Endava PLC

NYSE:DAVA

Earnings Call Transcript 2019-Q2

[Operator]

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Endava Earnings Release Q2 Fiscal Year 2019 Conference Call. [Operator Instructions] Thank you.

Laurence Madsen, Investor Relations Manager, you may begin your conference.

[Laurence Madsen, executive]

Thank you, operator. Good afternoon, everyone, and welcome to Endava's Second Fiscal 2019 Quarter Earnings Conference Call. As a reminder, this conference call is being recorded.

Joining me today are John Cotterell, Endava's Chief Executive Officer; and Mark Thurston, Endava's Chief Financial Officer.

Before we begin, a quick reminder to our listeners. Our remarks today include forward-looking statements, including our guidance for the third quarter of fiscal year 2019 and the full fiscal year 2019 and other forward-looking statements. These statements are subject to risk and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Actual results and the timing of certain events may differ materially from the results and timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. Please note that these forward-looking statements made during this conference call speak only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law. Please refer to our SEC filings as well as our financial results press release for more detailed description of the risk factors that may affect our results.

Also during the call, we'll present both IFRS and non-IFRS financial measures. The reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which you can find on our investor relation website. The link to the replay of this call will also be available there.

With that, I'll turn the call over to John.

[John Cotterell, executive]

Thank you, Laurence, and thank you all very much for joining us today. Mark and I are pleased to be here to provide some updates on our business and financial performance for the 3 months ended December 31, 2018.

Q2 fiscal year '19 was another record quarter for Endava, with revenue of GBP 71.8 million, a strong growth of 43.6% year-over-year from GBP 50 million in the same quarter in the previous fiscal year and 8.2% growth sequentially over Q1. Our revenue growth rate at constant currency was 42.4% year-on-year. This remarkable revenue growth was driven by the expansion of our existing customers, particularly our larger ones, as well as the acquisition of new customers. We now have 60 clients who spend over GBP 1 million on a rolling 12-month period from 42 a year ago. And of these, the number spending over GBP 5 million more than doubled, from 6 to 13, during the same rolling 12-month period.

We also expanded the overall number of customers, seeding the business with new customers who will be the future engines for growth. We ended the quarter with 271 active clients compared to 262 at the end of September 2018 and 197 at the end of the same quarter in the previous fiscal year. We continue to expand in all 3 of our industry verticals, and see acceleration in our newer verticals, underpinning our belief that next-gen technology is reaching more industries and driving deeper levels of disruption. And we are at the center of an ongoing technology and business revolution that shows no sign of slowing down. For instance, Gartner projects that by 2022, 2/3 of all customer experience projects will make use of IT automation. And by 2021, 70% of organizations will integrate AI to assist employees' productivity.

From the very beginning, Endava has been set up to accelerate this revolution, basing our strategy-led, user-centric approach around the multidisciplinary teams that drive the cycle of ideation to production. By doing so focused on solving core business problems, not just blindly providing capabilities. The combination of this approach, our expertise in next-gen technologies, and our responsible focus on the human impact of the technology we create has allowed us to help our customers become dynamic and reliable digital experience-driven organizations, facilitating their journey from idea generation to the ongoing development, deployment and production of new products, platforms and solutions. Our strong and sustained revenue growth shows that Endava continues to demonstrate that we're the right partner to help our customers drive their transformations.

This quarter, I want to highlight a couple of areas where significant progress illustrates how Endava wins: firstly, our progress in North America; and secondly, the payments area, where we continue to see strong expansion.

So our business in North America is expanding nicely. It grew 161% year-on-year in the second quarter of fiscal year '19 and accounted for 27% of our revenue in the quarter, up from 15% in the same quarter last year. Whilst Velocity Partners has contributed significantly to this step-up, North America also demonstrated the highest organic growth of our 3 regions, aligned with our investment math. In TMT and other verticals in North America, we're expanding the scope of work we provide clients and are renewing larger, multiyear deals in various sectors, such as health care, media and consumer product goods. In the Payments and Financial Services verticals in the U.S., we're winning significant new logos and announcing the expansion pattern experienced in Europe.

So turning more specifically to payments. Our payment vertical remains an area of strength and growth as our customers see us as thought leaders in this space. We continue to leverage our know-how to expand our client base and our footprint with existing clients. Revenue from payments grew by 35%, all organic, over the last 12 months. Based on our consistent software engineering excellence, we continue to win innovative and strategic delivery programs, helping our payments clients provide value-add to their customers through a variety of products and experiences.

Let me give some examples. We provide a fast and simplified activation processes for merchants. For example, Endava has been working with Elavon, a leading global payment processor, on creating plug-ins for e-commerce platforms, which helps merchants link their web store with the payment company much more quickly than custom development. In the U.S., we're also working with Western Union on the transformation of their online bill payment platform, modernizing and enhancing the product offering for their clients. We leverage service-based architectural patterns and DevOps to streamline the onboarding process, taking it from months to a matter of days. Additionally, we're working with a large European payments company to bring new merchants on board through Salesforce, with a completely self-served platform without the need for sales agent support.

We build merchant portals that significantly improve the value-add of the payment platform. Merchants of all sizes are seeking increased business information from their payments reports, and we're working with many payments companies to create attractive and easy-to-use business dashboards, in many cases, utilizing machine learning tools. We've built and implemented 7 merchant portals in the last 5 years for large payment companies with more in the build phase.

In the customer experience arena, we've helped our payments clients build smart point-of-sale solutions and enhance their loyalty and omni-channel capability, driving repeat business and improving experiences. And we upgrade payments methods. We're working with Elavon to integrate the likes of Pay by Bank app, WeChat and Alipay, and are expanding it to include tomorrow's technology, including biometric payments methods.

We helped another global FX company scale their technology team and support the design, implementation and infrastructure automation of many digital payment products, providing B2B and B2C payments through multiple channels to their clients.

In a further expansion of payments-related business, we are doubling the teams working for global payments on their e-commerce platforms, particularly in the U.S. Additionally, we are in the agile development stage of 2 open banking PSD2 solutions for market-leading account information and payment initiation services.

Now turning to other areas. Our partnership with Bain & Company continues to accelerate, bringing in 3 more active projects over the last quarter and successfully driving revenue growth for both businesses. A key area of growth has been in the private equity space, and we expect this to continue to be a pillar of our joint go-to-market strategy, both to perform a joint technology due diligence to assess company's readiness for digital transformation and to deliver real value once the deal is closed. Last call, we spoke about the large digital transformation client we had won together. The strategic review is progressing well, and we are beginning to look towards helping our client with the implementation phase.

Our client growth has translated into strong employee growth. We ended the quarter with 5,389 employees, an 18% increase from 4,580 at the same point in the previous fiscal year. We continue to focus on attracting great people to Endava, creating an environment where the interesting technology and business challenges, the career development opportunities and investment in our people makes Endava a desirable destination in the cities where we operate.

We continue to forge relationships with local universities. As an example, we developed a strategic partnership with 2 universities in Moldova, which graduate around 350 IT students annually. At these universities, we provide educational programs designed and delivered by Endava mentors and held in labs which we have fitted out to Endava office standards. This significantly enhances the Endava brand amongst our target undergraduates.

And finally, an update on Brexit. We continue to review the potential impact of Brexit on Endava. Currently, we've not identified any clients who are adjusting their spending plans with us as a result of the uncertainties caused by Brexit. Mark will talk about how we've mitigated FX risk in his financial section, which we continue to monitor closely.

Despite Brexit and other well-reported macro uncertainties, we continue to look forward confidently. Our demand environment continues to be healthy, and our pipeline is strong. Customers across our territories and verticals need to change, and Endava is well positioned to help drive their transition. Our ability to help our clients ideate new products and services and scale them into production deeply differentiates us and makes us an ideal partner. As a result, we remain optimistic about our ability to deliver sustainable growth in the future.

I'll now pass the call on to Mark Thurston, our CFO, who will walk you through our financial results for the quarter and update guidance for the rest of our fiscal year.

[Mark Thurston, executive]

Thanks, John. Here are some highlights for the recent quarter. Endava's revenue totaled GBP 71.8 million for the 3 months ended December 31, 2018, compared to GBP 50.0 million in the same period last year, a 43.6% increase over the same period in the prior year. In constant currency, our revenue growth rate was 42.4%.

Our adjusted gross profit was GBP 30.4 million for the 3 months ended December 31, 2018, compared to GBP 19.3 million in the same period last year, a 56.9% increase over the same period in the prior year. Our adjusted gross profit margin was 42.3% for the quarter, up from 38.7% for the same period last year. The year-over-year improvement was mainly due to continued improvement in pricing and continued strong utilization.

Adjusted gross profit is our reported gross profit excluding allocated cost of sales and the impact of share-based compensation. Adjusted gross profit margin is calculated as a percentage of our total revenue. Our adjusted profit before tax for the 3 months ended December 31, 2018, was GBP 13.6 million compared to GBP 7.5 million for the same period last year, an 80.7% year-over-year increase. Our adjusted profit before tax margin was 18.9% for the 3 months ended December 31, 2018, compared to 15.0% for the same period last year. The year-over-year improvement in our adjusted profit before tax margin is mainly the improved adjusted gross margin.

Adjusted PBT is defined as our profit before taxes adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses, fair value movement on contingent consideration, initial public offering expenses incurred and SOX readiness expenses, all of which are noncash other than realized foreign currency exchange gains and losses, initial public offering and SOX readiness expenses. Adjusted PBT margin is calculated as a percentage of our total revenue.

Our adjusted diluted EPS was 20p for the 3 months ended December 31, 2018, calculated on 54.9 million diluted shares as compared with 12p for the same period last year, calculated on 49.6 million diluted shares, up 66.7% year-over-year.

We are growing with our largest clients. Revenue from our top 10 largest clients decreased to 38% of revenue for the 3 months ended December 31, 2018, from 45% of revenue for the same period last year. But the average spend per client from our 10 largest clients increased from GBP 2.2 million to GBP 2.7 million.

We are also growing outside of our top 10 clients. The number of clients who paid us at least GBP 1 million on a rolling 12-month basis grew to 60 at December 31, 2018, compared to 42 at December 31, 2017, and to 52 at September 30, 2018. These large clients operate in all 3 of our geographical locations: North America, Europe and U.K.

We continue to diversify our geographic mix. In the 3 months ended December 31, 2018, North America accounted for 27% of revenue compared to 15% in the same period last year. Europe accounted for 28% of revenue compared to 37% in the same period last year. And the U.K., 45% of revenue compared to 48% in the same period last year. Revenue from North America grew 160.5% for the 3 months ended December 31, 2018, over the same quarter of 2017, with Velocity Partners making a significant contribution. Comparing the same periods, revenue from Europe grew 6.1%; and the U.K., 35.7%. We grew in all 3 of our industry verticals during the quarter.

Revenues from Payment and Financial Services grew 22.8% for the 3 months ended December 31, 2018, over the same quarter of 2017 and accounted for 53% of revenue compared to 62% in the same period last year. Revenue from TMT grew 51.3% for the 3 months ended December 31, 2018, over the same quarter of 2017 and accounted for 27% of revenue compared to 26% in the same period last year. Revenue from other grew 132.7% for the 3 months ended December 31, 2018, over the same quarter of 2017 and now accounts for 20% of revenue compared to 12% in the previous fiscal year. This growth was mainly driven by clients in the consumer products goods, health care and retail sectors.

Our free cash flow was GBP 9.2 million for the 3 months ended December 31, 2018, compared to GBP 7.4 million during the same period last year. Our free cash flow is our net cash provided by, used in operating activities, plus grants received less net purchases of noncurrent tangible and intangible assets.

CapEx for the 3 months ended December 30, 2018, as a percentage of revenue was 2.8% compared to 2.3% in the same period last year.

As John mentioned, we see the major impact on Endava from Brexit coming from FX volatility. Since 2015, Endava has taken a conscious decision to diversify geographically away from the U.K. Back then, the U.K. represented 78% of fiscal year '15 revenues, whereas in Q2 of fiscal year '19, the U.K. stands at 45% of revenue. At Q2 fiscal '19, the proportion of revenue that were in non-British pound currencies were 62%, while the proportion of non-British pound expenses was 81.3%. The natural hedge we are developing mitigates large FX movements. We estimate that if a British pound weakens by 5% versus the U.S. dollar and the euro, our adjusted profit before tax margin would be reduced by approximately 0.3 percentage points for fiscal year '19.

Our guidance for our Q3 fiscal '19 is as follows. We expect revenues will be in the range of GBP 71 million to GBP 72 million, representing constant currency growth of between 20% and 21%. We expect diluted adjusted EPS to be in the range of 16p to 17p per share.

Our updated guidance for full year fiscal 2019 is as follows. We expect revenues will be in the range of GBP 284 million to GBP 286 million, representing constant-currency growth of between 29% and 30%. We expect diluted adjusted EPS to be in the range of 69p to 72p per share.

This concludes our prepared comments. Operator, we are now ready to open the line for Q&A.

[Operator]

[Operator Instructions] Your first question comes from Ashwin Shirvaikar of Citi.

[Ashwin Shirvaikar, analyst]

Good quarter here and good guidance. I guess my question is -- my first question is with regards to talent, which I think is addressed a little bit in the prepared comments, but given the -- given that some of your competitors have either acquired or are building out presence in a couple of your core geographies, like Romania, could you comment on whether you're starting to see any kind of impact as it relates to talent?

[John Cotterell, executive]

Yes. Thanks, Ashwin. So recruitment of quality staff in each of our locations is always a challenge. It always requires a successful business to build a good market presence, a good brand and proposition, a good career proposition, to attract and retain the best. And we're continuing to find that. Now I think you're referring to 1 or 2 organizations that have moved into -- through acquisition, I think, mainly into Romania. The reality is that those companies have been there for a while. So Cognizant, for instance, acquired Softvision. We looked back, and we can see that we'd lost 3 people to Softvision over the previous 3 years, so a very, very small attrition to them. We haven't seen any since the Cognizant move at all. And I think the other one who's done something is Globant, and we haven't seen anything with them at all.

[Ashwin Shirvaikar, analyst]

Great. No, that's very candid and then very good to hear as well. I guess the other question I had, the other segment, obviously, very strong growth there partly driven by Velocity and your comments on North America. I was most curious about the comment you had that North America, even without Velocity, had the fastest organic growth across the board. So what's driving that? Is it partly maybe the fact that you are now public? Is it the presence of the acquisition of Velocity was seen as a commitment to the geography? Is it delivery being a little bit more same or similar time zones? What is the thing that you are doing? Any of the -- I mean, can you give some more details on what's going on there?

[John Cotterell, executive]

Sure. So actually, you picked up on all the key points there. So just to give the headlines, we were up 161% on the equivalent quarter last year. Actually, the number for organic growth in the U.S. was 43.7% on a constant-currency basis, so it was very, very strong. And I think the deal we did bringing Velocity Partners on board absolutely confirmed our commitment to the U.S., significantly enhanced our presence and credibility. You put that alongside the New York Stock Exchange listing and the recognition that we see in the U.S. for companies who have listed, and we've seen a very strong and positive response by U.S. customers. And of course, with the significant strengthening of our Latin American delivery, we have much, much more near-shore capability. And that was always a little bit of a little bit of an issue for us on the West Coast, as you are aware. So we've seen a lot of really good activity on the West Coast emerging from that.

[Operator]

Your next question comes from Brian Essex of Morgan Stanley.

[Brian Essex, analyst]

Great. I was wondering if you could dig in a little bit to your Worldpay relationship and how that's progressing, given the, I guess, ownership changes at that customer. Have you been able to expand that relationship? And what the outlook might be for deepening the relationship within the larger organization.

[John Cotterell, executive]

Sure. So yes, the Worldpay relationship continues to be strong, continues to grow. In Q2, we grew by 6% over -- sequentially over Q1, which, of course, itself was an excellent quarter. The rest of the business, the rest of Endava, is growing fast. So it means Worldpay is continuing to shrink very slowly as a proportion of the Endava business while growing itself. So it's now sub-10%. So we were 9.7% in Q2 compared to 11.2% in Q2 last fiscal year and 9.8% in Q1. The relationship remains very good. We continue to commission new teams and move into new project areas. We're having much more meaningful conversations around some opportunities in Cincinnati, but there's nothing signed. And we started providing teams to them from Latin America, just giving some greater time zone coverage on a key program that they have. So very positive.

[Brian Essex, analyst]

Great. That's very helpful. Maybe just a follow-up on the pricing front. It seems like -- and I think you commented in the -- in your prepared remarks that pricing was driving some margin improvement there. Can you maybe unpack that a little bit and help us understand, where are you seeing the better pricing? Is this from any particular type of region, customer or contract type?

[John Cotterell, executive]

Yes. So our pricing continues to expand. It's a reasonably favorable environment, more so with new customers than the larger, old ones, where we're going through inflationary-type price discussions with them. But overall, it's an encouraging environment, and as Mark commented, we've seen the benefit of that on to our gross margin. It's pretty much across the board in all the geographies, across all the sectors there. It's pretty universal, and I think very much down to the fact that we're operating in this next-gen technology space where the differentiation and the opportunities for change that we can bring to our clients means that they're amenable to the pricing that we have because they can see the impact, the positive impact on their business.

[Mark Thurston, executive]

And you get a sense for it, Brian, when you look at our revenue per head, which we measure as the revenue over the average operational head. So ended the quarter at GBP 59,000 compared to this equivalent quarter last year of GBP 54,000. So that's almost 9% increase. Now part of revenue per head is utilization and rates, but it gives you an indication of the progress that we're making in this environment on the rate discussions.

[Operator]

Your next question comes from Bryan Bergin of Cowen.

[Bryan Bergin, analyst]

I wanted to dig in on the Bain relationship here. It sounds like you're continuing to show traction there. Can you comment on how you're seeing the client wins driving more industry diversification? I think you mentioned PE. Are there other industry opportunities that you like through the Bain relationship? And then also, how is the nature of these deals compared to your existing engagements? Are these potentially larger in overall scale?

[John Cotterell, executive]

Okay. So yes, we're seeing a lot of activity with Bain. And of course, we announced the Bain partnership to the world at the beginning of October, and we're reporting Q2 numbers here. So it's quite a short time period over which to see change. But now that we've made our partnership public, we've seen quite a lot of activity. So the main areas are in financial services, CPG, retail and private equity, as I touched on. The interesting thing on the private equity side is that obviously then applies across many, many industries, essentially helping customers to evaluate potential acquisitions, giving some insights into how technology can be used to transform those business models and drive improved performance. And clearly, we hope that where our private equity customers proceed with the deal, that we'd be well placed to assist them in the execution of the transformation strategy. So we're at that very much front end of what we're doing in that space. So it's just a -- it's another route into those strategic conversations with clients about how technology can transform their business models going forward.

[Bryan Bergin, analyst]

Okay. And Mark, can you comment on the sustainability of the margin strength? How are you thinking about the gross margin from here as you go in through the second half?

[Mark Thurston, executive]

So we had a very strong adjusted gross margin, so at 42.3%. And we sort of trailed in -- coming to the quarter with anticipated strong utilization and pricing, which has been driving it. But people should bear in mind, going forward, that we moved our main pay round from June to January. So we have put through the majority of our pay rises through in January, which was to align with the local tax authorities in the locations that we operate in. So the gross margin will be impacted in Q3. We also see the utilization coming off slightly from where it has been through the most recent quarters. So the margin will -- gross margin will come down slightly. And -- but as we go through the rest of the year, we would then seek to recover those cost increases by moving our rates up with the clients and therefore start to recover the gross margin. So in summary, Q3 will come off somewhat from the quarter we've just seen.

[Operator]

Your next question comes from Maggie Nolan of William Blair.

[Margaret Nolan, analyst]

Wanted to talk about the good growth that you saw. You said in part, it was driven in particular by some of your larger existing customers. Can you give us a little more detail there? Is this a couple of customers in top 5, top 10? Any particular geographies or verticals that they're sitting in?

[John Cotterell, executive]

Yes. So the growth is pretty much across the board. There's a mixture of sectors and so on that are covered by our top clients. And I think one of the encouraging things for us, given our roots in Payments and Financial Services, is the amount of opportunity that we're seeing to take our technology transformation stories into other sectors. And some of those other sector clients, CPG and so on, are making it into our top 10 client base now as well as our traditional sectors. And I think one of the very exciting things is you see these technology waves coming through and impacting different sectors. Actually, it is carrying us across into different parts of the economy and different segments.

[Mark Thurston, executive]

Yes, I mean, I think we're seeing real good strength bases. I mean, if you look at the average spend in the top 10, that's increased and also the average spend outside the top 10. So it's good, solid progress across the portfolio.

[Margaret Nolan, analyst]

Okay. Great. And then what's your appetite for M&A, like, right now? And how does the acquisition pipeline look?

[John Cotterell, executive]

So on the M&A front. We've been absorbing Velocity Partners. It was an absolutely crucial deal for us in expanding in the U.S. and so on, as we've touched on earlier. And clearly, we had a very busy year last year going through the IPO process. But we're now back to looking and talking to people on the M&A front. Our strategy remains the same, focused on tuck-in level deals going to add capability from a sectoral domain point of view, geographic or technology perspective. And we've had a few conversations, but there's really nothing progressed to a point where it's worth calling out at the moment.

[Operator]

[Operator Instructions] Our next question comes from Bryan Keane of Deutsche Bank.

[Bryan Keane, analyst]

Let me ask the demand question another way. So if you look at the second quarter revenues and earnings, it came in ahead of your guide. So what caused it to be above expectations when you guided a quarter ago? Because it does look like second quarter organic growth accelerated. So maybe something surprised you guys a bit on the demand side.

[Mark Thurston, executive]

No surprises, basically. I think we still have trailed. The momentum in the business was strong. We did say that we felt good about the business, and we still continue to feel good about it. And we're a newly established public company, and we want to perform and guide as such. So there was no sort of significant lurch or improvement that wasn't foreseen.

[John Cotterell, executive]

I mean, I think at a very small level, there was a little bit less holiday taken, which converted into billing that we didn't anticipate, but it wasn't material.

[Bryan Keane, analyst]

And remind us, as you go into every quarter and you give guide on the quarter, what's your level of visibility to the revenue and the earnings?

[Mark Thurston, executive]

It's pretty strong. I think as we've outlined before, we have good visibility. We split our revenues down into contracted and committed. So near term, the visibility is very strong. We tend to be at the sort of 90% to 95%, and sometimes a little higher. So we do have good visibility.

[Bryan Keane, analyst]

Okay. And the last one I had was just on utilization. Mark, I think you said utilization expected to drop a little bit going into the third. Just curious, any reasons for that? And then should we expect it to pick up back in the fourth? Or is just utilization running a little high right now?

[Mark Thurston, executive]

So I think we highlighted this all in Q1, Q2, the utilization had picked up mainly because the business accelerated going into the financial year, and our supply of our people to sort of deliver on those revenues sort of lagged slightly behind that. And as a result, utilization revved up slightly higher than we're comfortable with. But the supply side of the business has now sort of caught up. Utilization is coming down to our more sort of standard norms. And I don't see at the moment any particular sort of revving going forward. So we're in that sort of comfortable level at the moment.

[Operator]

Your next question comes from Charles Brennan of Crédit Suisse.

[Charles Brennan, analyst]

Great. I've just got a question on your guidance, actually. If I look at my model, it looks like, in the prior year, the growth comp eases slightly in the third quarter versus the second quarter. And yet when I look at your guidance, it looks like you're assuming a slight downtick in organic growth. Can you give us the reasons behind that? Is that just simply some Brexit uncertainty you're factoring into the guidance? Is it some known contracts that are ramping down that we should be aware of? Or is it just sort of usual Endava conservatism?

[Mark Thurston, executive]

So as usual, Endava conservatism. Typically, when we're going from Q2 to Q3, we do see a slight slowdown, going from quarter to quarter on a run-rate basis. And it's not marked when you look at the year as a whole, but it's particularly a pattern we do see, mainly because most of the companies we provide our services to have a fiscal year that begins in January, so freshly agreed budgets start to come on stream in the quarter. And this quarter is really no different to that. But we're seeing positive momentum, and you can see the sort of confidence that we feel by the full year guidance.

[Operator]

There are no further questions at this time. I will now return the call to our presenters.

[John Cotterell, executive]

Thank you. And thanks, everyone, for joining us on this call. As you all picked up, we're optimistic about our ability to continue to deliver sustainable growth, and we look forward to speaking with you on next quarter's call. Thank you.

[Operator]

This concludes today's conference call. You may now disconnect.