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Extreme Networks Inc. (NASDAQ:EXTR)

F2Q 2014 Results Earnings Call

February 5, 2014 08:00 AM ET

Executives

John Kurtzweil - Chief Financial Officer

Chuck Berger - President and CEO

Analysts

Mark Kelleher - DA Davidson & Company

Christian Schwab - Craig-Hallum Capital

Rohit Chopra - Wedbush Securities

Operator

Good day, ladies and gentlemen. And welcome to the Extreme Networks Second Quarter Fiscal 2014 Financial Results Conference Call. As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference, John Kurtzweil, CFO. Please go ahead, sir.

John Kurtzweil

Thank you, Nova. Welcome to the Extreme Networks second quarter of fiscal 2014 conference call. On the call with me today is Chuck Berger, Extreme Networks' President and CEO.

This conference call is being broadcast live over the Internet and is being recorded on behalf of the company. The recording is -- will be posted on Extreme Networks' website for replay shortly after the conclusion of the call and will remain there for the next seven days.

The presentations and the recordings of this call are copyrighted property of the company, and no other recording or reproduction is permitted unless authorized by the company in writing.

By now, you have had a chance to review today's earnings press release. For your convenience, a copy of the release and supporting financial materials are available in the Investor Relations section of the company's website at www.extremenetworks.com.

This conference call contains forward-looking statements that involve risk and uncertainties, including statements regarding the company's expectations regarding its financial performance, the impact of the Enterasys Networks acquisition, strategies, growth of customer demand, development of new products, customer acceptance of the company's products, customer buying patterns and spending patterns and overall trends and economic conditions in the company's markets.

Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including, but not limited to, a challenging macroeconomic environment worldwide, fluctuations in demand for the company's products and services, a highly competitive business environment for network switching equipment, the company's effectiveness in controlling expenses, the possibility that the company might experience delays in the development of new technologies and products, customer response to its new technology and products, the timing of any recovery in the global economy, risks related to pending or future litigation, the dependency on other parties for certain components and for the manufacturing of the company's products and our ability to receive the anticipated benefits of the acquisition of Enterasys.

The company undertakes no obligation to update information on the conference call. For more information about potential factors that affect our business and financial results, we suggest you review the company's filings with the Securities and Exchange Commission.

Throughout the conference call, the company will reference some financial metrics that are derived in accordance with generally accepted accounting principles or GAAP while other metrics are not in accordance with GAAP. This approach is consistent with our management measures the company's results internally.

However, non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered as supplement to, and not a substitute for, financial statements prepared in accordance with GAAP.

A reconciliation of the non-GAAP information to the corresponding GAAP measures is in the slide presentation under the Investor Relations tab on our website and the accompanying our press release.

Non-GAAP results exclude stock-based compensation, acquisition and integration costs, restructuring charges, amortization of intangibles, purchase accounting adjustments, litigation settlement and the gain on the sale of facilities.

Before I go into a review of our fiscal Q2 financial results, I’ll turn the call over to Chuck Berger for some opening comments.

Chuck Berger

Thanks, John, and thanks to everyone on the call for joining us this early hour call. It continues to be a very exciting time at Extreme Networks. We announced the completion of the Enterasys acquisition just before our last earnings call on November 4th and today we announced our first quarter as a combined company.

John will give the details, but today we are reporting non-GAAP revenues of $148.3 million and earnings per share of $0.14. Both revenues and EPS were within the guidance ranges we gave in the quarter. We are pleased with these results as it represents our third straight quarter of delivering on our guidance, something that Extreme was not known for in the past.

As significant, we delivered these numbers in the first quarter after closing the acquisition that we were able to forecast our financial performance accurately is one of the many examples of how well the integration of the two companies has gone to date.

Overall, we have found few surprises since closing the acquisition, reflecting how well Chris Crowell, now our Chief Operating Officer and his team manage Enterasys for the past six years.

Additionally, we have the $11 million in revenues Enterasys booked in October prior to the acquisition. Combined revenues for the company were flat year-over-year. To this point we have not seen significant evidence of revenues and synergies and we are positioning ourselves for revenue growth in the future.

During the quarter, we shift the Summit 770, our newest Top of Rack data center switch. The 770 brings a new level of performance to data center with unmatched 10 gig and 40 gig support density.

This advanced scalability, programmability and robust software make it the perfect solution for companies dealing with the challenges of Big Data and cloud-based computing. Our first 100 gig switch is in data with the number of IXP customers and doing very well. We expect a fourth fiscal quarter launch for general availability of that product.

We are growing faster than the market in our data center products. However, it is still small part of our revenue. We plan to increase our focus on the data center to drive revenue growth in the future.

In mid January, Extreme, at a National Football League, announced that Extreme had been selected as the Wi-Fi analytics provider for the NFL and Super Bowl XLVIII. Just yesterday, we launched our new analytics product Purview. Purview has now deployed that the stadiums for the New England Patriots, the Philadelphia Eagles, the Detroit Lions and MetLife Stadium, home of the New York Jets, New York Giants and last Sunday’s Super Bowl.

Please visit our website, see data gathered by the NFL during Sunday’s game using Purview. We literally have this data out only 48 hours after the game is completed. Purview builds on our CoreFlow2 ASICs technology in our website network management suite to provide unprecedented visibility into the application activity on the enterprise network.

Purview integrates with any vendors, network infrastructure, wired/wireless in providing insight into usage and performance of applications at any point in the network from the wireless edge to the deep core of the data center.

With open APIs, Purview can enter into any third-party application as well as either a data field or as an action for control point. The NFL is focused on improving the game experience at the stadiums and Purview provides them with data and the analytics to do that and more.

The NFL announcement in the launch of Purview will be followed by the release of our 802.11 ac products early in the fiscal quarter. We experienced double-digit growth in our wireless revenues for second quarter. However, it is relatively small part of our overall business.

With Purview, the NFL announcement, the upcoming ac release and an increased focus on our wireless product line to expect significant growth in our wireless revenues in the future. In October, Extreme hosted its annual global partner conference. Attendance was more than double last year’s event and one of the principal reasons was the legacy Extreme resellers interest and our new wireless product line.

In January, we had over 200 of our system engineers from around the world in the Bay Area for product training. Data center and wireless were two of the main focus areas. Finally, yesterday we launched the new Extreme brand and state-of-the-art website.

I encourage you to visit our website at www.extremenetworks.com. The brands speaks volume for the bold and exciting future we see for Extreme. The comments from our customers and analysts featured on the website are indicative that our technology and our customer first strategy is winning in the market place.

We changed the game for Extreme Networks and the Ethernet switching market in our second fiscal quarter with the acquisition of Enterasys. We have already entered the new calendar year with tremendous momentum, including a partnership with the NFL, the Purview launch and our new branded state-of-the-art website.

John will be giving guidance for March quarter that shows year-over-year revenue growth within the range for the first time in a long time for Extreme. It is indeed a very exciting time at Extreme but we believe there is much more to come.

Now John will give you the financial details from the quarter.

John Kurtzweil

Thank you, Chuck. I will now provide a review of our fiscal Q2 financials and our financial targets for our Q3 of fiscal 2014. GAAP revenues for Q2 fiscal 2014 were $146.6 million and non-GAAP revenues were $148.3 million which is at the low end of our guidance of $145 million to $160 million.

The difference between the two is related to purchase price accounting under third service revenue and will be with us for the next several quarters. As a reminder, from our last call when we provided guidance, we noted that there will be three months of Extreme product line revenue and expenses for only two months of Enterasys product line revenue and expense.

I will now provide you the revenue splits and this will be the last time regarding for the split of the two product line as there is already some cross selling occurring which would skew the forward numbers and make the meaningless draw any conclusions from.

Legacy Extreme Networks was $76.5 million which was $1 million or 1.3% growth year-over-year and $0.6 million or 0.8% growth sequentially. Legacy Enterasys Networks Non-GAAP revenue was $71.8 million. The revenue for the month of October that was not recorded in consolidation was $11.4 million.

If you add in October, the non-GAAP revenue would have been $83.2 million, which was a decline of $0.7 million, 4.9% year-over-year and a decline of $5 million or 5.7% sequentially and we have found out that December quarter is a seasonally weaker quarter for that line of business.

As you can see, we were essentially flat on a year-over-year basis. Combined product revenues were $119.1 million and combined service revenues were $29.2 million. When we look at the overall market, North America is a tough market right now. Latin America has line of sight to continuing growth in the spring. Asia Pacific is in line with weaker expectations and EMEA was surprisingly strong, especially the Eastern region.

Americas non-GAAP revenues were $71.9 million or 49% of revenue. The legacy and services revenues in the Americas, was greater than the legacy Extreme revenues and gives us a greater presence in the region. When compared to last quarter, the legacy Extreme revenues were 42% of revenue.

During the quarter, we saw North America as a weakest region and in particular, the central part of the country. As we mentioned last quarter, we believe this is due to decisions of the delayed capital spending at year end.

EMEA’s non-GAAP revenues were $61.3 million, or 41% of our revenue. The legacy Enterasys revenues in EMEA were greater than the legacy Extreme revenue and also gives us a greater presence in the region. While compared to last quarter, the legacy Extreme revenues were 40% of our combined revenues.

Southern Europe, the Middle East and Africa were the weakest regions with strong results in the Eastern region where several large infrastructure projects broke loose during the quarter. Asia Pacific non-GAAP revenues were $51.1 million or 10% of our revenue. The legacy Extreme revenues in Asia Pacific were greater than the legacy Enterasys revenues, which gives us the opportunity to reach deeper into that region.

When compared to last quarter, the legacy Extreme revenues were 18% of our revenue. We had solid performance in both Korea and Taiwan. Overall, GAAP and non-GAAP gross margins were 47.6% and 56.4% respectively and above the high end of our target non-GAAP ranges of 54% to 56%.

This non-GAAP improvement came from a richer product mix, supply chain cost reduction and slightly higher service to product mix. The cost items that are included in GAAP and not in non-GAAP are stock-based compensation of $0.2 million, the step-up to fair value for acquired inventory of $9.2 million and the amortization of intangibles of

$2.7 million.

GAAP operating expenses were $83.6 million and non-GAAP operating expenses were $67.5 million. The earnings included in GAAP and not included in non-GAAP are as follows. Stock-based compensation of $3.2 million, acquisition and integration related expenses of $8.7 million, the amortization of intangibles of $3.8 million and restructuring charges of $0.4 million.

Non-GAAP R&D was $18 million. Non-GAAP sales and marketing was $39.4 million, and non-GAAP G&A was $10.1 million. First quarter GAAP operating income was a loss of $13.8 million, which includes items mentioned above and non-GAAP operating income was $16.3 million or 11% of revenue.

Other expense for the quarter of $1.3 million included approximately $0.5 million of interest expense on our debt and the balance was primarily related to foreign currency translation losses. Taxes were $0.9 million, which is as we expected and is primarily related to foreign income.

GAAP net loss for Q2 was $16 million and $0.17 per basis share. Non-GAAP net income for the quarter was $14 million, or $0.14 per diluted share and the results were in our target range of $0.14 to $0.16 per diluted share.

Turning to the balance sheet, total cash and investments for the quarter ended at $112 million as compared to $199.4 million at the end of last quarter. During the quarter, we closed on $125 million credit facility for which we drew down $100 million as part of the funding for the $180 million net of cash, purchase of Enterasys Networks. As it relates to the credit facility, the balance outstanding at the end of December was $99.2 million and we were in compliance with all covenants.

Accounts receivable increased to $94.3 million and non-GAAP DSO of 58. This is an increase of 11 days from the prior quarter. Inventory increased to $62.9 million with non-GAAP days of inventory of 88. This is a decrease of 11 days from the prior quarter. These balanced increases were planned as part of the Enterasys acquisition.

I will now move to provide guidance for our third fiscal quarter. This will be the first time we have a full quarter of the legacy Extreme and legacy Enterasys combined into one entity. As we have already started the integration process and some cross-selling, we’ll be not providing product line splits as we operate in a single segment.

We are targeting GAAP revenue in the range of $138 million to $153 million with non-GAAP revenue of $140 million to $155 million. The difference is related to purchase price accounting and deferred service revenue and will be with us for the next several quarters.

As note, when we look at the third fiscal quarter of 2013 and if the companies were combined, the revenue was $139.5 million at that point. Our guidance is flat to up 11% year-over-year.

GAAP gross margin is targeted to be 50% to 52%. Non-GAAP gross margin is targeted to be 55% to 57%. The three key deltas between the GAAP to non-GAAP gross margin are purchase price accounting on deferred service revenue of approximately $2 million, the purchase price accounting step-up value of inventory estimated at $2 million and this will be the last quarter this will be an impact on the company. The amortization of intangibles is estimated at $4 million and stock-based compensation of $0.5 million.

When we look at the third fiscal quarter 2013 and if the companies were combined, the non-GAAP gross margin at that point was approximately 55.6%.

GAAP operating expenses are expected to be in the range of $88 million to $94 million. Similar to revenue this will be the first quarter when we will have a full quarter of the legacy Extreme and legacy Enterasys combined into one entity. The GAAP expenses include the following items which are not included in our non-GAAP expenses.

Stock-based compensation is targeted at $5.8 million. Amortization of acquired intangibles is targeted at $5.7 million. On a non-GAAP basis we see expenses increasing to between $75 million to $81 million with R&D targeted to come in between $24 million to $25.5 million, sales and marketing targeted to come in between $42 million and $43.5 million and G&A targeted to come in between $9.5 million and $10 million.

Interest expense and other is targeted to being approximately $0.7 million. This includes the interest expense related to the debt incurred in relations to the acquisition. The all-in interest rate on the debt is approximately 3%. Tax expense is targeted to be approximately the same as last quarter at $0.9 million.

GAAP net income is targeted at a loss of $15 million to $20 million or $0.15 to $0.21 per share. Non-GAAP net income is targeted in the range of $0.5 million to $6 or $0.01 to $0.06 per diluted share. The GAAP and non-GAAP net income targets are based on estimated $96 million plus or minus to $99 million plus or minus average shares respectively.

Targeted non-GAAP earnings exclude expenses related to stock-based compensation expense of $6.3 million, the amortization of acquired intangibles of $9.7 million, acquisition and integration related expenses of $1.5 million, the step-up value to fair value the acquired inventory of $2 million and the purchase accounting value related to the deferred service revenue of $2 million.

When we look at the third fiscal quarter of 2013 and if the companies have been combined, the non-GAAP EPS would have been $0.01. At this point, we are similar at the low end of our revenue guidance and expect to provide positive growth in earnings as our revenue increases.

Moving on to a bit more detail regarding acquisition and expected synergies, we see cross-selling already beginning, sale of the company that will lead to reduced materials costs and will show up in the P&L begin in the fourth fiscal quarter, a reduction in incremental operating expenses that will begin short-term sales in the third fiscal quarter, marketing in the fourth fiscal quarter in G&A and fiscal 2015.

We have fully integrated these two teams. We target to reduce combined material costs and operating expenses between $30 million to $40 million. The timing of synergies will begin to be -- being in the financials in a small way this coming quarter and will hit all strides 12 to 15 months from now.

At this point -- at this point this brings close to our prepared remarks and we'll now open the call for questions. Nova, you can please start the polling?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Mark Kelleher. Your line is open.

Mark Kelleher - DA Davidson & Company

Great. Thanks for taking the question. Just to pick up where your commentary left up there on the synergies, you talked about a reduced material costs in Q4 and you also mentioned that you had some supply chain cost reductions that were helping in the current quarter? So could you talk about how that plays out and maybe talk a little bit more about what the limitations are on reducing the operating costs quicker? Thanks.

John Kurtzweil

Okay. So on the costs we're -- where we're seeing the benefit is that, from the inventories, we have to roll all the inventory through for the -- that was on the balance sheet at the end December for the quarter, a solid 88 days, it is great quarter for the inventories, but we are seeing good cost reductions on the material side.

We've been able to open up those materials for both product lines and where we have common parts we're able to get the lower price on both. So we are seeing real good progress on that side, as well as incremental volume on our success with Broadcom and the manufacturing costs with Alpha, so we're seeing good efforts there.

We're also now that the peak season has finished on shipping, we are starting negotiations on freights and we're also starting some consolidation efforts in terms of our warehousing, so that all takes a little bit of a time. But we saw little bit last or this quarter in terms of some of the prices that will roll through, but the big impact will really start to show up in the June quarter. And I'll pass over to Chuck for the operating expenses.

Chuck Berger

Just to add to John's comment, remember we're integrating here $200 million, $300 million plus companies that had just similar business models on the supply chain side, as well as two different ERP systems, legacy Extreme was on Oracle, we had just upgraded to Oracle 12, if you remember back a couple of calls and legacy Enterasys was on SAP.

We expect to have that integration complete late summer, early fall, but as anyone who's gone through that can tell you it's a fairly monumental task, our parts and logistics side we're going to go from 95 total parts depots around the world to a number roughly equal to half of that.

So we've put in place plans in relatively short order given that we've only closed this transaction three months ago. We realized these benefits, as John points out, it just takes a lot of more time.

On the operating expense side, we are making progress but we're also being very mindful of commitments we've made to our customers not to disturb the product roadmap of -- even of the companies and to already to combine the product lines under a unified operating system, which as I've said, at the beginning would be a 18 to 24 months effort.

And we're also being very mindful not to disturb our ability to create and deliver on our revenue guidance. So we have started to make significant cuts particularly in removing duplicative and very expensive senior management and the sales -- sales organization. We've got a similar move already in the marketing organization. So I think you'll start to see more of those synergies this quarter and certainly next.

Mark Kelleher - DA Davidson & Company

Okay. Just a quick follow-up on the integration efforts, can you tell us where you stand with the sales effort getting each side to cross sell. Is that still in the early stages as given? How is that going?

Chuck Berger

I would say it’s still in the early stages although as I mentioned there is a tremendous interest in the wireless product that we purchased as part of the acquisition of Enterasys. And we’re putting a lot of focus on that as I mentioned in the past along with our data center business to drive revenue growth as we come out of fiscal 2014 at the end of June. So we’re just starting to integrate the sales teams and generate cross selling opportunities across product line. I would say ahead of the curve particular in wireless right now.

Mark Kelleher - DA Davidson & Company

Okay. Great. Thanks.

Operator

Our next question comes from the line of Christian Schwab of Craig-Hallum Capital. Your line is open.

Christian Schwab - Craig-Hallum Capital

Great. Thank you. As we look and we’re really going one quarter at a time here but as we look to the June quarter in the peers that their business experiences the same seasonality, seasonal strength as your business does, would we expect that to be replicated again this year?

Chuck Berger

Hi Christian, yes. Both companies have a pretty significant concentration in the education market which has their fiscal year on June 30th. In addition to that, it’s the end of now the combined company since a year, which attended five sales performance towards total accelerators and making their year end number and club attendance and things like that. So we would expect to see that now for the combined company, yes.

Christian Schwab - Craig-Hallum Capital

Great. And then on the $30 million to $40 million in cost synergies that we’ve outlined that almost drive 12 to 15 months from now. Does that mean, we wait three to four quarters for meaningful OpEx productions or does that mean 12 to 15 months from now we’re well on our way to prove points on that $30 million to $40 million?

Chuck Berger

So within this $30 million to $40 million contains two items. It contains rationalization of our manufacturing network and our logistics network, which is a significant part of that and that should start to hit as we come into the first and second quarter of next fiscal year, with some of that happening in fourth quarter as John -- of this year as John mentioned. On the OpEx drive, we’re also dealing with over in this current quarter and that will ramp-up each quarter over the next two to three or four quarters. The last place that we’ll see synergies as an R&D for the recent side, I just mentioned.

Christian Schwab - Craig-Hallum Capital

Great. And then on a go forward basis, should we assume taxes remain kind of that similar above versus the last few quarters or do you see any material changes and taxes as we go throughout the time here?

John Kurtzweil

I don’t see much because we’re certainly but it used to be NOLs in the U.S. For your models I would plan $900,000 to $1 million on a quarterly basis.

Christian Schwab - Craig-Hallum Capital

Excellent. No other question. Thank you.

Operator

Our next question comes from the line of Rohit Chopra of Wedbush Securities. Your line is open.

Rohit Chopra - Wedbush Securities

Thanks very much. Couple of questions John, maybe I’ll start with North America. You indicated it was tough, some of the other communities who have reported indicated they were seeing that a pretty decent budget flash and I think, one of your large competitors actually had a pretty good quarter in switching. So I just want to get a sense of what you saw in North America that made it tough. Was it more competition or was it something in the sales force where you’re making some adjustments.

And on the second question, if you could talk a little bit about where you are with Lenovo today and if there have been any discussions post what they are doing with IBM?

Chuck Berger

Yeah. I want to grab that Rohit. I think, we’re seeing in North America it is a combination of things. We are seeing a tough market with the ways in CapEx decisions as John mentioned, we particularly saw that in the central region.

I think our focus is to keep this on prospective is, we have been in the middle of turnaround of both our sales and our marketing efforts at legacy Extreme and that was probably most pronounced -- the need for that was probably most pronounced in our North American organization. And where our lack of demand generation where there was a pretty significant headcount reduction, we took back in November and February over a year ago, are now having some impact on our revenue going forward.

So we saw tough market conditions, but we also saw the results of some of the issues in our sales and demand creation engine that I have been talking about almost literally since joining the company. We see that getting dramatically better with the couple of things, the combination of the sales forces under the leadership of our Head of North American Sales, John Fabiaschi who came over from Enterasys with strong performance there.

We should by the end of the quarter be integrated onto a unified automated marketing system as part of the launch of the new website that I talked about as well as how the Enterasys, I think line and sales force integrated on the Salesforce.com. So, I think you will start to see improved performance there. But mostly what you are seeing there is tough market conditions and also some self-imposed issues that we’ve been particularly -- I have been talking about for some time.

On Lenovo, frankly, we are extremely excited about the prospects for Lenovo with their recent announcement of the acquisition of IBM’s server business. This takes them probably 2% global market share player to a 14% global market share player. And we continue to be their only networking partner and we now included a price list shared by 1,200 more sales people that they are getting as part of the acquisition. Again, assuming it’s says on track and closes in six to nine months and we just see this as tremendously positive.

That said, we’ve been even saying, the ramp on this prior to this acquisition was going to be delivered but slow and we would not see significant results in this fiscal year, but a fairly steeper ramp once we left the fiscal year and this just only makes that that much better in my opinion.

Rohit Chopra - Wedbush Securities

Can I ask a quick follow-up just on some other partners? We did talk about Aviat and some others. Just give us an update there. And then may be John if you could just talk about NSM and Siemens and their contribution in the quarter, were they both better than 10%?

Chuck Berger

So we really have four key partners, Lenovo and Ericsson and you've seen this Ericsson in the past be a 10% revenue contributor to the Extreme as a stand-alone company revenues. We continue to see strong performance from Ericsson and we have new opportunities at Ericsson that we can’t talk about yet, but we think we'll make that relationship significantly larger and a bit larger than it has been in the past. And those will again kick in as we come into the next fiscal year.

Aviat is a small microwave backhaul vendor. We are just starting to see around in business with them. It will be as I’ve said in the past single digit millions. It will also absorb our router products, the E4G, which we'll get good margins on because a lot of that has been inventoried for some time. And again, we’re just starting to see the ramp in the SGI business given the size of their business overall, again I can say, I think, that simple have single-digit million per quarter opportunity as it ramps up. The two large ones are really Ericsson and Lenovo going forward.

John Kurtzweil

And then, Rohit, answer to your question on -- [we will start first Siemens], they changed name of their company. It’s now called [Unified]. And to be honest the revenues out, they're actually a little bit disappointing, they are not a 10% customer, they're not even 10% customer of the legacy Enterasys, they are going through a restructuring themselves. So there is a little bit of chaos in their organization, but we do expect going forward for them to be a solid partner with us.

Chuck Berger

Your greatest contribution to Enterasys’ revenue was in the EMEA region and the Latin America region despite the fairly significant downturn with now Unified formally SCN., both of those regions were on target for the quarter. So what we're seeing is that hasn’t -- we’re being able to take business that they would have picked up as a reseller and buying other resellers for the bought back buying.

Rohit Chopra - Wedbush Securities

Thanks.

Operator

And sir, this ends our Q&A session. I would like to turn the call back to Chuck Berger for closing remarks.

Chuck Berger

Thanks everyone again for joining us in this very early hour and very snowy and icy New York City where we will be spending our day and I suspect many of you are as well. And as I said at the end of my comments, this is extremely exciting time for us. We have an enormous amount of momentum as we show up in the last couple of days with the preview launch and the rebranding of the company and we look forward to next quarter results and moving towards the guidance ranges that we gave you. Thanks.

Operator

Ladies and gentlemen, thank you for participating in today’s program. This concludes the program. You may all disconnect.

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