Ormat Technologies Inc

NYSE:ORA

Earnings Call Transcript 2019-Q2

[Operator]

Good morning and welcome to the Ormat Technologies Second Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would like to now turn the conference over to Rob Fink. Please go ahead.

[Rob Fink, IR]

Thank you, operator. Hosting the call today are Isaac Angel, Chief Executive Officer; Doron Blachar, Chief Financial Officer; and Smadar Lavi, Vice President of Corporate Finance and Investor Relations.

Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements related to current expectations, estimates, forecast and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements generally relate to the company's plans, objectives and expectations for future operations and are based on management's current estimates, projections, future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties.

For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technology's annual report on Form 10-K and quarterly reports on 10-Q that are filed with the SEC.

In addition during the call, the company will present non-GAAP financial measures such as adjusted EBITDA and adjusted net income attributable to the company's stockholders. Reconciliations to the most directly comparable GAAP measures and management reasons for presenting such information is set forth in the press release that was issued last night as well as in the slides posted on the Company's website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP.

Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at ormat.com under the presentation link that's found on the Investor Relations tab.

With all that said, I would now like to turn the call over to Isaac Angel. Isaac the call is yours.

[Isaac Angel, CEO]

Thank you very much Rob and good morning everyone. Thank you for joining us today. Starting with Slide 5, four months continues to benefit from the initiatives we’ve put in place to drive operational efficiencies in our existing power plants. These efforts which includes adjusting resources and adding modern equipment are helping to grow our generation and improve margins in our Electricity segment, while simultaneously we’re expecting our portfolio.

Generation in the Electricity segment increased by 5.7% compared to last year as we began to benefit from our Phase 3 of McGinness Hills power plant as well as the expansion of our Olkaria power plant partially offset by no activity at our Puna power plant. This resulted in a 5.6% increase in Electricity segment revenue compared to the second quarter of last year.

Excluding the impact of Puna, our gross margin for this segment would have been at 41.7%. This margin is down as we expected from the first quarter of 2019, but lower than anticipated field maintenance expense in the quarter mitigate the expected decline.

We continue to make good progress in our efforts to resume operations at Puna and we expect that our planned refurbishment activity will be completed on schedule by the end of 2019. But their operation will resume as soon as the local permitting and transmission network upgrades being undertaken by our local utility partner are completed by early 2020.

In our product segment, revenues declined slightly, however, we continue to benefit as the industry is only vertically integrated company. During the quarter, we booked approximately $26 million in new contracts from the Turkish market and our backlog reached $201 million. Demand for our solutions remained solid.

We delivered $94.9 million in adjusted EBITDA for the quarter, up 17.4%. Adjusted EBITDA excluding the impact of Puna, mainly from the business interruption proceeds is approximately $19.8 million, up 11.5% compared to last year. We’re increasing our 2019 adjusted EBITDA guidance and reiterating our revenue guidance provided in the first quarter’s earnings release.

I’ll turn the call over to Doron for our review of the financial results before I provide an update on our operation. Doron, please.

[Doron Blachar, CFO]

Thank you, Isaac and good morning everyone. Starting with revenues on Slide 7, total revenues for the quarter were $184.1 million up 3.2% compared to the same quarter last year. Breaking this down the Electricity segment grew 5.6% and product segment revenues decreased 5.3%.

Moving to Slide 8, revenues in our Electricity segments were $129.1 million for the quarter compared to $122.2 million in the same quarter last year. As the growth resulting from recently expanded operations at McGinness Hills and Olkaria as well as contribution from the acquired USG plants combined to overcome the loss of revenue resulting from the temporary shutdown of the Puna power plant.

Turning to Slide 9, product segment revenues decreased to $52 million from $54.9 million in the same quarter last year. The decrease in revenue was due to the timing of certain orders which is routine in this part of our business.

On Slide 10, you can see that the other segment contributed $3 million of revenues compared to $1.2 million in the same quarter of 2018 as we have started benefiting from revenues at the Plumsted and Stryker battery energy storage project which came online in the first quarter of this year.

Moving to Slide 11 for discussion of our total gross profit and margin, second quarter consolidated gross margin was 35.4% compared to 32.2% in the same quarter last year. On Slide 12, gross margin for the Electricity segment expanded year-over-year to 42.8%. As Isaac said, this was down sequentially which we expected, but thanks to lower than anticipated maintenance issues including routine pump replacement and well field issues, the decline was less than we expected. Gross margin in the Electricity segment excluding the impact of Puna mainly from the business interruption proceeds was approximately 41.7%.

In our product segment, gross margin was 20.6% in the second quarter compared to 31.6% for the second quarter last year. As previously mentioned, it relates to the impact of two large Turkish contracts at a lower margin than our usual margin. We anticipate margin to begin to normalize in the second half of the year and we continuously expect gross margin for this segment in 2019 to be between 22% and 27%. Our other segments reported a negative gross margin as we anticipated.

Turning to slide 13, selling and marketing expenses for the second quarter of 2019 was $3.3 million compared to $3.7 million for the same quarter last year. General and administrative expenses for the second quarter of 2019 were $14.2 million compared to $15.9 million for the same quarter last year. This decrease was mainly related to high expenses in Q2, 2018 associated with our identification of a material witness related to taxes in the fourth quarter of 2017, as well as the restatement of our second, third and fourth quarter financial statements and our full year 2017 financial statement.

Turning to Slide 14, operating income for the second quarter of 2019 was $46.9 million compared to $36.6 million for the same quarter last year. The interest was primarily attributable to higher revenues and improved gross margin. On Slide 15, you can see the breakdown of the operating income by segment.

Turning to Slide 16, net interest expense for the second quarter of 2019 was $21.5 million compared to $15.8 million last year. This increase was primarily attributable to U.S. geothermal loans and new loans as well as interest related with sales of tax benefit as detailed in this slide offset by lower interest expense as a result of principal payments of long-term debt.

Turning to Slide 17, income tax benefit for the second quarter of 2019 was $3.5 million as we recorded a non-recurring tax benefit of $13.3 million from our tax strategy plan to re-file tax returns net of change in accrued withholding taxes given our decision to no longer reinvest our earnings in foreign locations, what's called APB 23 assertion. Income tax expense for the second quarter of 2018 was $29.1 million as we recorded a non-recurring tax expense of $16.9 million for the increase of the evaluation allowance related to foreign tax credit and production tax credits. Our effective tax rate benefit is 11.2% excluding the non-recurring tax benefit occurring this quarter, Ormat’s much income tax provision effective tax rate would have been 31.1%.

Turning to Slide 18, inclusive of these non recurring income tax benefits, Ormat reported net income attributable to the company's shareholders of $33.9 million or $0.66 per diluted share compared to net loss attributable to the company’s shareholder of $0.3 million or $0.01 per diluted share. Adjusted net income attributable to the company's stockholder excluding these non-return tax item was $20.6 million or $0.40 per diluted share compared to $16.6 million or $0.32 per diluted share in the same quarter last year.

Turning to Slide 19, adjusted EBITDA increased 17.4% to $94.9 million from $80.8 million in Q2 of 2018. Adjusted EBITDA includes approximately $4.1 million and a negative $0.6 million loss of adjusted EBITDA related to Puna in Q2 2019 and Q2 2018 respectively. Adjusted EBITDA excluding any impact from Puna was $90.8 million in Q2, 2019 and $81.4 million in Q2, 2018. The Puna related EBITDA includes $6.8 million of insurance proceeds, proceeds for business interruption in Q2, 2019. No proceeds were saved in Q2 of 2018. Reconciliation of EBITDA and adjusted EBITDA are provided in the appendix slide.

Turning to Slide 20, cash and cash equivalents and restricted cash and cash equivalents as of June 30, 2019 was $181.6 million compared to $177.5 million as of December 31, 2018. The accompanying slide breaks down the use of cash for the six-month. Our long-term debt as of June 30, 2019 was $1.3 billion net of deferred financing costs and its payment schedule is presented on slide 21. The average cost of debt for the company is 5.1%. Our net debt as of June 30, 2019 was $1.1 billion.

Turning to Slide 22, let me speak briefly to our financing activities during the second quarter. Year-to-date we have successfully raised approximately $133 million in the aggregate including $41.5 million in the second quarter. During the second quarter, we completed a drawdown of $23.5 million under a non-recourse loan agreement with U.S. financial institution for the financing of Plumsted and Stryker, two 20 megawatt battery storage projects located in New Jersey.

In addition, we raised approximately $18 million for our Bouillante project in Guadeloupe. Overall, Ormat is well-positioned with ample access to additional capital to fund future initiatives. On August 6, 2019 the company's Board of Directors declared, approved and authorized payment of the quarterly dividend of $0.11 per share pursuant to the company's dividend policy. The dividend will be paid on August 27, 2019, to shareholders of record as of the close of business on August 20, 2019.

That concludes my financial overview. I would now like to turn the call to Isaac for an operational and business update. Isaac?

[Isaac Angel, CEO]

Thank you very much, Doron. Starting with Slide 24, is an update on operations. Year-to-date, we added approximately 82,000 megawatt hours and increased our generation by 5.7% to 1.52 million megawatt hours by adding our McGinness Hills Phase 3 and Olkaria III expansion as well as from the consolidation of Neal Hot Springs, San Emidio and Raft River power plants in late April 2018.

Specifically in the second quarter this year, the 7 megawatt solar portion of our extension in Tungsten Hill come online. The expansion commenced commercial operation in early July. The year-to-date expansion in generation was partially offset by the Puna shutdown.

Turning to Slide 25 and 26. Let me spend a few moments providing an update on the situation at Puna. We continue to make good progress in our efforts to resume operations at Puna. We expect that our power plant refurbishment activities including the work on the substation will be completed on schedule by the end of the year.

Our plants will resume operations as soon as local permitting and transmission network upgrades being undertaken by our local utility partner are completed by early 2020. On the field side during work to renew the plugs from our geothermal wells, we found that two of the production wells were damaged and we will have to repair or re-drill them.

In addition, we continue to work on the other wells. We believe that once we resume operation, capacity would gradually increase as we continue to complete necessary well repairs and trailing. As a vertically integrated company, we have the unique advantage of controlling the entire value chain of geothermal development, this will help us to bring Puna online.

Moving to Slide 27, as of June 30, 2019, we claim $36.8 million of business interruption and at the end of the second quarter we have received totally of approximately $20 million in proceeds. We see 6.8 million of such proceeds during the second quarter of 2019. Discussions with the new with few insurers that are not paying the business interruption is ongoing and it is quite possible that you will have to turn to legal procedures.

The business interruption coverage compensates the company for the loss of profits that resulted from the inability of the own surface property to generate electricity. Once the power plant is on operation at any capacity level, we anticipate that we will not be eligible to business interruption proceeds.

Moving to Slide 28. We have recently announced the operation of our first ever geothermal and solar hybrid project. We added 7 megawatt AC solar expansion to the Tungsten Mountain power plant in Nevada bring our total generation capacity to 917 megawatts. We remain on track with our new term growth plan to add between a 120 megawatts and a 125 megawatts by the end of 2021.

This target is supported but supported by the list of potential project presented on the slide. In Heber repowering, permitting, engineering and procurement are ongoing and in Steamboat Hills Enhancement engineering work and procurement are also ongoing. We are also optimistic about the mid and long term future opportunities for Ormat; expanding our geothermal portfolio around the world.

We have recently strengthened our position in Indonesia where we acquired from a Medco Power subsidiary, 49% of the Ijen project for approximately $3 million. We are committed to additional funding for the project exploration and development subject to specific conditions. The Ijen project which its final capacity will be determined after exploration include a geothermal concession and the 30-year PPA for up to 110 megawatt capacity that currently is being extended.

The project is ready for exploration and development with some slim holes already drilled.

Turning to Slide 29, for an update on our backlog. As of for with 07, 2019, our product segment backlog stands at $201 million. In the product segment, we see opportunities in New Zealand, the Philippines, Turkey and Latin America. We anticipate that our backlog contract mix to get with lower margin contracts in Turkey currently in the backlog will drive product segment gross margin to be in the range of 22% to 27%.

Long term, we believe opportunities in the other regions as I mentioned will help us to diversify our broad product backlog. Moreover, as our Electricity segment continues to grow, the impact of the volatility of the product segment and especially margin volatility will have relatively less of an impact on our overall financial results.

Turning to Slide 30, for an update on our storage activity. In our storage side of our business, we continue leverage Ormat's core capabilities in project origination, development, engineering, procurement, construction, financing and operations together with the unique IP network operation center and talented workforce obtained through diversity acquisition to expand our footprint and build a robust project pipeline.

We successfully created one of the most diverse storage portfolios in the market spanning multiple regions in the U.S. with Plumsted and Stryker, two 20 megawatt hour operation project setting services to PJM, Rabbit Hill 12.5 megawatt hour project in Texas that is under construction and will services to ERCOT.

05 megawatt hour Hinesburg project under commissioning in Vermont connected to ISO New England market and 40 megawatt hour Vallecito development project that will sell services to CAISO. This project multiple applications both in-front-of-the-meter as well as behind-the-meter with combination of contracted revenues and merchant revenues.

We are using technology one from multiple Tier 1 vendors in the battery side and invertors and other key components. Our efforts in the battery storage activity are directed both towards Greenfield development as well as towards M&A and joint development opportunity.

Turning to Slide 31. Our estimated capital needs for the last two quarter of 2019 include approximately a $105 million for construction of new project and enhancement of our existing power plants. In addition, we estimate a $25 million of capital expenditures for maintenance of our operating power plants.

Where our exploration and development activity, we plan to invest approximately $10 million and an additional $10 million is planned for our storage activity. For our production facilities, we plan to invest approximately $6 million. Also, will repair and new drilling in our Puna power plant to resume operation at its original 38 megawatt generation capacity, we expect between $30 million to $50 million.

Debt, we expect insurance proceeds to recover part of this investment. In the aggregate, we estimate total capital expenditure for the last two quarters of 2019 for approximately between a $186 million and $206 million. In addition, we expect $41.5 million for long-term debt repayment in the last two quarters of 2019 and additional $38.1 million for repayment of short-term revolving clients of credit that we assume will be renewed.

Please turn to Slide 32 for a discussion of our 2019 guidance. We are increasing the adjusted EBITDA guidance we provided in the first quarter's earnings call and reiterate the revenue guidance. The increase in adjusted EBITDA is the outcome of the minimal well field issues and lower pump replacements we experienced in the second quarter.

In summary, I'm encouraged with our progress and believe the company's operating efficiently. By the end of 2019, we expect to have Puna power plants ready for operation and we continue to work closely with HELCO and the local agencies to expedite the work to enabilize resuming the operation of Puna. Ormat continues its efforts to put these challenges behind us and is very well positioned in the growing geothermal and storage market.

And this concludes our prepared remarks. Now, I'll like to open the call for questions. Operator, if you may please?

[Operator]

Thank you. [Operator Instructions] Our first question comes from Noah Kaye with Oppenheimer. Please go ahead.

[Noah Kaye, Oppenheimer]

Thank you. Good morning, and good afternoon, depending on where you may be. Let maybe start with the energy storage on the financing side, you got LIBOR in 3.5%, seven year tenor, it looks like you put a bit more than half kind of the capital requirement on with nonrecourse debt here.

How should we think about your ability to do that for future projects and given that this was merchant and how do we think about kind of your levered equity ARRs in cases where you have to do something like this. Because I certainly think this is a positive development.

[Doron Blachar, CFO]

Hi Noah, this is Doron. This is one of the thing that was important to us when we started you know with the energy storage is the ability to nonrecourse merchant project. And this was the first time we've done it and the LIBOR plus 3.5 is enough for the first project. We expect to continue in the leverage, our storage project as we build them.

They roughly I'll say they delivered at about 60% 65% of the total invested capital. And going forward, we might take this approach or specific project alternatively in order to be more efficient you know we might combine a few project and leverage them together, so it will be on one end the larger facility and the fact that we will bundle a few of the projects together, will obviously reduce some of the risk and we expect that to that will enable us to get a better lower margins and better financing.

[Noah Kaye, Oppenheimer]

Makes sense. Entering the products briefly, it looks like with the new contracts the Turkey exposure increased a bit sequentially. Maybe can you update us on the pipeline for products generally and in other geographies?

[Isaac Angel, CEO]

Hi Noah, this is Isaac. Contrary to previous quarter end year, actually the Turkish exposure is much less than before even though the last two projects that we signed were from Turkey but in a normal Turkish profitability not as we has taken to us in the last year.

In general, the number in Turkey which used to be around 80%, 85% of the total backlog, today's less than 45%. So, you can see its dramatic change in our driver certification around the world. We have today the new market that join our New Zealand, China, Philippine, and others go and in general I'm very optimistic that we -- after the crisis in Turkey which is somehow it's clearing.

We try to diversify it as fast as we can and we were very successful on that.

[Noah Kaye, Oppenheimer]

Okay, great. And then, just to clarify on the guidance and the EBITDA revision, does the higher EBITDA guidance include the Puna proceeds insurance proceeds that you get this quarter, does it not?

[Isaac Angel, CEO]

No. they're not included.

[Noah Kaye, Oppenheimer]

But you did receive almost $7 million and you didn't exclude that from EBITDA on the quarter correct?

[Isaac Angel, CEO]

No, of course not. The actual numbers they include the proceeds, but the number they gave you which is excluding Puna doesn't also includes the proceeds received from the insurance.

[Noah Kaye, Oppenheimer]

So it's just $5 million from better operating performance and then the true kind of number right now implied is that plus what you've received in the insurance proceeds. That's very helpful. Thank you.

[Operator]

[Operator Instructions] Our next question comes from Paul Coster, with JPMorgan. Please go ahead.

[Paul Coster, JPMorgan]

Yes. Thanks for taking my questions. I got a couple. The first one is on the hybrid initiative. Can you explain to us what the value proposition is here? How is it contributing to the bottom line?

[Isaac Angel, CEO]

Paul, as you're probably aware of the fact that in most of our power plant, we have parasitic loads which as a result of pumps and other auxiliary equipment that we are operating within the power play. In some cases, this can be between 10% to 25% of the total production of the power plant. And the idea is and that we will be empowering those auxiliary, this auxiliary power through solar facility that we are heading to the power plant.

And by that our net output of the power plant from the geothermal fluids will be a higher than today that's the main idea. And then second part is, as you also know we have output power fluctuation which are dependent on ambient temperature and solar power and geothermal power with ambient temperature they fit together which means when during noon time when the actual power from the geothermal power plant is a bit low because of the temperature, we obviously have more solar power which is complementary.

[Paul Coster, JPMorgan]

That makes great sense, thank you so much. The second question is, I'm sure you're aware of the Department of Energy's ETS initiative and it just sounds incredible and I'm wondering are you involved, is it a game-changer and if it is, what kind of timeline do you think before we so start realizing the implied growth to geothermal power from that initiative?

[Isaac Angel, CEO]

What the initiative that you’re referring to Paul?

[Paul Coster, JPMorgan]

So this is the enhanced geothermal system initiative.

[Isaac Angel, CEO]

Yes. We were involved in enhanced geothermal system initiatives four or five years ago but not anymore. We're not involved in the enhanced and also at the fracing initiatives that are going few places in the world.

[Paul Coster, JPMorgan]

Thank you.

[Isaac Angel, CEO]

Thank you.

[Operator]

Our next question comes from Jeff Osborne with Cowen & Company. Please go ahead.

[Jeff Osborne, Cowen & Company]

Yes, good morning. A couple questions on my end. I was hoping you could just help us try to make a scorecard on the insurance side for both property damage and the business interruption. Can you just talk about cumulatively for both items how much you've received thus far and how much outstanding claims there are? I know you have the possibility of taking people to court. I just want to get a put it in perspective what's received so far over the past few quarters relative to what the total opportunity is over time?

[Doron Blachar, CFO]

Hi Jeff, I don't have the exact figures in front of me, but I think that if you look at it actually we got in the $20 million for the BI. We have a claim of a bit more than $3 million per month. So if you go from a June of 2018 so it's about 12 months or 13 months including July. So that should be about 36, something million dollars and out of that we got the 20 on the property. We got a few millions but the property basically, it's a very there's no argument on the property. So it's just a question of us doing the procedure with the insurance companies gathering the invoices, showing it to them and getting the money. So the property is quite straightforward.

[Jeff Osborne, Cowen & Company]

So just so I understand the property side better, do you have to complete the restoration of the project and that's more of a maybe mid 2020 event as you're up and running you can then go to the insurance companies and say here's how much it cost? Is it mechanism?

[Doron Blachar, CFO]

For the property, we can issue claim as we move along. So far we got $4 million for the property and $7 million for the rig. But it's a question of us issuing a request. So we are not waiting for anything. It's something that is an ongoing issue.

[Jeff Osborne, Cowen & Company]

That's helpful.

[Doron Blachar, CFO]

And one more thing I think, its important thing to account, the business interruption and it goes with the property so this is one policy. The other policy that we are activating and also started to get the money on is the control of [Indiscernible] policy because of the damaged towards that was found in the quarter we are working to re-drill them, to unplug them and this is a different policy that covers the work on the wells.

[Jeff Osborne, Cowen & Company]

Two other questions or lines of questioning. You had some tax movement this quarter. Can you give us any insight as to either including or excluding the benefit this quarter? How should we think about the tax rate for the full year?

[Doron Blachar, CFO]

We expect the effective tax rate excluding this one-time to be around 31 point something percent and the net impact of the changes in the taxes strategy that we did was about $13.3 million positive.

[Jeff Osborne, Cowen & Company]

I saw the 31 for the quarter. I wasn't sure if that's a good run rate for the year. The last question I had is, as you look out to the second half and in particular in the third quarter where it's been a very hot, is there any an ambient temperature issue or ongoing maintenance that rolled over from Q2 and the Q3 just as we think about the margin profile for the electricity business? Is there anything that flag for the quarter that we're in currently?

[Isaac Angel, CEO]

Jeff, this is Issac. Q2 was exceptionally good from the well field or for pump issues. So we expect some spillover statistically that will happen during the second half of the year. That's why we are very cautious on our expectations. But on the other hand, some of the things are working well and most of the expectations that we build are working as expected. So obviously there will be some spillover. On the ambient temperature side, as you can imagine is our budget and expectations take into account the expected ambient temperatures, we are operating for more than 50 years. But unpleasant things can happen. So we have to be ready for it.

[Jeff Osborne, Cowen & Company]

Makes sense. I appreciate the detailed responses. Thank you.

[Isaac Angel, CEO]

Thank you, Jeff.

[Operator]

Our next question comes from Gerry Sweeney with ROTH Capital. Please go ahead.

[Gerry Sweeney, ROTH Capital]

Thanks for taking my call. Just one or two more additional questions on Puna if I may, now that you're in the process of repairing the facility, any opportunity to upgrade the facility maybe increase production or increase efficiency while you're in there doing the work right now?

[Isaac Angel, CEO]

Gerry our first priority is to bring the power plant back as it was working at the evening of the rupture and that's what we're trying to do. If you recall before the incidents actually very close to the incident, we had a plan to enhance the power plant to a much higher output and we were in discussions with HELCO in order to also extend the PPA for further than 2020.

This negotiation has been picked up where they stopped before the eruption and we are in negotiations with them on that. And based on those negotiations, we will decide how to continue with the enhancements of the power plant in the future.

[Gerry Sweeney, ROTH Capital]

And then, back to the insurance side, any material changes in terms of costs of insuring the facility on a go-forward basis after everything we've been through and then is there an opportunity to potentially even self insure the facility maybe had some savings?

[Doron Blachar, CFO]

The impact of the event already occurred in the last renewal that we did. So the premium for the insurance was up which is obviously something that you can expect, but that's it. Generally, renew the policy in the middle of the year, this year and last year so actually the cost, the premium cost is already included.

[Gerry Sweeney, ROTH Capital]

Got it. Thank you. Appreciate it.

[Operator]

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

[Isaac Angel, CEO]

Thank you very much operator, and thank you very much everybody on the call for and not on the call for your ongoing support. We went through a challenging year during 2018 and 2019 look much more promising for the company. And we will be doing our best to present the company to make it happen this year and also in the future. Thank you very much.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.