Impinj Inc

NASDAQ:PI

Earnings Call Transcript 2018-Q1

[Operator]

Good afternoon and welcome to the Impinj First Quarter 2018 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Chelsea Lish, Investor Relations. Please go ahead.

[Chelsea Lish, IR]

Thank you, Gary. Thank you all for joining us to discuss Impinj's first quarter 2018 results. On today's call, Chris Diorio, Impinj's Co-Founder and CEO will provide a brief overview of our strategy, market and performance; Eric Brodersen, Impinj's President and COO and Principal Financial Officer will follow with a detailed review of our first quarter 2018 financial results and second quarter 2018 outlook. We will then open the call for questions. Impinj's CFO Consultant Linda Baird is also on the call and will join Chris and Eric in the Q&A session.

Please note that management's prepared remarks along with quarterly financial data for the last eight quarters are available on the Company's website.

Before we start, note that we will make certain statements during this call that are not historical facts, including those regarding our plans, objectives and expected performance. To the extent we make such statements, they are forward-looking within the meaning of the Private Securities Litigation Reform Act from 1995. Any such forward-looking statements represent our outlook only as of the date of this conference call.

While we believe any forward-looking statements we make are reasonable, our actual results could differ materially because any statements based on current expectations are subject to risks and uncertainties. Please see the Risk Factors section in the annual and quarterly reports we file with the SEC for additional information about these risks. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Also during today's call, all statements of operations results except for revenue, or where we explicitly state otherwise, are non-GAAP financial measures. Balance sheet metrics and cash flow metrics are on a non-GAAP basis.

I will now turn the call to Chris Diorio, Impinj’s Co-Founder and Chief Executive Officer. Chris?

[Chris Diorio, Co-Founder CEO]

Thank you, Chelsea. Thank you all for joining the call. First quarter revenue is 25.1 million towards the high end of our guidance. Our endpoint IC sales exceeded expectations even as our inlay partners reduced their inventory levels by several 100 million units in the quarter. We continue to expect that our partners, endpoint IC inventory correction will result mostly in the first half of 2018.

We also continue refining our views of channel inventory, taking steps to better map demand to end customer projects. We believe this enhanced visibility will enable us to improve inventory management and materially reduce our inventory in the second half of 2018. Also we successfully executed the product exchange I highlighted on our last call.

Overall, I am pleased by how the Impinj team rallied during the difficult start to the year. Based on our booking trends and normalizing for the product exchange, we expect the first quarter to mark the low point for our endpoint IC sales volumes. We continue to anticipate 15% to 20% growth in 2018 end user endpoint IC consumption with our first half unit volume shipments lagging end user consumption due to the inventory correction.

Our systems business faced a difficult comparison versus first quarter of 2017. Deal timing, first quarter seasonality, reader IC supply constraints and an APAC reorganization led to a 40% revenue decline on a sequential basis, 29% decline on a year-over-year basis and modest under performance versus our expectations. As a reminder, many of our systems deals are project based, meaning size, timing and mix are important factors in our quarterly results.

Despite the declines, we remain confident and enthusiastic about the quality and size of our systems opportunities. Based on current projections, our reader IC supply will improve significantly in the second quarter and meet third quarter demand. I'd like to take a moment to expand on this systems business.

Our EMEA team continues to execute both on traditional range channel opportunities and on new asset [after] [ph] tracking and shipment verification solutions. A key goal of our first quarter reorganization is to replicate those EMEA solution selling successes in the Americas and in Asia, we have the right teams to execute this strategy, and we expect those teams to ramp productivity and build pipeline throughout the remainder of 2018.

Turning to the market, our first quarter trade-show activities including National Retail Federation, HIMSS and the RAIN Connection Summit hosted by Google. We supported METI's announced extension of the Japanese Government Electronic Tag initiative to include connecting items at 19,000 drugstores beyond the original 57,000 convenience stores.

We introduced a new reader module, the RS1000 targeted at embedded applications. We implemented new channel partner programs to help partners win business, deliver success and create value for their end users. We ended the quarter with 239 issued and allowed patents, which we view as a key asset and a core strength of our business, and we published several case studies including two platform deployments that incorporate ItemSense, xArrays and Monza based tags.

The first with Parkland Memorial Hospital track hospital assets. The second with the University Teaching Clinical improves visibility procedure duration and patient flow. Finally, at the Connection Summit, our partner Aware Innovations highlighted a successful ITE asset tracking deployment at the U.S. Patent and Trademark Office, using our readers and gateways.

Bart Ivy, Chief Solutions Officer for Aware Innovations said, "We always test our equipment prior to installation in our customers' facility to ensure we get the best product to meet our customer needs. Through this testing, we’ve learned that Impinj products are the most reliable, easiest to use and best value for our customers."

In summary, despite the first quarter revenue decline, we took positive steps on internal and partner inventory, sales execution, platform development and strategic realignment that we believe position us well for the long term. Based on positive bookings trends and the second quarter starting backlog that is up sequentially, our second quarter revenue outlook is between $25 million and $27 million.

We remain vigilant about our use of cash. We believe we are on track to make the first half of 2018 the turning point for our business. Our CFO search is ongoing, focused on finding the right candidate to scale our business. In closing, I would like to thank all the Impinj employees for their hard work and dedication this quarter, and for their efforts toward our vision of digital life for everyday items.

I will now turn the call over to Eric for our detailed financial review and second quarter outlook. Eric?

[Eric Brodersen, President, COO and Principal Financial Officer]

Thanks, Chris. Before I review our first quarter 2018 financial results, I want to remind you that with the exception of revenue or unless explicitly stated otherwise, today's statement of operations is on a non-GAAP basis. Our balance sheet and cash flow metrics are on a GAAP basis, a reconciliation between our non-GAAP and GAAP measures as well as how we define our non-GAAP measures is included on our earnings release available on our website.

First quarter 2018 revenue was $25.1 million, compared with 26.9 million in the prior quarter. We concluded the one-time product exchange we discussed on our prior earnings call and received payment in full. Our first quarter revenue mix including the product exchange was 77% endpoint ICs and 23% systems.

As a reminder, the latter includes reader ICs, readers, gateways and software. This mix compares with 65% and 35%, respectively, in the prior quarter. Excluding the one-time product exchange, endpoint IC revenue was down 22% and systems was down 40% compared with the prior quarter.

First quarter gross margin was 49.2%, compared with 50.5% in the prior quarter. Revenue mix was the primary cause of the sequential decline. Total first quarter operating expense, excluding the impact of the restructuring was $19.5 million compared with 19.3 million in the prior quarter.

Research and development expense was 6.9 million, sales and marketing was 8 million, and general and administrative expense was 4.6 million. We ended the quarter with 284 employees consistent with our restructuring plan.

Our adjusted EBITDA was a loss of $7.1 million compared with an adjusted EBITDA loss of 5.8 million in the prior quarter and in line with our guidance. GAAP net loss for the first quarter was 14.4 million. Non-GAAP net loss for the first quarter was 8 million or $0.38 per share, using a weighted average diluted share count of 21.1 million shares.

Turning to the balance sheet, we ended the first quarter with cash, cash equivalents and short-term investments of $57.9 million compared to 58.1 million in the prior quarter. On a cash basis our net loss was offset by an $11 million increase in long-term debt and a $5.2 million reduction in accounts receivable.

In March 2018, we increased our term loan to 20 million refinancing approximately 9 million in term and equipment loans and extending the maturity date to March 2022. We also amended our senior credit facility to extend the maturity date of the $25 million revolving credit facility to March 2020. We've not drawn on the $25 million revolver. Our accounts receivable balance was 17 million, down from 22.2 million in the prior quarter. Our balance sheet remains strong and we have sufficient capital to execute our plans.

Inventory totaled $54.7 million, up 7.6 million from the prior quarter. As a reminder on our fourth quarter earnings call we forecasted total inventory growth at roughly $10-$12 million in first quarter 2018 declining sequentially through the remainder of 2018. We now expect inventory to increase approximately $2 million in the second quarter due to receipt of some systems inventory in the second quarter, rather than the first.

We continue to expect inventory to decline meaningfully through the second half of 2018. As we noted on last quarter's earnings call most of this quarter's inventory growth is in whip rather than finished goods. We remain confident that our inventory does not have material obsolescence risk.

Turning now to our outlook we expect second quarter 2018 revenue in the range of $25.0 million to $27.0 million. We expect adjusted EBITDA to be a net loss in the range of $7.75 million to $6.25 million. On the bottom-line we expect a non-GAAP loss of between 8 million and 6.5 million and a non-GAAP loss per share between $0.38 and $0.30 per share based on a weighted average diluted share count of 21.3 to 21.6 million shares.

On last quarter's call, we announced a restructuring plan in light of our reduced revenue outlook. In first quarter 2018, we completed that plan by reducing our global workforce, tightening our product development focus, halting our Seattle office expansion, working to sublease the facility and closing several remote offices. As Chris noted, we remain vigilant about our usage of cash the leader team intensely focused on executing our strategy.

I will now turn the call to the operator to open the question-and-answer session.

[Operator]

[Operator Instructions] The first question comes from Mike Walkley with Canaccord Genuity. Please go ahead.

[Mike Walkley, Canaccord Genuity]

Chris, you've talked about refining your channel inventory views as you better map demand and customer project. Can you maybe walk us through what you're seeing for end customer projects? And if you -- what gives you the confidence industry still around 10% to 15%, despite the change in channel inventory?

[Chris Diorio, Co-Founder CEO]

So, we engage with both our inlay partners and our end customers to better understand channel inventory. We see growth at the end customer level in retail segment and in other segments. We are aligned what others have cited in terms of inventory expectations at 15% to 20% growth and overall end customer assumption about those unit volumes, and our data roughly match what you've been hearing from others in the space.

[Mike Walkley, Canaccord Genuity]

And then just on the systems sales, little softer than expected you've listed some reasons. Can you talk about -- it sounds like Q3 you are going to see a recovery on the component side, but is this a business you expect to pickup sequentially in the Q2 and then stronger in the Q3? Or just how should we think about what's going on that piece of your business?

[Eric Brodersen, President, COO and Principal Financial Officer]

Mike, this is Eric. From a systems business standpoint, you talked about Q3 I think we can talk about the idea that we experienced a mix on the systems business that was modestly below our expectations. We can say that we expect the systems business to improve in Q2 but as Chris highlighted on the call, there is a range of factors including IC supply on the reader side, APAC restructuring but also deal timing as we said before these are project based deals and so timing can play a factor.

[Chris Diorio, Co-Founder CEO]

And then Mike just to answer the last part of your question, regarding the reader ICs, and we expect we had a supply shortfall in first quarter, we expect to catch up significantly in second quarter and be fully cut out by third quarter.

[Mike Walkley, Canaccord Genuity]

Just in terms of overall inventory reduction I think you talked about several hundred million unit reduction, can you kind of walk us through where you think it is relative to finishing that reduction. I think you talked maybe it could be upwards of the billion units. So how far do you think we are in terms of that inventory correction? And then what could that mean for your future endpoint growth exiting 2018 versus the run right now?

[Eric Brodersen, President, COO and Principal Financial Officer]

Mike I'll stay focused right on the current assessment of what's happening in the channel inventor, we know that our partners have burned down several 100 million units of channel inventory and we believe that keeps us on track for that channel inventory correction to be to mostly completed in the first half of '18 and we know there is always going to be pockets of inventories that we need to continue to work, but that's our current assessment of the inventory position that we highlighted on our previous call and the inventory correction move that we have yet to complete.

[Operator]

The next question comes from the line of Nick Johnson from Piper Jaffray. Please go ahead.

[Nick Johnson, Piper Jaffray]

Congrats on the first quarter. I'd like to say more about your new channel partner program, you've had a press release on. I am trying to understand if this is going to help to reduce sales and marketing by maybe turning over more [indiscernible] to your partners or could it maybe - offset an increase as [indiscernible] add train to help out the partners?

[Eric Brodersen, President, COO and Principal Financial Officer]

Nick, this is Eric. the updates to our channel program really are designed around better aligning our overall go-to-market and support of our channel to our overall extended channel team and channel partners, and so we've implemented a tiered system that best aligns our overall support from Impinj and overall capabilities of our team to those partners appropriately based on tier. I think it will represent not a -- we don’t expect it to be an increase from our sales and marketing OpEx standpoint, we actually it will be more of an efficiency driver as we optimize support around the core partner base. So, we're excited about that we've gotten great feedback from our partners. And the key is about continuing to grow leverage through our channel partners into our target verticals and in verticals that they specialize in.

[Nick Johnson, Piper Jaffray]

I have taken a look at your competitive environment for endpoint ICs, kind of talk to some competitive dynamics there? And then when you [reissue][ph] contracts or purchases from customers. How long are prices locked in for? And is it different for customers, it it a yearly rate you have across your entire business?

[Chris Diorio, Co-Founder CEO]

So, this is Chris. From our standpoint, the competitive dynamic in the industry hasn’t changed significantly at the endpoint IC level. We continue to see NXP as a competitor, a primary competitor, but we continue to be -- really the market leader in the space. We are the only company within integrated platform with strong intellectual property and we continue to drive the RAIN RFID business overall. So I think we focus on and it's really what we focus on doing. Tell me again about the second part of your question.

[Nick Johnson, Piper Jaffray]

Yes, I'm just wondering kind of how you locked in the prices for endpoint ICs with your customers whether it would be in yearly terms, and if it's the same for all customers across the year or if it's different by customer?

[Chris Diorio, Co-Founder CEO]

Okay, yes. So, it's generally the same for all customers. We typically do pricing negotiations in the first quarter and those pricing negotiations generate last throughout the year.

[Nick Johnson, Piper Jaffray]

And then last question from me, if you - just talk through your vertical performance versus expectation. I know obviously retail is number one but maybe something that came up this quarter that was a bit of surprise.

[Chris Diorio, Co-Founder CEO]

So, when you say verticals performance, you mean in terms of performance in other verticals for example retail versus the other verticals.

[Nick Johnson, Piper Jaffray]

Correct.

[Chris Diorio, Co-Founder CEO]

So, we see -- we continue to see strong growth especially in endpoint IC and retail, but we do see retailers beginning to highlight fixed infrastructure solutions, as they move -- as they begin to investigate alternatives to handheld reading. We are also seeing retailers investigating broader categories of products for example cosmetics and beauty products and in many cases food products.

At the same time, we see growth in other verticals, healthcare. Healthcare asset tracking significantly and supply chain and logistics, those are two core focus areas. And then the other verticals are partners -- our partners track which includes everything from automotive to healthcare, automotive to airlines to industrial, to everything even all the way up to marijuana tagging. Our partner base goes after those opportunities and they deploy our platform into those opportunities.

[Operator]

The next question comes from Craig Hettenbach with Morgan Stanley. Please go ahead.

[Craig Hettenbach, Morgan Stanley]

Chris, just question on framing kind of the first half of the year as a bottoming process, as you look out into the second half of the year. Can you talk about what your visibility is like today and just maybe even at a high level? Now what you're expecting from the trajectory of the recovery into the back half?

[Chris Diorio, Co-Founder CEO]

So, Craig, in terms of how we're seeing the market unfold, we're seeing the market unfold really according to our expectations. And in terms of our execution, we're executing one quarter at a time against our plan and against our guidance.

[Craig Hettenbach, Morgan Stanley]

Okay, understood. I mean, is there anything from a growth initiative, I know the dynamics of inventory you kind of getting through that, hopefully getting through that from an inventory depletion, but what are some things we should be watching for into the back half of the year, again for the recovery?

[Chris Diorio, Co-Founder CEO]

I think you should just look at our overall performance relative to the expectations that we set. You should look at continued growth of our overall platform sales, not just Monza, not just to endpoint IC, but the overall systems business. You should look at opportunities that we're going after in our strategic verticals, not only retail, but also healthcare and supply chain. And should measure against -- measure us against our ability to deliver against those opportunities.

[Craig Hettenbach, Morgan Stanley]

Got it. And then if I could follow up on the Japan electronics tags initiative. Can you maybe just at a high-level talk about that initiative? And when you see something like that, where Impinj within? Where potential competitors could be there? And just what's your advantage if you will to really leverage an opportunity like that?

[Chris Diorio, Co-Founder CEO]

Well as you look at an initiative like that which is even in the original messy announcement which was just convenience stores, as it was a hundred billion -- connecting a 100 billion items per year, and now that the initiatives have being expanded. Obviously, there're many companies looking at that initiative and that opportunity. For us being the leader in our space, having the fully integrated platform being traditionally a step ahead of our competition in terms of our innovativeness and also our continued presence and efforts in Japan, which go back more than a decade, I think position us well to be a key driver of the kind of thought processes underlying that initiative. I can't say whether -- how sooner whether that's going to ultimately be successful, but what I can say is that there are many large initiatives to drive connectivity for everyday items. And I think we're very well positioned to go after delivery solutions for and win those opportunities.

[Operator]

The next question comes from Charlie Anderson with Dougherty & Company. Please go ahead.

[Charlie Anderson, Dougherty & Company]

I wanted to start with gross margins. I know it sounds like mix was a big factor there, but I think you just speak to maybe like margins on like-for-like products and their year over year sequential basis, and maybe even the gross margins going into Q2 and back half of the year? Then I've got a couple of follow-ups.

[Eric Brodersen, President, COO and Principal Financial Officer]

Charlie, this is Eric. I'll start by highlighting that on a like-for-like basis, the gross margin on our business performed according to our expectations. The mix that's been our challenge on the overall gross margin in Q1, so it's really that the mix as we highlighted that underperformance relative to our expectations around systems. As it relates to go forward, we are really expecting systems as a percentage of our business to increase in Q2 and that for us will be a driver of gross margin.

[Charlie Anderson, Dougherty & Company]

And then, Chris that you had highlighted in couple of calls I think even last call too. How important new products are going to be the whole ecosystem approach? I didn’t hear anything in the script this time about new product, I'm wondering if you can maybe just update us there. Is that something it's still going to be part of this year and it can potentially help this year was it more of the next year type dynamic and any update on new products would helpful?

[Chris Diorio, Co-Founder CEO]

Sure, Charlie. So, we did mention the RS1000 which is new reader module that we introduced this quarter. So I just wonder the new products we introduced and I guess what I want to say is we continued innovating across all layer, all layers of our platform where we see us, we are the market innovator, we continue innovating, and we’re going to introduce market leading products as it become available. But as we said on the last call, we don’t expect new products to be a material percentage of our revenue in 2018.

[Charlie Anderson, Dougherty & Company]

And then last one from me. You gave a good overview of some of the end markets, but I wonder maybe specifically on the grocery opportunity in food, I think some of your partners should highlight that with little bit of increasing in pace. I just wonder what you are treating as far as that's concerned and maybe how you have any unique ways to get out that market relative to competition throughout your product set.

[Chris Diorio, Co-Founder CEO]

Yes, so like our partners excited, we see significant opportunities in food whether it happens to be for example the net initiative in Japan or on convenience stores to perishable food products to things going in other parts of Asia for example in smart refrigerators. So, we see food products as being really the biggest long-term opportunity. We don’t -- we expect that opportunity to grow and mature overtime, but given its size, we don’t expect a gigantic immediate ramp. It's just going to time to deliver against those opportunities.

What we're seeing early on is some growth in areas around food that delivered directly to consumers for example fast food and fast food type products. We look at it as part of the retail space because it's primarily retailers that are selling those opportunities and don’t that just retailers as an U.S. type retailers, I think about worldwide retail. And so, we continue to pursue it in terms of our overall retail initiative.

[Operator]

The next question comes from the line of Mitch Steves with RBC Capital Markets. Please go ahead.

[Mitch Steves, RBC Capital Markets]

Just had a question on this second half commentary. Since you're implying endpoint guide that's going back to the mid-teens, if I look at the numbers I mean you break out it implies that you are going to be doing about 20 million just in that. So, is it fair to assume just from modeling perspective as you'll see revenue growth from back half of the year?

[Eric Broderse]

Just a second Mitch. So, Mitch, when you think about our guidance methodology, it really works. As Chris said, we're focusing on executing and delivering against our guidance one quarter at a time. And so from a second half commentary standpoint, we want to say really focused just on the same guidance we just outlined with respect to Q2 and continue to prove ourselves as we deliver on each quarterly guide.

[Mitch Steves, RBC Capital Markets]

I guess one follow-up and just to clarify here. So, is there any reason why the unit growth shouldn’t near the endpoint revenue growth, meaning that if you're going to true up 15% then endpoint shouldn’t be up 15% in terms of revenue?

[Chris Diorio, Co-Founder CEO]

Well, there’re obviously pricing reductions that happened in the beginning of the year especially as we enter into our reduced pricing. And as Eric said, there may remain pockets of inventory. There’re always our pockets of inventory that we’re dealing with, but overall we expect endpoint IC consumption to increase at our direct end customers at 15% to 20% for the year. And as we burn through our inventory correction, we expect our volumes to grow in the second half of the year. And the key is the inventory correction is mostly in the first half as we said already.

[Operator]

[Operator Instructions] The next question comes from Jim Ricchiuti with Needham and Company. Please go ahead.

[Jim Ricchiuti, Needham and Company]

I think in the last call you talked about ASP erosion in the 8% to 10% or at least in the range that was similar to what you saw in the second half. Is that what you’re seeing thus far this year?

[Eric Brodersen, President, COO and Principal Financial Officer]

Jim, this is Eric. We haven’t seen any material changes in the pricing environment in the market since our last call.

[Jim Ricchiuti, Needham and Company]

Chris, I wondered if you could talk a little bit about these pilots regarding the fixed infrastructure in retail. What’s your sense as to how long these pilots could go on? And I wonder if you could just elaborate a little bit about some of these pilots, because it does seem like that longer term that’s the opportunity for you on the system side?

[Chris Diorio, Co-Founder CEO]

Sure. And Jim, as you know, I mean we could talk for hours about this topic. I guess I am going to lead in and say that in terms of fixed infrastructure, as I said previously, the more immediate opportunities are in the healthcare and supply chain verticals, because there isn’t a preexisting handheld model in those verticals and in many of the use cases there, and most of the use cases that I can think of handhelds aren't inappropriate. So the going in position is with fixed infrastructure whether it happens to be, if you’re tracking the locations with boxes or pallets or items or assets for example in the case of the USPTO. And so, there’re significant opportunities in fixed infrastructure, and those other two verticals.

Now turning to the retail case, what we see as I said before is that. In general as a retailer gets closer to a 100% tagging and gets significant benefits in terms of inventory visibility, they want to look at either additional use cases, for example, maybe loss prevention or supply chain visibility for their items or they want to free up their store labor to focus more time on customers and less time on doing inventory, in which case they look at using fixed infrastructure to give them either a fill in or complete inventory visibility within their stores.

Retail environments are very complex and dense. And so, as a consequence those pilots tend to take a reasonable amount of time, relative to the other types of verticals. But we of course do see that fixed infrastructure opportunity in retail as just -- a big opening, a gigantic premise for us in the future, and we continue to pursue it. And really, the net upside of it is that, at the end of the day retailers want to enable omni-channel replenishment and we believe that it truly is that fixed infrastructure that will enable and allow them to go after omni-channel replenishment.

[Jim Ricchiuti, Needham and Company]

Are these pilots that you have underway in retail, more of them in Europe or they in the U.S. are they split mainly departments for specialty stores. I'm just trying to get a sense as to where the activity is? I know it's going to take a little while, but just in terms of where the activity that you're seeing?

[Chris Diorio, Co-Founder CEO]

You know, Jim, my best answer to that question is, yes. Everywhere, I go around the world there's opportunities, I was just in Asia a week and a half ago, opportunities in Asia, I visit Japan a lot, Europe across North America. The answer is just a straight up yes and I don't think I can go further beyond that, we see opportunities worldwide.

[Jim Ricchiuti, Needham and Company]

Well lastly, is there any update you can provide on ItemSense?

[Chris Diorio, Co-Founder CEO]

Sure, Eric, you want to take that one?

[Eric Brodersen, President, COO and Principal Financial Officer]

So, Jim, we went [indiscernible] on ItemSense in Q4 of '17, and we now have more than 40 active ItemSense and full platform deployments and pilots underway. And I would encourage to checkout our website and review our most recently published case studies. They're both in healthcare at the Parkland and the prestigious university teaching hospital, and since there's an asset tracking are couple of important examples. That said, work continues at pace on those platform deployments, but ItemSense as a percent of our revenue is still a small fraction.

[Operator]

This concludes our question and answer session. I would now like to turn the conference back over to Chris Diorio for any closing remarks.

[Chris Diorio, Co-Founder CEO]

I'd just like to close by thanking everybody for joining the call today. And I'd like to again thank the Impinj team for their execution this past quarter. Thank you.

[Operator]

The conference has now concluded. Thank you for attending today's presentation, you may now disconnect.