Q4 2019 Earnings Call
Welcome to the Q4 2019, Digi International Inc. earnings Conference call.
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The conference or what your speaker today, Jamie Lock Chief Financial Officer. Thank you. Please go ahead Sir.
Thank you Gigi good afternoon, everyone and thank you we're happy to have you joining us today to discuss the fiscal 2019 fourth quarter results of Digi International.
Joining me on today's call as Ron Konezny, our president and CEO , Ron will provide his thoughts on our business and I will follow with the highlights of our financial performance. Following our prepared remarks, we will take your questions.
You should our earnings release shortly after the market closed you may obtain a copy through the financial releases section of our Investor Relations website at <unk> Dot com.
Some of the statements. So we make during this call are considered forward looking are subject to significant risks and uncertainties.
Statements reflect our expectations about future operating and financial performance and speak only as of today's date.
We undertake no obligation to update publicly or revise these forward looking statements.
Well, we believe the expectations reflected in our forward looking statements are reasonable we give no assurance such expectations will be met or that any of our forward looking statements will prove to be correct.
For additional information. Please refer to these forward looking statements section in our earnings release today and the risk factors of our 2019 Form 10-K , and subsequent reports on file with the FCC.
Finally, certain of the financial information disclosed on this call include non-GAAP measures information required to be disclosed about these measures, including reconciliations to the most comparable GAAP measures are included in the earnings release.
The earnings release is also an exhibit to a form 8-K that can be accessed through the FCC piling sections of our Investor Relations website now.
Now I'll turn the call over the wrong.
Thank you Jamie and welcome to everyone that has joined our call today.
We capped off another record breaking fiscal year with a strong fourth quarter enter fiscal 2020 with excitement in both of our business segments and also with the pending acquisition of open here.
Our past fiscal year was driven by key initiatives that the team delivered.
Newpark introduction, we doubled our revenue from products introduced within the past three years, nearly $40 million and we forecast that number will increase to 70 million in fiscal 2020.
These key metric shows the alignment and effectiveness of our product management sales in R&D teams within Aiotv products and services.
Strong direct salesforce and solution selling.
Our sustaining high win rate on large opportunities, while continuing to work closely with our critical channel partners.
Our 20 million dollar purchase order this past summer highlighted this effort.
While we are still unable to disclose the specific end user we can talk about the project in more detail as we think we can replicate the success.
A large U.S. city is deploying a full suite of did you products and services to connect thousands of signalized intersections twins traffic management Center. When finished the smart City project will be one of the largest mission critical cellular networks in the world.
The Smart City project is a natural consequence of the global trend towards urbanization were city managers must increase surface transportation capacity to support residents and businesses.
Are you package the solution with partners into a reference design and actively engaged with other cities.
The Digi product suite includes brought manager that'd be our 54, Firstnet routers 900 megahertz radios and Port servers did you services include custom application development configuration solution kitting and technical support.
Improve system in process efficiency.
We launched the final stage of our CRM ERP transition in early October the entire companies now on one system, one database and increased visibility a tremendous accomplishment and a huge thank you to the team.
We are digging into the process efficiency with the goal, the making digi and easier company for customers and partners to do business.
Effective leadership.
We named President of each business unit, Barbara last year, a new supply chain leader in early 2019.
The new CFO has passed me, we've a great team as a line in our mission and supporting each other with unwavering commitment.
As we look forward to fiscal 2020, we look to deliver another record year turbo charged with the opening your acquisition.
As disclosed on November seven did you announced we have agreed to acquire this leader remote access network resiliency in automation services. You don't think your team will continue to be led by good remarks, their CEO and report into Mike you want the President of did you I have tea products and services business.
We share similar cultural values.
Our teams have worked together in the past.
Easing the planned transition.
It will be imperative that we support all the attribute made opening here a leader in their market well acclimating their teams a digi.
Jamie will provide the expected financial contribution to our results in his comments anticipating a close by year end.
Now a few comments on each of our business segments.
Our IC products and services customers and partners are looking for more complete solutions oftentimes incorporating professional services and sometimes including other products that are integrated within these offerings.
We will expand our professional services team to support these initiatives building from our large smart City project.
New product introduction in our cellular infrastructure management product lines will be introducing new and refresh offers that are based on a single device operating system linked to our did you promote manager application.
In our embedded in RF product lines will be launching the connect or eight connect or eight nano some and ones that we will be building on our leading XP product family to offer choice and ease of use.
Service offerings, we were increasingly off our products in combination with device management wireless data and professional services. This combination will help our customers, but will also provide opportunities for our channel partners have more repeatable sales increasingly we are hardware enable and software and services defined.
Increased efficiency, we must drive improvements from forecast to cash.
We will be leveraging that switch angry point sales data integrating it with demand planning software and improving the productivity of our key this will benefit customers as we expect this to lower the time and effort required to do business.
As we look forward to fiscal 2020. This project based business can experience uneven performance as you will hear in our guidance, we will start a bit softer, but we expect to ramp throughout the year.
Including depending on opening your acquisition, we expect LTE products and services generate higher growth rates.
Higher gross margins and higher EBITDA margins.
Our smart says I OTI solutions business continues its focus on health care, Foodservices and logistics customers to increase their efficiency improve their safety and enhance their decision making.
This subscription oriented business will increasingly focused on annualized recurring revenues, including bundled offers to an increasing number of enterprise customers. We expect this bundling will temper topline growth rates, but will accelerate recurring revenue growth rates.
We added over 2500 sites in the quarter ending the year with approximately 63500 sites. We anticipate continued subscriber additions that will build on our nearly $15 million an annualized recurring revenue.
Smart sense for the singular destination platform was launched last quarter and more of our new customers will join that platform. We will work closely with our existing customers to introduced the new platform and migrate them when appropriate.
New product introduction, new products introduced in the first half of 2020 will allow the interoperability of our Bluetooth zigbee sensors to better meet our customer requirements. This provides an optimized aiotv environment to help our customers achieve their goals.
We are investing in automation and process control to make onboarding and support of our customers easier and more efficient improved mobile applications will guide users through the installation and training process and a new ecommerce site will allow our customers to self service.
Our LT solutions business remains and growth mode, and we expect the business to contribute a modest but growing EBITDA contribution in fiscal 2020.
Lastly, we improved our cash balance by $30 million and reduced our inventory to just under $40 million in fiscal 2019, providing an even stronger balance sheet. The open gear transaction will put us in a net debt position, but we expect to generate significant cash in fiscal 2020, we continue to look for acquisitions.
Charities in both businesses and would ideally like to enhance our solutions business if the opportunity presents.
Ill now turn the call over to Jamie for more detail on our financial performance.
Thanks, Ron good afternoon, everyone.
I'll start with some of the key financial highlights that contributed to the results of our fiscal fourth quarter and our fiscal year.
Our fourth fiscal quarter revenue performance of 65.0 million and adjusted EBITDA performance of 7.6 million or 12% of revenue both exceeded our quarterly guidance ranges.
As demonstrated during our fiscal year, our annual performance continues the trend of delivering dependable quality results.
Our record revenue of 254.2 million for fiscal 2019 was that the high end of our original guidance range for the fiscal year.
And we delivered 26.5 million of adjusted EBITDA, which exceeded the midpoint of the original guidance range.
We are proud of our ability to deliver quality predictable results for our shareholders.
Our adjusted EBITDA was 7.6 million for the quarter and 26.5 billion for the year.
Or 12% in 10% of revenue respectively.
Included in our fiscal 2019 adjusted EBITDA figure is approximately 1.6 million of acquisition related to earn out expense as well as approximately 30 basis points related to impacts from China tariffs.
Finally, we drove our cash to 92.8 million through strong collections from accounts receivable and good cash management related new accounts payable and inventory.
As Rod mentioned, we grew our cash balance by 30 million with 29 million coming from operations.
Now I'm going to move to discussing our results on a segment basis, both of our segments were important delivering strong performance for our fiscal Q4.
Start with products and services.
Our revenue and I OTI products and services was 55.4 million for the fourth fiscal quarter, representing a decrease year over year or 1.7%.
The majority of that year over year decline as related to lower sales for the quarter from our cellular network products.
For the fiscal year or 2019, our I O T products and services revenue increased by 6.8% 215.3 million.
The increase was mainly driven by improved sales from our RF and embedded products as well as incremental revenue of 5.4 million from accelerated since the acquisition occurred in January 2018.
That growth was partially offset by lower sales from our network products.
Gross margin trial would you products and services was 47.9% for our fiscal Q4 compared to 47.3% in prior fiscal Q4, which has increased 60 basis points.
The increase was driven by favorable product mix and lower manufacturing costs.
For the fiscal year 2019, our IC products and services gross margin declined 1.1% to 46.7% that's primarily due to unfavorable product mix as we had lower sales from our network products, which typically have higher gross margins.
Actually offsetting that was more manufacturing costs, we incurred during the fiscal year.
Hi shipped over to high OTI solutions as Ron mentioned.
Solutions business surpass 63000 sites.
During the fourth quarter with an annualized recurring revenue or our our of nearly $15 million, which is approximately 35% the total solutions revenue.
We finished the quarter with revenue of 9.5 billion in the fiscal year with 38.6 million increases of 9.1 and 53.3% respectively.
These increases were driven by new customer deployments additional purchases of equipment upgrades from existing customers as well as an increase in our recurring revenue base.
For the quarter I OTI solutions gross margin was 42.7% that compares to 46.4% in fiscal Q4 of last year. This decrease was primarily related to implementation costs incurred.
Higher implementation costs incurred compared to the prior prior fiscal Q4.
For the year, our gross margin was 47.6% an increase of 6.7%.
The increase is reflective of our growth in our A.R.R. and demonstrates the leverage that would be expected with increased recurring revenue.
Finally, a few additional balance sheet items mentioned as Ron discussed our cash balance of 92.8 billion. In addition to the our strong cash performance or inventory balance is 39.8 down by 2 million sequentially and 1.8 billion from September of prior year.
Just be continuing to drive this balanced out of as we progress through fiscal year 2020.
As mentioned in our earnings release, we have adopted an expanded non-GAAP EPS calculation this fiscal quarter.
We now further exclude the effects of amortization stock based compensation expense adjustments to acquisition earn outs acquisition related expenditures and other non operating income and expenses.
We believe this gives our investor community and better understanding of fed financial performance of the company better benchmarking of our performance externally against our competitors.
I'm going to ship to provide our first quarter and full year 2020 guidance.
For the first fiscal quarter of 2020, we expect revenue of 50 to 62 million.
We expect our GAAP EPS to be between a loss of two cents to an income of two cents per diluted share.
We expect our adjusted EPS to be between 10, and 14 cents per diluted share and we expect adjusted EBITDA to be five to 6 million.
For the full fiscal year of 2020.
We expect revenue of 310 to 325 million.
We'll continue to focus our gross margin rate improvement combined with Opex controls to give us expanded leverage with targeted GAAP EPS to be 70 to 83 cents per diluted share.
Targeted adjusted EPS to be $1.14 to $1.27 per diluted share.
We expect adjusted EBITDA of 45 million to 50 million.
As mentioned in Ron's prepared remarks, we are anticipating you opened gear merger to close before January 2020 with that we've assumed nine months of opening your results in the above annual guidance ranges in general. This includes approximately 45 million of added revenue at approximately 15 million of adjusted EBITDA from their performance.
For reference the opening gear financial figures provided in the Investor presentation that is available on the did you website, our unaudited financial results.
We expect on a GAAP basis for open gear, the adjusted EBITDA figure to be approximately 1 million lower than the posted figure in the investor deck.
Finally included in our guidance, we expect our fiscal 2020 annual effective tax rate to be in the range of 15% to 20%.
That's driven up by or increased profitability that we're projecting for fiscal year 2000.
That completes our prepared remarks and at this time running Iyer. Please take your questions.
Could you please provide the instructions.
As a reminder to ask a question you want me to press Star one on your telephone to withdraw your question press the pound key please standby well, we compile the Q and a roster.
Our first question is from Scott serum from Roth Capital. Your line is now fan.
Hey, good afternoon. Thanks for taking my question congratulations on the open gear transaction.
Hey, Thanks Scott.
First off on open gear could you just provide us a little bit more color with historic growth rate and just looking at some of the existing customer base in sales channels do you expect a lot of cross selling opportunities I mean, how your initial thoughts kind of approaching that as we as we go into 2020, and then I had a couple of follow ups on guidance.
Yes, great Great question, <expletive> Theyve experienced double digit growth in the past and we do expect that continue you can tell from our guidance, we're being a it it may be a modest at the midpoint here to make sure we're incorporating any acclamation to digi.
We do anticipate the opportunity to do some account mapping opened gear as I mentioned earlier, we share a lot of the DNA and and have called on similar customer sometimes with similar offerings, but also with very different offerings. So one of the first exercises as we'll take our joint sales teams and do some some account mapping to.
There's some opportunity that can be unlocked.
Okay and maybe on the.
The product side of equation Im not sure. If you gave a breakout which could provide a little bit of color in terms of fourth quarter, how that looked it sounds like it's a little bit softer and I would imagine we'd see some acceleration going into 2020. So your thoughts in general around the cellular products and accelerated acquisition.
Yes, the the fourth quarter, we actually had a good contribution from from Saudi the year embedded in RF were a bit of the success story, they performed better than expected.
We do anticipate in fiscal 20 that.
Between cellular and our network product offerings that those will have significant contributions clearly the the large $20 million project is at its core cellular router and so that in particular is going to is going to contribute to the success of saga.
Got you and lastly, if I could just looking at the guidance for fiscal <unk> 20.
Backing out contribution from open gear and guns that you've done for the first quarter, you've got to organic growth of about I think 6% to 10% for the year, but given the flattish guidance in the December quarter.
Only implies an acceleration in over the last three quarters I think of 7% to 14%. So could you take us through what gives you the comfort on that front from a visibility standpoint, it sounds like cellular certainly a key component of that but just help us understand a little bit better.
Why you feel so comfortable with that acceleration in the back half. Thanks.
Yes, Thanks, Scott yet in our first fiscal quarter is it's not unusual for us to have a slower quarter.
Channel tends want to optimize their inventory and so they're up there being careful with restocking orders theres not because of course as many selling and installation days. So that first fiscal quarter does tend to be a slower one for us we did say quite frankly, a little bit of revenue that we would ordinarily see in this quarter that actually got accelerated into the previous quarter, which helped us succeed.
The guidance, we had previously set in fiscal Q4.
But between the large project, we talked about our strong bookings that we've seen to date and some of those and higher visibility from larger accounts that gives us a little more a little more confidence than what we've have seen in the past, where we just didn't have quite as much visibility.
Okay, great, Thanks, and congrats and opened here again.
Thank you Scott.
Thank you Sir our next question is from Anthony So from Craig Hallum. Your line is now fan.
Afternoon Rotten Jimmy in my congrats as well in the acquisition, Ron or JV, maybe can provide little bit more info on open here such as.
Our average gross margins average.
Sales side.
How many 10% customers. They may have and then Ron your comments kind of alluding to potential other smart city type of deals is it your partners. In this first 20 million dollar when they're drawing year to others than anything you'd like to elaborate on there would be helpful. Thanks.
Great. Thanks, Thanks, Tony Yes.
The open gear business. It has a lot of similarities to disease infrastructure management or network business. They have margins that are higher than than dgs combine margins in that product and services similar to the margins that we've experienced in that network infrastructure management.
Business. They do service 75 of the top fortune 100 companies, but they do have four large direct customers that represent combined.
Something close to 20% of their business, but they do a lot of business through through channel partners Ingram micro and cynics in particular.
So they do have a distributed book of business. They do have a relatively.
Narrow product sets they have a very good focus and establish themselves both branding as well as performance within that product set and what's happened to them recently as well as they've expanded beyond being more of a north American provider into EMEA and APAC. So.
So across the board, we think they've got good growth rates. Good margins. Good EBITDA margins that will help lift the overall performance of products and services.
And as I mentioned before we do anticipate.
And cross selling opportunities on the smart city.
Question.
These are either as a problem that many cities face cities approach it in different ways. We think we partnered with us in great.
Great companies to offer one of the leading implementations. We've got this great reference point, we've got a pipeline thats built these projects do take some time, especially projects that Rick require.
Some type of government funding, there said theres a bit of a lead time with it but we're encouraged by by the ability to start talking about this project more publicly up proving ourselves in the field with this customer and we do have a dedicated team that's that's working.
These types of customers to create repeatable sales.
Great. Thanks, Ron.
Thank you our next questions from Mike Walkie from Canaccord. Your line is now fan.
Great. Thanks, guys.
Yes, just maybe follow up on Tonys question.
Just as we put open geared to the model can you help us Jamie just think about.
Operating expenses coming in from that customer.
Okay.
From that acquisition.
Yep.
Mike I think.
So with the with the offering that they have as Ron alluded to with the expanded with the expanded margin rates in that sector. You do see more that kind of flows down at the EBITDA line that that suggests that the operating expense profile does kind of lined up with with what did you sees.
The go to market strategies with channel theirs.
There's there's really a part of why it's a good fit.
Is there a structure and the way that they go to market largely matches the way that we do so there's not really anything that's unusual there to kind of fits the profile that digi has and where you see the leverage is in that in that product offering that comes at a pretty good margins and I will say, we'll get building pure team a lot of credit they've got a.
A narrower product set.
Very defined market, so they've got a well run company either opex profile is quite frankly lower than what digi his experience with our combined portfolio.
Great that's helpful and.
Can you just help us think too about.
Just as you guys first time.
I've covered you that you're starting to lever up the company a little bit.
You talked about maybe looking at solution. So what what is kind of the acquisition appetite, where you guys comfortable leveraging up the company and Jimmy maybe you could help us for the models for your adjusted EBITDA guidance, what type of net interest expense are you guys assuming for fiscal 2000. Thanks.
When I take the first question Jamie can can take the interest expense question.
As you can see from open gear and you see the progression historically, we start office small acquisitions to form smart sense, we we increased our appetite and confidence in taking on bigger acquisitions.
Opened gear represents the largest acquisition if and when closed the company's history, we want to follow that theme, we're not going to be exclusive but we are looking for bigger more transformative opportunities.
We want to look for opportunities that have characteristics of opened gear that their leaders Theyve got momentum they've got a great track record.
On the solution side quite frankly, the metrics are going to be a little bit different theyre not going to be probably is based on.
A multiple of EBITDA there'll be based on growth rates and recurring revenue.
So we may or may not be able to to use debts as as efficiently as we have with the opening your transaction, where it's accretive immediately and generating cash and and not diluting. The shareholders. We think ended up being the rights approach for for this particular opportunity, but as we look for larger solutions.
Opportunities those valuation metrics are different and depending upon where we stand in terms of the net debt.
We will have more or less flexibility as I mentioned in my remarks, we do anticipate the combined company generating specific amount of cash and you can visualize this company getting back to a net cash positive position in a relatively short amount of time, we're less than where the company with expanded EBITDA margins and quite frankly more capacity to take.
Some debt should an opportunity arise.
Mike It's Jamie on on.
Relative to the debt as we kind of move through.
Fiscal 2020.
The interest so we're kind of assuming below the adjusted EBITDA number comes in at a rate of about something below linerboard plus 300, there are stepped down throughout the year as we delever ourselves.
And so.
We've got we've got that moving between that L. 200, L 300 range, but step downs kind of.
Practically starting around the first half the year and stepping down sequentially each quarter after that.
Great.
That's helpful.
One more question I'll pass on kind of a two part question.
With the with the city opportunity, it's great to hear.
How long are these projects is that 20 million was that all included in fiscal 2000 guidance or is it spread out longer than that and maybe any color on on pipeline. How many more of these projects you think you might be able to enter over the next next year.
That'd be great. Thanks.
Great questions. We did start deployments of this project.
Last quarter, and so did contribute somewhat to the upside we saw in the quarter of the $20 million about a million of it is an annual were occurring.
Revenue that we are expecting to achieve over the next five years. So the 20 sort of becomes 15 little bit was deployed.
In fiscal 19, the balance will deploy in fiscal 2000.
But with this tale of annualized recurring revenue that goes beyond beyond this fiscal 2000.
The sorry.
Yes, sorry, but.
No go ahead.
So the pipeline.
No, we're not prepared to share quantity information, but but we're getting some really positive feedback again. These sales cycles take awhile. So the pipeline might be a little bit deceiving in terms of the number of entities within a chance to talk to and and begin to share. Some of the success, we heard greatly anticipating be able to share the specific end user base.
'cause it to a public entity it will be registered and will be available for the public to to know so we're anxiously awaiting that time, because I think that provides even more of an exclamation point beyond.
Beyond what we've described this project but.
But we're anticipating being able to land additional projects potentially as early this year.
Great. Thanks, and one last question pop had just on the solutions business with with the talk about going to more bundled deals should.
Should we assume applied in your guidance a step down in the run rate of that business, maybe closer to halfway between the run rate of the business and what you put up last quarter.
Recurring revenue and then last quarter like say six to 8 million. Thanks.
Yes, we do expect the topline to grow we expect the annualized recurring to grow faster than the topline up because we anticipate that three to 4000 subscribers happening on a quarterly basis were little bit short of that last quarter, but we think will more than makeup for at this current quarter.
But if you if you kind of extrapolate those those additions.
And up and assume a high customer retention.
Thats, how that gives us the confidence that return revenue will grow and and bundled deals are generally going to have higher ARPU than our existing installed base.
Which which also.
Herges acceleration in annualized revenue.
Thank you very much.
Thank you. Our next question is from Greg Burns from Sidoti and company. Your line is now fan.
Yes.
I guess just kind of.
Total.
Last question about the solutions, Hey, Greg a big rabbits uptime near you.
So any better.
No Hello.
Hello.
Yes, Greg you are you pretty tough to here.
Okay, I'll, just I'll catch after the call.
Okay. Thanks.
Thank you. Our next question is from Jason Smith from Lake Street. Your line is now fan.
Hi, guys. Thanks for taking my questions. Just curious if you could share what the breakdown in open gears revenue between products and services and solutions was or is.
Yes, so as I mentioned my remarks, Jason that.
This business will report into the product and services business unit. So all of its revenue will attribute to that business segment.
It is truly M&A in the spirit of hardware enabled software defined although mark.
Customers in that business are mainly paying an upfront fee they do.
Have a stronger attach rate than what digi has historically experienced on their equivalent of device management, so, but a little bit under 5% of their total revenue would be software recurring in nature.
Okay. That's helpful. And then just lastly, if you could comment on what you're seeing.
As far as inventory in the channel that the distributors and where you think that is.
The channel inventory is pretty.
Pretty similar to what we've reported in previous quarters around 20 million or so maybe a little bit higher than that but but it's around that 29 mark.
Yes, Jason it's actually stayed fairly consistent.
Quarter over quarter.
So not a lot of movement there there wasn't.
There wasn't really a lot that changed from from fiscal Q3 into fiscal Q4.
Okay. Thanks, a lot.
Yes, thanks, Jason.
Thank you as a reminder to ask a question you want me to press Star one on your telephone.
Our next question is from David Gearhart from first analysis. Your line is now open hi. Good afternoon. Thank you for taking my questions I wanted to go back to be Aiotv solutions business in the past you've said that the Aiotv solutions business should grow roughly 20% hand, and we on a total total revenue basis, and I know with model shift I just wondered if you could update that.
Metrics. So we can kind of get too far afield on that line.
Yes, it's a good so at a fair question. We've we've achieved our goal of growing this business and over 20% on the topline last couple of years.
With a focus more on recurring revenue, which is really where we want this business to land our expectations for topline growth and probably closer to 15% to 20%.
But that subscriber base and the annualized recurring revenue should grow faster than that.
Got it and then back to the site additions.
Figure is one of your lowest quarters.
For side or asset additions since you've had the business Im just curious why is it just absent flows noble project based work and and what gives you the confidence to get back up to a normal more to 3000 plus.
Units per quarter.
Yeah. That's another another real good question, David I think the on the positive side, we haven't seen any market.
Trends either customers' interest competition that have.
Have a challenged our projections are competence in the business I do think as we enabled smartphones 4.0.
We are starting to move customers so that as the destination platform I think thats caused us a little bit the hiccup last quarter, we do anticipate.
Seeing much improved subscriber numbers in this current quarter, so, but you're right last quarter was a little bit lower than what we've traditionally achieved but we do expect that to bounce back for not only this quarter, but for the for the balance of the year as well God and last one from me a housekeeping question what was the capex in the quarter.
For the year right now.
For the for the quarter, David we were under million and Capex for for Q4 got it that's it for me. Thanks.
Thanks, David.
Thank you at this time I'm showing no further questions I would like to turn the call back over to Ron Konezny, President and Chief Executive Officer for closing remarks.
Thank you Jay in closing I want to thank the entire did you team our customers and our partners. We are unwavering in our mission to support them with leading aiotv offerings.
We believe that we will build shareholder value and earn Investor Trust and confidence. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.