Baylin Technologies Inc
TSX:BYL
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Baylin Technologies Inc
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Ladies and gentlemen, thank you for standing by. I'll now turn the call over to Mr. Daniel Kim, Executive Vice President, Corporate Development of Baylin Technologies.
Hello and welcome, everyone. Thank you for joining us this morning for the Third Quarter 2019 Earnings Conference call for Baylin Technologies. Joining me is our President and CEO, Randy Dewey; and our CFO, Michael Wolfe. Before we begin, let me make it clear that our comments today will include statements and answers to questions that could imply future events, such as our 2019 and 2020 prospects and financial performance, and could include the use of non-GAAP and non-IFRS measures. Although it is obvious, these statements are subject to risks, uncertainties and assumptions. Accordingly, actual performance could differ materially from statements made today, so do not place undue reliance upon them.We also disclaim any obligation to update forward-looking statements except as required by law. I ask that you read our legal disclaimers and refer you to the risks and assumptions outlined in our public disclosures, in particular, the section entitled Forward-Looking Statements and Risk Factors in our annual information form for the year ended December 31, 2018, in our filings, which are also available on SEDAR.Q3 results were released after market yesterday, the press release, unaudited interim financial statements as well as the MD&A are available on SEDAR and on our website at www.baylintech.com. I would now like to turn the call over to Randy.
Thank you, Daniel. This year started out well. Asia Pacific revenues were ahead of plan, coupled with a strong order book in both our embedded as well as in Advantech. However, concerns over our small cell deployments continued to mount through the course of the year. While Q1 and Q2 tracked well, relatively speaking, I noted in our last earnings call that there were several issues in the industry that were -- that we were monitoring very closely. One was the U.S. carrier CapEx spending rates, the T-Mobile, Sprint merger and the FCC and state legal battle over small cell site rental costs. As we noted in our September 18 press release, the issues related to our infrastructure group had a material impact on our Q4 -- sorry, Q3 performance. While we are aware of these concerns, the speed at which they hit and the timing was much faster and sooner than anticipated. Our concerns about one of our wireless carrier customers began to heighten towards the end of August, and it was apparent their small cell volumes were not going to meet expectations. The result was a decline in anticipated infrastructure revenue.Revenue was also negatively impacted by a longer delay than expected for orders from a large embedded customer. Q3 results were further strained by volume declines in mobile that will continue until the end of 2019. Most of the issues we are dealing with are industry-wide and are similarly impacting our customers and competitors. Revenue for the third quarter of 2019 came in at $36.4 million. It was $1.8 million lower than the third quarter of 2018. As I discussed, infrastructure and embedded revenues decreased compared to the prior year quarter. These decreases were somewhat offset by SATCOM revenues being ahead and increasing. Improvement in Advantech Wireless' operations continue. Manufacturing efficiencies have been realized, and we are seeing a lot of positive momentum on several significant sales opportunities. In addition, we implemented cost-cutting measures in the latter part of Q3, which we expect to improve profitability in Q4 and into 2020. Although mobile revenue fell from Q2 to Q3, it was incrementally higher than the prior year, and the higher mix of that business in Q3 had a lower than targeted gross margin impact.Consolidated gross margin was 33.5% in the quarter. We expect gross margin to increase in Q4 and through 2020, returning to historical levels as infrastructure and embedded revenues recover and SATCOM revenues continue to be strong. Adjusted EBITDA in Q3 was $1.2 million compared to $5.3 million in the prior year, excluding that onetime indemnification amount of $1.8 million in Q3 2018. In addition to the cost reductions at Advantech, we have implemented cost-cutting measures in other parts of the company, which also contributed to improved profit margins starting in Q4. I'd like to now turn the call over to Michael to provide you a little more detail on the financial results and some commentary. Michael?
Thank you, Randy. While third quarter financial performance was within the range we announced in September, it did fall short of our expectations. Trailing 12-month revenue has decreased slightly from the end of Q2 from $161 million to $159 million. Trailing 12-month adjusted EBITDA has decreased to $14.3 million. At September 30, we had a cash balance of $16.5 million and access to approximately $25.2 million of our revolving credit facilities, of which $15 million was utilized. On October 28, we closed the sale of our Quebec facility, the proceeds of $7.1 million were used to reduce the outstanding revolving credit facility. Uses of cash in the quarter included interest and principal payments on the revolving loan, term loan and convertible debentures and capital expenditures, offset by a decrease in noncash working capital. We currently have senior debt in the amount of $35.2 million. At September 30, our net senior debt to adjusted EBITDA was 2.3:1. Subsequent to the sale of the Quebec facility, the net senior debt to adjusted EBITDA ratio has decreased to 1.85:1, which is significantly below our covenant of 3:1.The net loss for the 9 months ended September 30 of $5 million included the Crown Capital prepayment fee, write-off of the Crown Capital deferred financing charges and other nonrecurring expenses offset by a fair value adjustment of the convertible debentures. Adjusting for these items results in an adjusted net loss of $2 million. I'll now turn the call back to Randy for his concluding remarks.
So although we are facing some short-term headwinds through to Q1, we are confident we are being able to successfully navigate through those issues. The opportunities that are in front of us, which include small cell as well as the base station antenna launches you probably have noticed in a number of our press releases, some of the IoT and Massive MIMO and SATCOM opportunities significantly outweigh any issues that we are encountering. The most important takeaway today are that customer diversification continues, our industry diversification plan continues that we implemented 4 years ago, which has created a far more diversified Baylin today. Although the broad industry has headwinds, Baylin still has a trailing 12-month revenue well over $155 million, trailing 12-month EBITDA over $14 million, a decent balance sheet, great prospects in 2020 and 2021 as 5G and many game-changing market opportunities do unfold.We remain very focused though on OpEx reduction, cost positioning, gross margin improvement and shifting our business towards these new markets that we've had success in over the past few years. That concludes my formal remarks. And operator, if we could open up the line to questions, that would be great.
[Operator Instructions] Your first question comes from Kevin Krishna with Paradigm Capital.
Randy, I'm wondering if you can help us think about expectations heading into Q4. I think there was -- you previously had some sort of confidence that Q3 may represent the bottom in terms of overall revenue for the company. I'm wondering if you can maybe talk about what you've been seeing in October across the division and how we should just think about the profile heading into the Q4 period?
So we have talked about the mobile decline in the second half of the year, that continues through to the end of the year. We are comfortable on the bottom line consensus number, for sure. I know that the consensus on the top line is close to $35 million in revenue, and the bottom line is around 2 -- $2.1 million of EBITDA is consensus. We are very focused, as I said earlier, on our operating expenses and continuing, we've implemented a number of cost-cutting measures that are done, and we will see the benefit of that. Plus, we've also seen some strength in the order book on the infrastructure side as well as SATCOM. So we are comfortable that the margin improvements will continue through Q4 on a slightly lower base of revenue than Q3.
Okay. And then just on the EBITDA, in the outlook section, there's disclosure on $4 million of cost savings. Do you -- Did you realize any portion of that in Q3? Do we get $1 million of benefit in Q4? When does that kind of start to become realized?
Well, there's obviously -- a lot of it is related to headcount, and that headcount has severances attached to it. So there's certainly -- and then it didn't all happen on 1 day. It happened over a period of time, it is complete. And then, of course, there's other cost-cutting measures that, I'd say, were close to 90% done, all the things on that list that will translate into that, but some of which, lease payments in our one factory, there are certain things that spill into Q1. So it's a $4 million cost reduction plan that has been vastly implemented. We will absolutely get pick up in Q4 on that front and the fullness of that will play out through the course of 2020.
Okay, great. And just switching back to the top line on the embedded. I know in Q2, there were some customer delays, you had an offset, though, with some pickup in other elements of the embedded segment. Q3, you've indicated that, that might have been softer. With regards to that delay that you saw earlier in the year, is that coming back now into Q4? How do we think about when that might return?
Yes. Actually, we have seen that orders have picked up far past the rate that we've had in prior months. So we have seen that pick back up. It hasn't picked back up to the same degree that we are expecting by this point in time, but it is hit -- it has hit us in a positive way in Q4. So obviously, the blend of having some pickup in infrastructure and some -- and having seen that order on the embedded side come through gives us continuing confidence that our gross margins will continue through Q4.
Okay. Great. Just the last one for me then, you mentioned infrastructure. There was a press release a few weeks ago, you've gone into production with a carrier on your first base station products. I'm wondering if you can just help us understand how to think about how that might flow through to revenue when the orders would start to come in? And maybe talk about the size of that opportunity. You've obviously been working on other base station products. So just help us understand in relation to the existing infrastructure business, where you see the base station antenna sales relative to that business over the next quarters here, just maybe not -- just the potential of that opportunity.
Well, for us -- this is an important milestone for us. One, to get our base station products into the market is certainly one thing, then getting a carrier to pick it up and having approval for it to be on the network is a really important milestone. We have -- I wouldn't start adjusting any models on infrastructure for Q4 as a result of this. But I think it just bolsters your confidence in the numbers that we have -- that the consensus has for next year because we have, one, the benefit of small cells starting to pick up. Not -- it hasn't -- it's not busting out of the gates, but it is picking up. And as well, we have a brand-new category that we've now got carrier approval on a BSA. So you've probably been hearing a lot of the earnings calls from the carriers. And there's a flatness in CapEx spend from 2019 into 2020. How that CapEx is being spent favors base station. So we are feeling bullish that as we have this new category opened up that we are going to make great gains. When you look at the way that carriers' spending and behaviors take place when you're between 4G and 5G, when you're between generations of networks, there is oftentimes a lull. We're in that lull. And that lull doesn't last forever, that lull is a few quarters long, and then this network has to be built, people will start deploying and start building out. The standards, as we've told everyone, get finalized in March of 2020 for 5G. We are well deep into the trenches of developing products for that market. We are a part of those test cities in the network development. So we are well positioned for that, but we got to see momentum pick up on the deployment of 5G, which is still a ways out. So we are confident and excited to the fact that we are now in the base station business, and that we've got really early adoption of one of our premier products, and that is expected to be part of our revenue for 2020.
If I may -- Kevin, it's Dan Kim here. Just to clarify one point on one of your questions with regards to the $4 million in cost savings. Just in terms of modeling purposes, if you look at what we reported in the quarter, we had $14.5 million in OpEx, which I believe was just over $1 million lower than consensus in terms of where the analysts had set for OpEx for the third quarter. I wouldn't -- just for modeling purpose, so you understand how that's going to split out going forward, the bulk of that will come in OpEx, roughly 60-odd percent, the balance will go into the COGS. So when you look at your 2020 forecast, keep that in mind.
And your next question comes from the line of Gavin Fairweather with Cormark.
So AT&T was obviously out with a new kind of strategic plan a few weeks ago. You kind of touched on some of the CapEx dynamics a little bit earlier. But curious if you had any other kind of read-throughs that came out of that plan as it pertains to you.
Well, their announcement was a contraction of CapEx spending from this year to next year by about 10%, $23 billion to $20 billion. That is obviously a reduction. However, it's how that CapEx is being spent, which I think is a bit of a silver lining for us because we're -- this year, if you looked at the behavior of the deployments from AT&T side, there was not as much as small cell, very little, if any, not if any, but very little. And comparatively speaking to what they were anticipating for this year, next year, there is an increase in focus on small cell. But as well, there's a significant amount of that money being spent on base stations. So the fact that we're entering that category and have products and we continue, as you see, releasing every few weeks these new products that are coming out, by March, we will have a very, very significant lineup of products for that market. So we are liking, I guess, at least, the fact that we have products that meet what is the majority of the carriers' needs in the sense of these base station products that we're launching out. If small cells take off in a manner that was expected for this year, all the more exciting for us. But right now, we're just trying to be cautious in our -- in what guidance that we do give you. We have good products that are coming out. It does meet the needs of the network that are coming, even though there's flat CapEx spending from the likes of Verizon, but contracting CapEx spend from AT&T and T-Mobile and Sprint, certainly, will be spending more this -- next year than they did this year with the delays that they have had. So early out and the numbers that are in consensus, we feel, are good and we're comfortable with. And the sort of configuration of our product mix is favorable, more favorable to next year than it had been for this year, so to speak.
Gavin, I would just add there that it's difficult to read through from just a top line number, what that's going to imply for specific spending on specific areas for AT&T. One thing I would note, which Randy had referenced, if you dig a little bit lower, as an example, AT&T has 50% of their network virtualized. So that's going to provide some significant cost savings. Their plan for 2020 is to have 75% of their network virtualized. We've seen data points where software-defined networks are 1/10 the cost of hardware networks. So we anticipate a pretty dramatic shift in spending for AT&T. And ultimately, we hope that's going to translate to more small cell and BSA sales.
Okay, got it. It's been about 9 months since Kathrein was acquired by Ericsson. Just curious if you've noticed any kind of change in how they're approaching the market from a product or a marketing perspective?
Well, there hasn't been a lot of change. Of course, it is early days in that acquisition, and Kathrein was having -- they've been a good competitor. They've got good products, more on the BSA side, not so much on the small cell side. They haven't launched a lot of new products. And from everything that we understood, there's -- things are sort of business as usual, not a lot of changes and certainly not a lot of aggressive new product integration, so to speak, with Ericsson or anything like that. So it hasn't -- it's been very -- it's been quite quiet to be honest with you. And it hasn't really surfaced as any new threats or any degradation either. So it's a bit wait and see, so to speak.
Okay, that's fair. And then maybe one for Michael. CapEx was a bit lower than I was looking for in the quarter. I'm assuming this is just kind of timing of the spend on the new facility. Maybe you can just remind us kind of how much has been spent and how we should be thinking about the timing going forward.
Yes, you're absolutely right. I mean, the money that we have spent so far on the new facility isn't showing up in CapEx yet because it relates to deposits and equipment that hasn't been delivered yet. So we've spent approximately $1 million, but that isn't included in that CapEx number.
Okay. And so should we expect that to sort of ramp up in Q4, Q1? Or how should we think about that?
Yes. Exactly. It will be those 2 quarters that the remainder will be spent.
Got it. Okay. And then just lastly for me before I pass the line, I noticed the implementation of a new NCIB. How are we feeling about using that? Are you going to be opportunistic? Are you looking at being aggressive? Like how should we think about the use of that?
Well, obviously, cash preservation, the fact that we've been containing our spend on CapEx, on areas and, of course, delaying where we can delay in our focus on OpEx. So of course, cash preservation during this period of time and OpEx reduction is our primary focus. So I wouldn't say that's an area of big focus for us. Obviously, we've put that in place. It's more opportunistic, but it's of course, with the limitations that we have as a percentage of daily float that we can actually use that, it doesn't constitute a large percentage. So it's not a significant cash strain. And our focus really primarily is cost reduction and cost containment.
Your next question comes from the line of David Kwan with PI Financial.
Michael, just on the Vietnam facility, thanks for the color there on CapEx. Could you also talk about what the expected amortization is once that facility is up and going. I assume that would kick in, in Q2 next year?
On the facility, we've already started, we've taken possession of it. So it's already being included in depreciation. It's about $75,000 a quarter.
Okay. And that's what is expected to be kind of going forward then?
Yes.
Okay. And then on the incremental cost saving, that $4 million. I assume that's incremental to the $5 million from the Advantech and Alga acquisitions?
Yes, that's right. It is.
Okay. And as it relates to the severance and onetime costs, what should we be modeling in there, I assume, probably for Q4?
Let me just try to find that number. It's probably a few hundred thousand dollars, but I have to check and get a more accurate number for you. And sorry, and that would be mostly salary continuance, so it won't impact cash in the quarter, but that would sort of be the quantum of what the amount will be over time.
Okay. And as it relates to the OpEx, was Q3 a reasonable baseline, I guess, just the commentary from Dan seemed to suggest that, that might be. So just trying to figure out how we should be looking at it, especially looking out into 2020?
I mean, I really look at it, I take what's on the income statement and then back out the depreciation, amortization and some of the EBITDA adjustments. So Q3 went down to $12 million net of those 2 items from $13 million in Q2. And given the cost-cutting we've already done, we do expect that to continue to decline in the next -- over the next 2 quarters.
Okay, perfect. And then, Michael, just on the sale leaseback of the Kirkland facility. I guess, from a -- I assume it to be in the cost of goods, just the decrease, I'm assuming, in the depreciation and an increase in the lease cost, is that mostly offset there?
Yes, and it will be between both cost of goods sold and OpEx because there is significant office space in that facility as well. It's about 1/3 office space. So it'll hit both COGS and OpEx. In terms of -- it should be pretty close, I think, on -- in terms of -- we'll no longer have depreciation on the building, obviously. So yes, those 2 amounts should probably be pretty close. I'll have to take a closer look at that, though.
Your next question comes from the line of Bill Zhang with Raymond James.
Can you hear me?
Barely.
Let me turn this up. So my first question is, for the infrastructure for this quarter, did it grow year-over-year or quarter-over-quarter?
Year-over-year, it was flat. I have to check on the quarter-to-quarter. Are you talking, sorry, Q2 to Q3 or you talking Q3 and moving into Q4?
For Q3 or so like quarter-over-quarter, Q2 to Q3.
Right. So we said earlier that infrastructure and embedded revenue decreased comparatively speaking to the prior year quarter. So -- and of course, as I alluded to earlier, we've seen a pickup in infrastructure moving into Q4. Of course, we're very -- we're halfway through the quarter. So we'll see how the balance of the year plays out. But to answer your question, the revenue decreased in those 2 categories year-over-year.
Okay, sounds good. And given the CapEx outlook in the U.S., would you expect infrastructure segment to grow next year? I guess, maybe just a little bit more color on that.
Our anticipation is that it will grow from this year to next year on the back of what we said earlier, where we have now launched a brand-new category in base station antennas. We've got early demand on those products. We've got approval on that category. So though small cell was disappointing this year, there is still small cells being deployed. We've seen a marked pickup there. If that continues through 2020 and with this new category we've got and already have very strong position in DAS and stadium products, we are anticipating that we will see an uptick in infrastructure revenue in 2020.
Bill, the other reason why we are optimistic for 2020 is small cells typically, our customer concentration in the past has been quite high. We anticipate that may moderate going forward as we continue to gain traction with other carriers. And also keep in mind, Randy had referenced earlier, and we have press released a number of base station wins, these programs typically are larger than small cells. So this is a new area for us that we only started to gain traction in most recently. The revenues will be modest this year, and we hope to see much more meaningful traction next year.
Great. And finally, last one for me. Can you give us an update on the radar opportunity with Advantech?
So we have continued to build out our new system. That new system is set to be launched. We've been quoting a number of opportunities in the radar space, which is an exciting opportunity area for us. We have -- as soon as we have a significant win there, we will post it. We did have one though earlier that we did announce, and we have deployed that. So we do have one win in that space. And -- but we have further interest and opportunity and are in the midst of a number of RFPs in that space that we hope will translate into a new category for Advantech for 2020.
And your final question comes from the line of Andrew McGee with National Bank.
I just want to start with the gross margin guidance and the sequential lift that you're expecting. Q4 is typically a stronger quarter for Samsung products with Mobile division. But then you're also expecting some headwinds from infrastructure and embedded. So I'm just trying to get a sense of, is it basically the satellite division that you expect to help out in the sequential lift and the cost control? Or is there anything else at play?
So on the retail side of smartphones, there is a Q4 typical sell-through because of the holiday season mostly, but that doesn't necessarily translate into an increase in the manufacturing end. So though there have been historical quarters, fourth quarters, for us when -- depending on the timing, where mobile can be a little stronger in Q4, but it's typically more on the retail end as opposed to the manufacturing end. Because if I was to take the last 10 years that I've been in the mobile business here, I would say the majority of the times, the Q4 is the softer quarter for mobile. And that's what we are expecting for this year. So when we said that the second half of the year was trending down on mobile, that is consistent with what we're seeing, for sure. And Q4 would be no different than norm historically. So if you have that lower-margin business trending down, and you get a little bit more strength on your infrastructure and embedded, that's -- and the cost-cutting measures that we've implemented, that's giving us confidence that margins will be moving in the right direction, moving back towards historical norms for us. But of course, revenue won't necessarily be as strong as maybe you may have expected, but it -- but we're comfortable on the bottom line, which is what we're really hyperfocused on right now.
Okay. And then just given your commentary on the next couple of quarters, is it fair to assume that we will be seeing a negative year-over-year growth. And in particular, as I think about Q1, and the Samsung volumes that you had saw in the first half of the year were particularly strong this year, I'm thinking of that as a tougher compare, it might have hit more in Q2, but I'm sure some of it landed in Q1. I just wanted to understand how you're thinking about that and whether or not we -- and as we model it out, if we should be modeling a decline?
Well, you certainly model decline in mobile. We had an unusually high first half of the year based on an opportunity that we came in to help one of our customers with a competitor that had a stumble. So we were there for that. That was a bit of an anomaly, and that will not repeat itself in 2020. So there's no doubt there's going to be a mobile reduction year-over-year. That said, on the flip side, the other 3 divisions of the company, embedded, infrastructure and SATCOM, we are expecting the opposite. There's a lot of strength in the order book. And there's a lot of opportunities that we're facing. So we're not anticipating reductions in the more important 3 categories of the company.
Okay. And then last question I have here, just on the competitive landscape, particularly for infrastructure and embedded. Is there any increase in the competitive landscape that might affect pricing over the next year? And are you seeing more players at the bidding table?
We are not seeing more players at the bidding table. It's typically the -- it's been the same cast of characters. The -- as things do shift, for example, as you see radios starting to get smaller and radio complexities changing, you are seeing ASPs in those areas starting to be under fire and under pressure, whereas the opposite has happened in the sense that the antennas are getting more sophisticated and complicated. When you look at some of the part counts, for example, in our -- some of our small cell products, they could be over 2,000 pieces inside of 1 of our more complex small cell antenna products. That's unheard of. When we were 2 and 3 and 5 years ago, antenna part counts were in the low hundreds, not in the thousands. So complexity and ASPs on the antenna side have been actually increasing and where on the opposite side, you're seeing more pressure on the radio side. So as we move to a network that's going to need a lot more antennas, a lot smaller, a lot more complicated, more radios that are smaller and maybe not as complicated, and as we move, as Daniel mentioned earlier, to more of a virtualized network, that's virtualizing on the radio side, it's not virtualizing on the antenna side. You still need something that grabs the RF out of the air, and you need a product that transmits it as well. So the long story short, virtualization of the network also creates interesting opportunities of complexity inside of our type of products. So the macro trend is in the right direction for us. We're just, unfortunately, between the Gs, as I mentioned earlier. So a lot of these things are to come. And we are well positioned to be a beneficiary of that when things come through. And I think what's important about this moment that we're in right now is that we have a more diversified Baylin today than we have ever had. And we're sitting here today with a lot of investment in products and opportunities with a market that will start moving in this direction. Timing, unfortunately, is a little softer today, but that network is going to be built. And we are nicely in a position to capitalize on that when that turns. And as we get our cost down, and we are more responsible on OpEx reductions and keep ourselves in line, the leverage, when that day comes, will be significant. So we are viewing this very seriously at this moment because it's important for us as we're shifting this business that may have historically been a little bit more mobile down -- more towards an infrastructure and embedded and SATCOM angle. This is -- this macro shift for us is an important time and an important moment.
Okay. And actually, I just have one more question. One of your -- one of the large players in the U.S. has been talking about continued delays with municipalities and utilities within certain jurisdictions. I'm just wondering if you can kind of shed any light on maybe some relief on those delays and whether or not the municipalities are starting to kind of work through some sort of resolution with the carriers and able to -- and the ability to kind of start rolling these small cells out and kind of laying the infrastructure for 5G.
Well, we -- there are 25 of the 50 that have come to a resolution there. That has been recent. That's only been in the last 4 months, particularly. And so those -- and they are the states that drive the most volumes, too. So it's the Floridas, the Texas, the New Yorks of the United States that are to the most degree resolved. So how the resolution is completed with the FCC and then how the carriers now respond to now that market opening up, I think that's why we've seen a little -- a bit of pickup. It's not as raging as we'd like to see it. But moving into 2020, it will be interesting to see how that plays out. But there's enough states now that have actually come to an agreement with the FCC that we should start to see that improve in 2020.
At this time, I would like to turn the call back over to the presenters for closing comments.
Well, thank you, everybody, for all your questions and your interest. I just want to make sure that we're clear on our message here that there's nothing changed in the results that we published the other day versus what we had communicated in our preliminary Q3 update in late September. We continue to be very focused on the bottom line performance. It is really our #1 priority today. We continue to drill down OpEx and continue to cut costs in the areas. And as we continue to pivot the business more towards infrastructure and embedded and SATCOM, these are obviously very important moments for us. And as we continue to do that, we should see margin improvements and continue to translate a lot of that EBITDA down into free cash flow, which is going to be our primary focus for 2020. So important moments for Baylin today. And we are -- we clearly have our hand on the wheel, and we're very much driving towards that end. So thank you again very much for all your time and attention.
This does conclude today's meeting. You may now disconnect. Thank you for your participation.