all of that put together essentially mobility or infrastructure for mobility both are showing signs of higher forecast improvement – improving business conditions starting in the third quarter and thus the comments that we made here in the call.

[Brian Chin, Stifel, Nicolaus & Company]

Okay. Maybe just one last question, I saw the breakdown by end market for the Q1 revenue level. I was little surprised that automotive and industrial seem to – if I did the math right, we're up sequential in a down sequential quarter. And so a little surprised, although it does sound like you don't expect much bounce up in terms of those markets at least over the interim. So kind of curious about that and second part of that is just data center a little bit more lumpy, kind of lumpy down, it looks like in Q1. Just kind of could you remind us what goes on the fully consolidated business, what goes into that bucket and kind of how to think about that segment moving forward?

[Luis Müller, President and Chief Executive Officer]

Yes. I think the first thing I would highlight to you Brian, is that these are, and as the people here say systems, so we're not talking about recurring business, right. And we do have a substantial recurring business in the data center, cloud and AI segment, and that did remains strong in the first quarter.

But what we have seen here in first quarter is really, as I said before sort of a bit of an uptick in the automotive market, particularly the automotive market and we think the automotive market has prospects to continue to improve throughout the year and now it could be a little lumpy, but nevertheless I think it will continue to climb through the year.

[Brian Chin, Stifel, Nicolaus & Company]

Okay. All right. Thanks so much.

[Operator]

Thank you. Our next question or comment comes from the line of David Duley from Steelhead Securities. Your line is open.

[David Duley, Steelhead Securities LLC]

Yes. Thanks for taking my question. I'm sorry, I signed on a bit late, so if I'm repeating questions, I apologize. You mentioned utilization rates uptick. Did you give what the overall utilization rates are at this point?

[Luis Müller, President and Chief Executive Officer]

Hi, Dave. Yes. The overall utilization rate actually went down a point. We were looking at about 81% at the end of the fourth quarter to 80% at the end of first quarter. With that said, it has increased at the OSATs and that's much of the pie with the mobility market. And it has decreased, proportionately decreased across IDMs.

[David Duley, Steelhead Securities LLC]

Okay. And then some of the signs that you might look to that would indicate that things are going to get better in Q2 in the second half, one is an increase in utilization rates. One is the OSATs coming to – starting to come into order, I guess is, what I heard you say is, are there any other signs or indications that you can see about the signs of recovery?

[Luis Müller, President and Chief Executive Officer]

Well for us, I think it becomes a bit more specific to certain projects that we have in 5G and in mobility. And those projects are due to pick up some speed here in the third quarter. So it's more specific than that in our case Duley.

[David Duley, Steelhead Securities LLC]

Okay. So those programs will pick up in the third and fourth quarter, if there's an overall industry recovery, we would also see a pick up from that as well?

[Luis Müller, President and Chief Executive Officer]

Yes.

[David Duley, Steelhead Securities LLC]

Or is there any…?

[Luis Müller, President and Chief Executive Officer]

Yes. Overall industry recovery would be very welcome. But right now, we're looking at utilization rate that we have today. I think it's going to continue to turn the corner towards an improvement particularly driven by the OSATs, I think the IDMs will start picking up as well, but that's just projection right. But realistically, in our case, we're very much focused on these programs that we have been qualified for and we expect to ramp in the third quarter.

[David Duley, Steelhead Securities LLC]

Okay. I don't think for me is, could you make a comment or talk about your initiatives in the flat panel display testing market and how you're doing there?

[Luis Müller, President and Chief Executive Officer]

So that that is one of the areas that pertains to the mobility market and also consumer market I should say, that we expect to see some activity towards the end of the second quarter into the third quarter. We have had our products qualified for certain customers, test insertion and we're looking forward to be in part of the next ramp on those device tests.

[David Duley, Steelhead Securities LLC]

Thank you.

[Operator]

Thank you. [Operator Instructions] Our next question or comment comes from the line of Craig Ellis from B. Riley FBR. Your line is open.

[Peter Peng, B. Riley FBR, Inc.]

Hi. This is actually Peter Peng calling in for Craig Ellis and thanks for taking my question. Congratulations on the strong execution. On the synergies, it's roughly about $6 million gap from 2Q to 4Q's $40 million annual run rate. On a quarterly basis, is it going to be $3 million per quarter run rate or it is more like back end loaded. How should we kind of think about linearity of the cost synergy?

[Jeffrey Jones]

Peter, are you referring to the cost synergies that we're achieving during the year?

[Peter Peng, B. Riley FBR, Inc.]

Yes. From 2Q $17 million to fourth quarters $40 million – about roughly $40 million, how should we think about the quarterly projects?

[Luis Müller, President and Chief Executive Officer]

Okay. Yes. So think about, as I said we've got about $4.2 million baked into Q2, so that's roughly $17 million a year, right. Then we're looking at about $7 million in Q3 to give to that $28 million a year. And then roughly $9 million, $9.5 million estimated for Q4. So $38 million-ish annualized. So that really puts us in a good position to start realizing the full $10 million beginning in 2020.

[Peter Peng, B. Riley FBR, Inc.]

Great. Thank you. And then on your Q2 guidance, can you talk about some of the end-markets, which end-market are you specifically seeing a pickup. I know you mentioned that automotive is involved, but can you talk about other end markets that's doing well?

[Jeffrey Jones]

Yes. So Peter, as I said we do see an uptick in – small uptick in automotive. We continue to see strong recurring on the data center cloud and AI markets, essentially compute right. We expect to see towards the end of the quarter also an uptick in the mobility market associated with flat panel display and we have received an order in April already for double-digit units of test handlers for a mobile processor tests. So that's pretty much the story for a second quarter.

And as you can see here, we have had really good success with high performance contractors and actually achieve record revenue in the first quarter for millimeter-wave contactor applications. So we expect that trend to continue into the second quarter and for the balance of the year, as we continue to gain new sockets for – not only millimeter wave, but also over the air applications, radar applications and also high performance low impedance contactors.

[Peter Peng, B. Riley FBR, Inc.]

Great. Thank you. And one more question before I hop back into queue. You mentioned the utilization rate at 80%. What's the historical rate to triggering capacity buy from your customers?

[Luis Müller, President and Chief Executive Officer]

It is usually on the low 80s when you see capacity buys. You are sort of 83%, 84%, trending to 85%. You're really in a healthy state. Now 80% is across all customers right, so it's a weighted average across all customer base. Within that, you have pockets of strength and pockets of weakness. And we basically have customers already at a position that are driving some capacity buys. It's just not broad based at the moment.

[Peter Peng, B. Riley FBR, Inc.]

Okay. Some of the bigger foundries and analog talk about potentially at 30% half on half increase in the sales. Would that push you near the 85-ish range or would that be above the 85-ish range, if that were to play out?

[Jeffrey Jones]

Honestly, I think to see a 30% increase, I think you'd be looking at an 85-ish range for utilization rate across the Board.

[Peter Peng, B. Riley FBR, Inc.]

Great. Thank you, guys.

[Luis Müller, President and Chief Executive Officer]

You're welcome.

[Operator]

Thank you. [Operator Instructions] I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

[Jeffrey Jones]

Thank you, Howard, and thank you for everyone joining us on the call today and hopefully we'll see you in an upcoming conference. Have a good evening.

[Operator]

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.