Siltronic AG

XETRA:WAF

Earnings Call Transcript 2021-Q3

[Operator]

Hello, everyone, and welcome to Siltronic conference call on its Q3 2021 results. Please note that this call is being recorded and streamed on Siltronic's website. The call will be available as an on-demand version later today. Your participation on this call implies your consent with this. At this time, I would like to turn the conference over to Petra Muller, Head of Investor Relations and Communications of Siltronic AG.

[Petra Muller, Head of Investor Relations & Communications]

Thank you, operator, and welcome, everybody, to our Q3 2021 results presentation. This call is also being broadcast live over the Internet at siltronic.com. A replay of the call will be available on our website shortly following the conclusion of this call. Joining me today are our CEO, Dr. Christoph von Plotho; and our CFO, Rainer Irle. Following our usual procedure, Chris will start with some general remarks, and Rainer will provide some more detail of our key financials, followed by Chris again updating you on our guidance and current market developments. After the introduction, we will be happy to take your questions. Please note that management's comments during this call will include forward-looking statements, which involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation and in our annual report. All documents relating to our Q3 2021 reporting are available on our website. Before handing over the call to Chris von Plotho, allow me one personal comment. Most of you will have seen that I passed on the baton as Head of IR and Comms to my colleague, Dr. Rupert Krautbauer, who is listening here next to us. This call will be my last official duty for Siltronic as I will take on a new challenge outside the company. I would like to thank you all for the great and professional collaboration and the great discussion. It was a great pleasure to work for Siltronic over the past 6 years, and I would like to say a big thank you to Chris von Plotho and Rainer Irle for their support and trust and for the good cooperation we had over the years. And now without further ado, over to Chris for introductory remarks.

[Christoph von Plotho, Chairman of Executive Board & CEO]

Well, good morning, everybody. Thank you, Petra. Welcome, everyone, and thank you for joining us for our Q3 results call. Let's start with a short update on the tender offer of GlobalWafers. As the waiting periods under the U.S. Hart-Scott-Rodino act have expired, one more completion condition set out is the offer document has been fulfilled. So only approvals are pending from the merger control authorities in Japan, in China as well as from the German Federal Ministry of Economic Affairs and Energy (sic) [ Federal Ministry for Economic Affairs and Energy ]. Due to protracted discussions regarding regulatory clearances, the merger will likely not be completed in the current fiscal year. GlobalWafers and we and Siltronic continue to discuss constructively with the authorities on the terms of the outstanding clearances. Please understand that we cannot comment any further on the ongoing proceedings today. Today, we had a groundbreaking ceremony for our new 300-millimeter fab in Singapore. Groundwork and piling already started, and we see good progress according to our timetable. By now, we have concluded further negotiations with customers, and the share of LTAs will cover the new capacity -- to cover the new capacity went up. We are still in talks with some more customers and expect a very high LTA share for both existing and new capacities. Looking at the business development, we continue to see a very strong wafer demand across all products. End market demand continued to be strong. This year, we see two major contributors. The first one is catch-up effects from last year. Smartphone sales are recovering and also, to a lesser extent, automotive. The second contribution is the same one as every year, ongoing digitalization. To name a few, silicon content in smartphones is increasing due to the growing rollout of 5G devices and the trend for more cameras in each phone. Server demand is strong driven by cloud services and hyperscale data centers. Commercial PCs are strong, and gaming PCs are at high demand. The auto industry continues its recovery, however slower than expected. Limitations due to supply chain issues persist, but the share of hybrid and electrical cars continue to grow. Demand for industrial electronics was also strong. When we look at demand by wafer diameter, all our production lines are fully loaded and output is limited by capacity. Our ASP increased slightly quarter-over-quarter. Before I hand over to Rainer for more details on the Q3 financials, let me summarize some KPIs of the third quarter. We achieved sales of EUR 372 million, 9% up versus the performance in Q2. Wafer area was slightly up, and we also saw small contributions from ASP and from foreign exchange rate in Q3. Our EBITDA came in at EUR 123 million with an EBITDA margin of 33%. EBIT was up to EUR 84 million. Our net financial assets increased to EUR 605 million as of September 30. Now let me hand over to Rainer for a detailed walk-through of our financials.

[Rainer Irle, CFO, Labor director & Member of Executive Board]

Yes. Thank you, Chris, and welcome, everybody. As Chris pointed out, Q3 sales were strong. Wafer area sold was up again. We also saw first price increases and the stronger dollar. In summary, seamless execution in times of severe supply chain hiccups. Overall, sales reached EUR 372 million, up 9% quarter-on-quarter and up 24% year-over-year. COGS went up by 7% quarter-on-quarter, EUR 253 million, partly due to increased wafer area sold but also due to high energy cost starting at the end of the quarter. However, COGS increased at a slower rate compared to volume growth. Depreciation did not increase in Q3. Comparing the 9 months period with last year, COGS went up due to higher wafer area sold and partly also due to higher depreciation. Cost per wafer area came down due to fixed cost evolution and productivity improvements. Additionally, successful cost saving measures have reduced manufacturing costs, which have also decreased somewhat as a result of FX movements. Our gross profit rose to EUR 119 million in Q3, and the gross margin was 32%. Our admin expenses in the 9-months period were burdened by roughly EUR 6 million for advisory services in relation to the tender offer from GlobalWafers. In comparison, last year, we had expenses for the transaction of EUR 12 million, all in Q4. In Q3, nonoperational currency effects were positive at EUR 2 million. They declined versus Q2 due to the weaker euro. The positive contribution from the increased wafer area sold and the slightly higher ASP, along with the favorable FX impact, led to strong results in Q3. EBITDA was up to EUR 123 million in, a 14% increase versus Q2 and the 53% increase year-over-year. EBITDA margin was 33% after nearly 32% in Q2 and nearly 27% in last year Q3. Now it is positive to see prices starting to climb. However, we also see the beginning of significant price increases in purchased materials and energy. In line with EBITDA, EBIT in Q3 went up by nearly 21% to EUR 84 million with an EBIT margin of 22.6% compared to 20.4% in Q2 and close to 15% last year. In the 9-months period, EBITDA increased 22% year-over-year and EBIT nearly 27%. Tax rate continued to be low but was up from 10% to 12% quarter-on-quarter due an increase in profitability in Germany. Net profit was EUR 74 million in Q3 compared to EUR 64 million in Q2. Earnings per share came in at EUR 2.15. Working capital went slightly up in Q3 to EUR 240 million. Trade receivables and inventories increased due to higher demand and higher production volumes. Trade liabilities went up due to higher CapEx. Looking at our balance sheet, equity was nearly EUR 1.2 billion with an equity ratio of 55% at the end of September. Equity increased nicely compared to December 2020 with high profits minus the dividend and with lower pension provisions, which are roughly stable quarter-on-quarter, but they came down nicely versus December last year. In Q3, we signed a 60-year lease contract for a piece of land for the new fab in Singapore, which increased our right-of-use assets and, obviously, also our lease liabilities by nearly EUR 50 million. Cash flow was strong and net financial assets went up by EUR 77 million. CapEx in Q3 was flattish quarter-on-quarter at nearly EUR 54 million. Apart from MOB, we continued to invest in capability, epi capacities and the expansion of the crystal pulling hall in Freiberg. Now we will see high CapEx in Q4 when first meaningful CapEx for fab next will be recorded, including massive prepayments for equipment. According to our guidance, we expect more than EUR 250 million CapEx in Q4. Our operating cash flow in Q3 increased to EUR 123 million. The net cash flow in Q3 was positive at EUR 70 million. Up to now, we received EUR 30 million of customer prepayments this year. We expect a larger amount of prepayments in Q4. And with that, I would like to hand over to Chris again.

[Christoph von Plotho, Chairman of Executive Board & CEO]

Well, thank you, Rainer. The overall market for silicon wafer area has been growing at a rate of 5% per year over the past 10 years. This was driven by growing demand from 300-millimeter wafers with a CAGR of 6.8% since 2010. Going forward, we assume a CAGR of 6% for 300-millimeter wafer demand over the coming years. This suggests that supply will remain short in the near term. We substantiated our outlook for 2021 for sales and EBITDA margin. As we have previously communicated, we expected sales to be more than 10% above 2020. Our current outlook is now more precise, and we assume a good 15% sales growth. We guided EBITDA margin to be between 30% and 32%. We now expect the EBITDA margin to be approximately 32%, hence on the upper level of the former guidance. The forecast for the other KPIs remains unchanged. With this, we close our presentation. But before handing over to the operator for questions, I would like to make a personal remark regarding Petra, who decided to have a workplace closer to her home office. Petra, you were the face of Investor Relations of Siltronic very successfully over the last 6 years, highly appreciated by investors, highly appreciated by analysts and highly appreciated by Siltronic, including the Board. Thank you very much. We wish you the very best for your future. I hope we will hear from you from time to time. And last but not least, you have a successor, Dr. Rupert Krautbauer. Very welcome to you and good luck. So now, I want to hand out -- hand over to the operator. Operator, please open the Q&A session.

[Operator]

[Operator Instructions] We have our first question. It's from Francois Bouvignies, UBS.

[Francois-Xavier Bouvignies]

I have a couple here, if I may. The first one is on maybe the pricing. So the first time you are saying that it's up quarter-on-quarter. Before, you were saying it was flattish. So can you give us a bit more color around the drivers of this pricing? Is it like 200-millimeter mainly because it's non-LTAs? Or you also see some 300-millimeter pricing hangup? So any color around the pricing moves that you are seeing would be helpful. The second element I wanted to ask is on the inventories in the supply chain and your customers. So how do you see the inventories of raw materials and finished goods given the strong demand is there, but we also have seen some double ordering or even triple, in some cases, for some products? So is it a concern for you in the inventory that your customers and maybe down the supply chain or even further? And I have -- last one is maybe on the LTAs. So you're saying that you are increasing the LTAs. So compared to what we have seen in the last few years, like 60% to 70% of your shipments are from LTAs, how should we think about this percentage going forward, let's say, in -- when you have your new capacity up and running?

[Christoph von Plotho, Chairman of Executive Board & CEO]

Okay. Thank you for your question. All 3 of them are very interesting. Let's start with the first one, pricing development quarter-over-quarter, which -- what were the drivers for price increases. The driver for price increase is always the same, the market is short. Whatever the diameter is, whatever the product is, when demand is stronger than the quantities offered to the market, this is an opportunity to increase prices. I'd like to remind you that when the last quarter came around the corner in '16, beginning '17, we only had one LTA, which basically did not allow us to increase prices for 2017. So we basically increased all the price apart -- of one customer in 2017. Today, the situation -- or during the year, the situation is different. We have more LTAs, and, consequently, the possibilities, opportunities for price increases are not as big as they were in 2017. But every contract that we renegotiated with customers ended up with price increases. Most of them only will have an impact in the year 2022. Yes. And of course, we always said LTA's share is around 65%, but we also did not hide that the share for 300-millimeter LTAs is higher than the average of the company. So consequently, smaller diameters and 200 are below. And lower number of LTAs allows you to do more price increases. And by the way, in the past, we always seek not to disclose price developments by diameter, and we'll continue to do so. With this, I would like to come to the inventories at customers and in the supply chain. So at customers, like always, we only see the raw material inventory, and we only have 2 major customers where we see it. They are both on a healthy level but slightly decreasing. But no reason to be nervous about that. When the last slowdown happened end of '18, beginning of '19, it was very much driven by finished good inventory at customers, and that's unfortunately something that we don't see. There are, -- some people, they start to ask questions about spot price development for DRAM chips. I think since beginning of September, the spot price went down by something like 18%. Some people are getting nervous about that. I try to remind these people that in the time frame between the beginning of the year and end of August, these spot prices went up by around 80%. So we do not see any reason to get nervous. But we agree with you that as we cannot fulfill all demands from customers, there is the potential of double ordering. But as we cannot fulfill the demand, there is probably double ordering or double demand but not double shipping. The LTAs for the actual period, which is still the year '21, we still stick to a figure of around 65%. But I think it's fair to believe that in the future, the LTA share will go up. We are still working on additional LTAs. And as soon as we have a figure which might deviate somehow significantly from the 65% that we always mentioned, we will make it public knowledge.

[Operator]

Our next question is by Amit Harchandani, Citigroup.

[Amit B. Harchandani, Director & Head of EMEA Technology Research]

Amit Harchandani from Citi. And before I move on to questions, thank you, Petra, for all your support over the last 6 years. With regards to the question from my side, my first question is a clarification with respect to the merger process. Could you kindly remind us what happens if you don't end up getting the approvals, I believe, by the end of January? If I understand, the deadline is -- that's the deadline. If you could just clarify, please, what are the possibilities from here on if one or more of the approvals does not come through on time? The second question is with regards to your longer-term demand trajectory. You've talked about 6% volume growth for 300-millimeter versus 6.8%. Trying to understand, why do you believe it would grow at a slower rate compared to history? Is that simply conservatism? Or is that -- is there more to it considering we see all these tailwinds out there? And my last question is with regards to supply side. You've talked about price increases for yourselves, but there are also input costs which might be going up for you in terms of energy costs, logistics. Could you help us understand how inflation is impacting you on the supply side?

[Christoph von Plotho, Chairman of Executive Board & CEO]

Well, let me start to answer your second question, comparing the 6% to the 6.8%. When you look at the CAGR over a long period of time, is 6% really different from 6.8%? Yes, it looks different. The figures are different. But does it send a different signal? No, it doesn't. 6% is the figure that we used in our Supervisory Board presentation to get the approval for fab next. And I think everybody understands that for this, we didn't want to use overoptimistic figure. Whatever happens, if we are the only ones to invest in additional capacity and demand will grow by 6%, this fab next will be sold out faster than anybody can believe. So the second question, that you -- the third question that you had was regarding cost development. Yes, we are doing well. We can increase prices. Our customers are doing well. They increase prices. Our suppliers consequently also do well. Everything is from offshore, so prices go up around the globe basically for everything. Yes, we will see a negative impact from pricing next year. But today is not the day to give an outlook for the year '22. This is something we will do in the beginning of the year 2022 like we always did. And for the clarification, what will happen after January 1, I would like to -- Rainer to answer that question. Rainer, please.

[Rainer Irle, CFO, Labor director & Member of Executive Board]

Yes, sure. Amit, the merger, I mean, it's kind of -- I mean, the next update is end of January. And if we don't receive all approvals until then, the deal would just fall off the cliff.

[Operator]

The next question is by Constantin Hesse, Jefferies.

[Constantin Harald Hesse, Equity Analyst]

First of all, from me as well, Petra, it's a bit more shorter period for me because I've only been covering you guys since September. So thank you very much for your help over the last year. And good luck in your next job. So a couple of questions from my side. Most of them have been asked, but I have just one on the input cost side. So you currently have long-term agreements with Wacker in Germany until '24; and for Singapore, I think until '23. And you talk about renegotiating prices every year, and there is a specific range. Can you maybe elaborate a little bit on that range? And the second question is on Slide 3. You talk about customer demand already being higher than fab next's capacity. Are you talking about the entire -- so the entire capacity, the entire shell capacity that fab will have? Or are we talking about the initial ramp-up only?

[Christoph von Plotho, Chairman of Executive Board & CEO]

Well, let me start with the second question. Whether you look at the ramp or the final capacity, if we look at the demand that we got in negotiations for -- with LTAs from customers, if we -- the LTAs that we concluded, we reused the quantities that customer wanted to have in every case because simply, they -- even fab next did not bring these additional capacities. And I think this shouldn't be a surprise because there is, I think, a basic agreement in the industry that fab next is coming too late. You all know the reasons, that we needed to get first support from customers and then making the call for the Supervisory Board. And you know my example since quite some time. When I do my calculation and I take a 600k fab, which is 8% additional capacity, assuming that it ramps over 4 years, this is something like 2% per year, and I'm referring to the 6% growth that we mentioned before. Then you basically need to fulfill demand 3 fab next. So I think it's completely normal. And when you get the first announcement, and that's the only announcement that customers can rely on, I think it's obvious then demand will be much more bigger than the additional capacity out of fab next. The question regarding polysilicon, I would like Rainer to answer it because he was much more closer to these negotiations than I were.

[Rainer Irle, CFO, Labor director & Member of Executive Board]

Yes, sure. So Constantin, what we believe today is that polysilicon is also kind of in short supply, and we want to make sure we lock it in over the -- I mean, let's say at least half a decade, so including the initial ramp of the new factor. So what we're probably doing is signing a longer-term agreement, which would then see a bit more significant step-up in prices in next year and then a more stable pricing going forward. I just think with that volume growth that we currently see all over the place, it's very important to lock in all the raw materials, all supplies, all the electricity today.

[Constantin Harald Hesse, Equity Analyst]

That's great. Can I just ask, with regards to that range you comment, is there any more you can talk about in terms of how big that range is?

[Rainer Irle, CFO, Labor director & Member of Executive Board]

No, not really. I mean the negotiations haven't concluded, but that's kind of the framework that we will be working in.

[Christoph von Plotho, Chairman of Executive Board & CEO]

But I want to add something. Whether we talk about a selling contract or a purchasing contract, when we have contracts with plus/minus price variations, we never disclose this variance, the limits, the upper and the lower limit. We don't do it today and, I'm sorry, we won't do it in the future either.

[Operator]

The next question is by Gustav Froberg, Berenberg.

[Gustav Froberg, Analyst]

I have two, please. I'll do them one after the other, if that's okay. First question is just on your loading and capacity that you see right now. So given that you are fully loaded, which I interpret is at 100% capacity, could you talk a little bit more about how much incremental wafer shipments or volume you think you can produce and/or sell at all next year through, for example, debottlenecking, et cetera? And then also, just a question on pricing again. And looking into next year, given that you saw a bit of a price increase quarter-on-quarter this quarter, should we expect to see the same type of development every quarter now going forward, the kind of gradual increase? Or will there be a sort of step change once we roll over into the calendar year '22?

[Christoph von Plotho, Chairman of Executive Board & CEO]

Well, let me try first answer the question regarding pricing. Yes, ASP will go up in next year. And we will have some prices which will simply go up at the beginning of the year and then remain flat. Mostly the case for, let's say, annual contracts or LTA contracts. And then -- but we also have half-year contracts and quarterly contracts. So you will see the ramp in ASP from quarter-to-quarter, but most of it will be a step function for -- coming from the long-term agreements. Your first question regarding loading, yes, I remember the story that investors were telling me that I disclosed the loadings in percentage, and I said I never did. In reality, I never did. The problem is that fully loaded is the only verbal description which translate into a figure which is called 100%. So the possibilities for next year are relatively limited. We do not add capacity. We were not really running at the edge in production max output, we call that, in the first quarter of the year, but I think to see significant increases when you take Q3 or Q4 as a basis is relatively unlikely to happen. I want to remind you that not every day runs at the same performance level like the other. We had months where we had excellent operational performance, for example, like the first 2 months in Q3. But we unfortunately have also from time to time months with more challenges. So the additional quantity for next year will mostly come out of the difference in Q1.

[Operator]

Your next question is by Jürgen Wagner, Stifel Europe.

[Jürgen Wagner, Director]

What is the cash out schedule for the new fab for Singapore next post the EUR 250 million you will spend in Q4? And a bit a longer-term question. What would be the margin profile of Siltronic, yes, assuming current state of conditions once the new fab is fully ramped?

[Christoph von Plotho, Chairman of Executive Board & CEO]

Once the fab is fully ramped. Now you want to have an outlook for 2028. I don't know what will be in 2028. The only thing which is for sure the most likely scenario by then, I will be retired because my age will be at 73. But I will try to answer your question. So yes, we will have some payout this year. And then we disclosed a figure, which is EUR 2 billion. This is the amount that we will spend for that project until the end of '24. But we never gave a detailed schedule how this will happen. But as you know, the investment in a new fab is typically front loaded. So if you take the EUR 2 billion and you divide it by the year -- the number of years, which is 3 years, then you end up at EUR 660 million. So probably, you will have a little bit less than '24, but some more at the beginning. But this is something we didn't disclose up to now. But one day, when we talk about the budget for next year, you will at least have a figure for the year 2022. And then your second question was regarding pricing development based on the ramp of fab next. Fab next will start to ramp in '24. It's difficult to predict pricing. But what is relatively easy to predict is the performance of that facility because you know from different statements that we made in the past that the running cost in Singapore are significantly lower than in Germany. So we will increase the share of 300-millimeter wafers, which are produced at a low-cost level. So once the fab is fully ramped, it should have a positive -- or it will have a positive impact on EBITDA development.

[Operator]

The next question is by Stephane Houri of ODDO.

[Stephane Houri, Research Analyst]

So let me just start by saying thank you to Petra and good luck for the following -- for your following job. I have 2 questions, actually. The first one is a little bit short term. Basically, there has been some ups and downs and mostly downs in the memory prices. So as memory is an important market for you, can you please share with us what is your vision on the current evolution of the memory market? And also, you have answered to some of the questions about the cost inflation. But let's say in the next 3 to 4 quarters, how do you see gross margin evolving? Because your loadings are probably pretty high at the moment, but, at the same time, you're facing some cost increases.

[Christoph von Plotho, Chairman of Executive Board & CEO]

So let's try to answer the most easy question at the beginning. This is the outlook for gross profit margins. Typically, we give an outlook for the year when the year already started, which is sometimes in Q1. So we will not talk about that today. I already gave you some input. Prices will go up. ASP will have a positive effect. But we also told you that raw material prices and also supplies for other materials and also energy will go up next year. I think I already elaborated on memory prices and what we think about the memory price development. And you asked whether memory is an important application for us. Let me remind you that roughly 2/3 of areas sold to the market is 300-millimeter, and 2/3 of that is memory is 300-millimeter polished. So there is no wafer supplier around the globe for whom memory is not important because it's the biggest eater of 300-millimeter polished. So yes, it is important to Siltronic. Up to now, we do not see any impact. It's a little bit more the other way around. We see additional demand from memory players for Q4 and also for next year that we are not able to fulfill.

[Operator]

The next question is by Amit Harchandani.

[Amit B. Harchandani, Director & Head of EMEA Technology Research]

Just a few follow-up questions, if I may, from my side. Firstly, with respect to the new fab in Singapore, could you kindly clarify what the initial mix of polished versus epitaxial is likely to be? Or at least what's the current planning assumption there? Secondly, I must admit we were slightly confused 4 days ago when you put out a release saying that the deal is likely to not close in the current fiscal year, and then GlobalWafers put out a release saying it is going to close by the end of 2021. Without -- I appreciate you cannot give much detail, but would you be in a position to help us understand why this differing viewpoint coming out on the same day? And lastly, if I may. Based on your comments regarding LTAs kicking in next year, is it fair to say pricing should be up year-on-year next year at least without formally guiding for 2022?

[Christoph von Plotho, Chairman of Executive Board & CEO]

Well, thank you for your questions. You're right, we will have significant capacity in epi here in Singapore. Typically, when you ramp a fab, the first thing you need to ramp is polished because without the ramp of polished, you don't have the substrate for epi. It will be significant for epi, but it will also be significant for polished. So I think it's fair to assume that the first ramp will start with polished, but epi should then follow as fast as possible. I want to remind you that typically, qualifications at customers for polished wafers are faster than the one for epi wafers. We already told the guys where we have LTAs that they have a major influence on first supply because this is reducing -- or reducing to an absolute needed minimum the qualification time at the customer. And then regarding the deal, I do not want to give you any additional detail because what needed to be said is already said. You need to consider that there is a certain likelihood that GlobalWafers' statement was in reaction to our statement. I think the statements are not that different. Both are saying that we continue to collaborate constructively with the authorities to find a solution to the challenges, and we are completely aligned, and I think that's the most important.

[Amit B. Harchandani, Director & Head of EMEA Technology Research]

And could you confirm if pricing is going up next year or at least that's a safe assumption to make?

[Christoph von Plotho, Chairman of Executive Board & CEO]

Yes, let's put it that way. If prices -- ASP of Siltronic does not go up next year, I recommend the company to fire the CEO.

[Amit B. Harchandani, Director & Head of EMEA Technology Research]

Okay. Well, that is -- I don't know if that's [indiscernible].

[Christoph von Plotho, Chairman of Executive Board & CEO]

Is that clear?

[Amit B. Harchandani, Director & Head of EMEA Technology Research]

So I'll take that as a yes.

[Christoph von Plotho, Chairman of Executive Board & CEO]

Yes.

[Operator]

[Operator Instructions] There are no further questions for the moment, and so I hand back to Petra Muller.

[Petra Muller, Head of Investor Relations & Communications]

Thank you, operator. You all, this concludes our Q&A session. The next Siltronic call will be on the full year 2021 results at the beginning of March next year. To everybody, all the best. Thank you for joining us today and goodbye.

[Rainer Irle, CFO, Labor director & Member of Executive Board]

Thank you, Petra.

[Operator]

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.