Opnext, Inc. F1Q11 (Qtr End 06/30/10) Earnings Call Transcript

| About: Opnext, Inc. (OPXT)

Opnext, Inc. (NASDAQ:OPXT)

F1Q11 (Qtr End 06/30/10) Earnings Call Transcript

August 5, 2010 4:30 pm ET

Executives

Steve Pavlovich – VP, IR

Gill Bouchard – President and CEO

Bob Nobile – CFO & SVP

Analysts

Ajit Pai – Stifel Nicolaus

Paul Bonenfant – Morgan Keegan

Rahul Khanwalkar – Jefferies

Operator

Good afternoon. My name is Sonia and I will be your conference operator today. At this time, I would like to welcome everyone to the Opnext, Inc. Q1 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions)

At this time, I would like to turn the call over to your presenter, Mr. Steve Pavlovich. Sir, you may begin.

Steve Pavlovich

Thank you, Sonia. Good afternoon and thanks for joining us everyone. Today, we will discuss our financial results for the first fiscal quarter ended June 30, 2010. We’ll begin with Gill Bouchard, our President and Chief Executive Officer, for an overview of the quarter followed by Bob Nobile, our Chief Financial Officer, who will provide additional detail on the financial results. Then Gill will talk about operational plans and guidance and, of course then, followed by Q&A.

As a reminder, the matters we will be discussing today include forward-looking statements, and as such are subject to the risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Such risks and uncertainties are discussed in the company’s filings with the SEC, including the press release filed today and our most recent annual report on Form 10-K, quarterly report on Form 10-Q and any applicable amendments.

Please refer to the Safe Harbor language contained therein in providing forward-looking statements. The company expressly disclaims any obligation to update these statements.

Also let me mention that throughout this conference call, we will be referencing both GAAP and non-GAAP financial measures. A complete reconciliation of the non-GAAP financial measure to the applicable GAAP financial measure, including a reconciliation of adjusted EBITDA to EBITDA can be found in the press release we issued today, which is available on our Web site in the Investor Relations section.

With that, I will turn it over to Gill.

Gill Bouchard

Thank you, Steve, and good afternoon, everyone. Today we reported mixed results for our first quarter. On the revenue side, we came in about $1 million below the bottom end of our guidance. Here we had a contrasted picture. Sales of 10G and below products grew 14% and sales of 40G and above modules were up 31%. On the other hand, 40G subsystems continue to be very challenging. Sales were down 60%, which was a primary reason for the shortfall versus guidance.

While module revenue was strong, deliveries continue to be negatively impacted by supply constraints. Backlog has doubled in the past two quarters and book-to-bill ratio is well above 1. We also are very pleased to have Huawei as a 10% customer for the first time this quarter.

The industrial and commercial business, again, turned in a solid performance this quarter with 10% revenue growth versus the quarter ended March 2010. Revenues were well above pre-downturn levels.

Moving on to bottom-line results, gross margin was flat versus the quarter ended March 2010 and R&D expenses declined. As a result, our non-GAAP loss per fully diluted share was $0.13, a $0.03 improvement compared to last quarter. Cash used was high in part of the result of increased working capital and continued investments in new capacity to support growth and new products.

Now, let me turn it over to Bob to discuss the financial results in more detail.

Bob Nobile

Thanks, Gill, and good afternoon, everyone. We generated total revenue of $78.9 million representing an increase of approximately $2.1 million compared to the March quarter. Revenue from sales of our 10G and below products increased 14% to $55.8 million primarily as a result of increased sales of 300 pin tunables, XFP, and SFP+ modules, partially offset by a decrease in sales of Xenpak modules.

On the other hand, our 40G and above revenues decreased 25% to $16.3 million. This decrease was driven by weak 40G subsystem sales, partially offset by strong growth in 40G and above module sales. While revenue growth was strong for both 10G and below products and 40G and above modules, product delivers continue to be delayed as supply constraints continued.

Revenue from industrial and commercial product sales increased 10% to $6.7 million, representing the fourth consecutive quarter of I&C growth. Compared to the first quarter ended in June 2009, revenue decreased $6.4 million from $85.3 million. Revenue from 10G and below products increased $7.8 million, or 16.3%, while revenue from 40G and above products decreased $18.6 million or 53% compared to the prior year. This decrease was caused by an almost 90% decline in 40G subsystem sales, partially offset by higher 40G and 100G module sales.

Revenue from sales of industrial and commercial products increased $4.4 million, or 191%, from $2.3 million in the June 2009 quarter, a historical low point for I&C revenue.

For the quarter ended in June 2010, Cisco Systems, Alcatel-Lucent, and Huawei each represented 10% or more of total revenues. Combined, these three customers represented approximately 51% of total revenues compared to 44% in the quarter ended June 2009. This past quarter was the first quarter that Huawei has represented 10% or more of total revenues.

Geographically, revenues in North America represented 44% of our total revenue; while Europe represented 22%; Japan, 13%; and the rest of Asia was 21%.

Gross margin was 18.8%, while non-GAAP gross margin was 20.9%, both unchanged from prior quarter. As compared to the March 2010 quarter, gross margin was favorably impacted by lower per unit average material and outsourcing costs, lower inventory charges, and a 30 basis point currency benefit. Gross margin was unfavorably impacted by lower 40G and above revenues and lower average selling prices.

Looking forward to our second fiscal quarter ending in September 2010, we expect our gross margin percentage to improve slightly assuming constant exchange rates as we benefit from more favorable product mix and improved volumes. Including the effects of our hedging program, the experienced an effective average exchange rate of 92 yen per US dollar for the quarter ended in June 2010.

If the exchange rate remains at approximately 86 yen for the remainder of the current quarter, we should realize an effective rate of approximately 88.5 yen after giving effect to our hedging program. A 20.5 yen decrease from 92 yen to 88.5 yen would result in an approximate 150 basis point adverse effect on gross margin.

R&D expense was $16.4 million in the June quarter as compared to $18.9 million in the March quarter, while non-GAAP R&D expense decreased $2.6 million to $15.8 million as compared to $18.4 million in the prior quarter. R&D spending came in just below the low end of the $16 million to $18 million per quarter range that we have previously discussed, primarily as a result of lower material and outsourcing costs related to advanced product development programs. We expect R&D spending in the quarter ending September 2010 to, again, be at the low end of our range.

SG&A expense was $14.3 million, while non-GAAP SG&A expense was $12.7 million during the June quarter, an increase of about $300,000 for the March quarter. Looking forward to Q2, we expect SG&A expense to be slightly higher than the amount incurred in Q1.

Operating loss for June quarter was $16.2 million, compared to an operating loss of $18.5 million in the prior quarter. On a non-GAAP basis, the operating loss was $12 million compared to $14.7 million in the March quarter, a reduction of $2.7 million primarily due to lower R&D spending.

Net loss was $16.3 million, or negative $0.18 per fully diluted share, compared to a net loss of $18.3 million, or negative $0.20, in the March quarter. Non-GAAP net loss for the June quarter was $12.1 million, or negative $0.13 per fully diluted share, compared to $14.5 million, or negative $0.16, in the prior quarter.

EBITDA was negative $8.5 million compared to negative $11 million in the March quarter, while adjusted EBITDA was negative $6.1 million compared to negative $9 million last quarter.

Cash and cash equivalents decreased by $25.8 million to $106.9 million at June 30, 2010, reflecting $3.1 million of capital expenditures, $2.6 million of capital lease payments, and $19.7 million of cash used in operations, including an $8.8 million increase in accounts receivable and a $5.4 million increase in inventory. We also experienced a $400,000 negative effect from foreign currency fluctuations.

Looking forward to Q2, we expect our cash utilization to decrease as day sales outstanding improve given [ph] recent collection of receivables, and the number of inventory days on hand declined after the build of buffer inventory during the June quarter.

We expect that CapEx and capital lease requirements will remain relatively consistent with the June quarter as we complete the capacity expansions we discussed last quarter.

Looking to the second half of our fiscal year ending in March 2011, we expect gross margins to improve as a result of favorable product mix and cost reductions in several internally developed components. In addition, we expect R&D spending to taper off to about $14 million per quarter by the end of the fiscal year as several advanced development programs transition to product introduction efforts.

Based on the expected gross margin improvement and lower R&D spending and assuming 90 yen to the US dollar, we expect to achieve breakeven EBITDA when revenue reaches $90 million per quarter. This represents an improvement from our previous goal of breakeven at $95 million of revenue.

We also expect that these factors together with continued working capital management will reduce cash utilization for second half of this fiscal year.

And now let me turn it back to Gill.

Gill Bouchard

Thank you, Bob. First of all, the market. When we analyzed the forecasts of various industry analysts, we believe that the total optical component market should grow at about 16% CAGR over the next three years, while the 10G and above transmission market, which is our sweet spot, should grow about 22% and 40G and above should grow almost 40%. This is very consistent with the demand trends that we are seeing from our customers. As I said earlier, backlog has doubled in the past two quarters and book-to-bill ratio is well above 1.

The supply chain solution is improving but still continuous to limit our ability to fully convert orders into shipments. Also, as we mentioned last quarter, we are in the midst of a major refresh of our product line. While demand for the new products has been strong, deliveries have been limited by ability to ramp up the supply chain.

The question is why haven’t the demand trend resulted in better top line growth for Opnext? As compared to a year ago, revenue this quarter is down $6.4 million, or 7.5%, but excluding 40G subsystems, which as Bob mentioned earlier, have declined by almost 90%, all other revenues increased by $21.6 million or 40%. In other words, the gains in modules and IC have been more than offset by the reductions in subsystems where customer inventory levels have been an issue.

It is now to the point where in Q1, 40G subsystems only represented 5% of total revenues. Therefore, we are at an inflection point where this offsetting effect is either minimal or turns positive. Based on recent order activity, we expect subsystem sales to be slightly down in Q2 and then show some growth in the second half. In parallel, based on orders and customer forecasts we expect module and IC growth to continue.

With that as a background, let's take a deeper look at modules. The 10G and below business has good momentum. Thanks in particular to strong demand for XFP products. As we mentioned last quarter, we have started a major upgrade of our 10G product line using a new in-house uncooled laser technology combined with low-cost optical subassemblies. We expect that this upgrade will have a favorable impact in the second half of the year. The increased use of in-house technology is expected to drive revenue and gross margin expansion and to give us more control over the supply chain.

New products have led to increased design wins. During the first quarter, we added 37 slots with 13 different customers.

As we said last quarter, we are seeing resurgence in 40G and 100G modules where revenue growth has been strong over the past few quarters. Much of the growth has been driven by major carrier deployments worldwide. For example, we have recently been selected to supply 40G DQPSK modules to a major OEM for a large submarine deployment.

New products have been driving design wins as well. 40G modules are now qualified in 63 slots across 25 customers, an increase of 11 slots. 100G CFP modules have been qualified in 9 slots with 5 customers. Our key focus in this area is to accelerate the ramp of new 40G and 100G modules.

On the industry and commercial front, we see current demand trends continuing. Our traditional markets have recovered and new opportunities, such as displays and printers, are contributing to growth.

Our 100G current program continues to progress well. In parallel, the overall 100G ecosystem has been gaining a lot of momentum in the past few months with many product, technology, partnership, M&A and carrier trial announcements.

The market has now clearly split with some system vendors choosing a vertical integration strategy with the 100G modem IC technology. Based on analyst data, we believe these vendors represent about a third of the DWDM market. Our focus has been to actively engage other key DWDM system vendors on our 100G module approach.

We believe based on those engagements that we have the potential to grow [ph] about half the market. As such, we continue to see this as a very exciting future opportunity for the company.

Now, let's move to Q2 guidance. For 10G and below products, we expect to see solid growth as supply constrains gradually improve. We anticipate that 40G and above will remain essentially flat as we ramp up new products and go through the inflection point on subsystems that I described earlier. Finally, we expect our industrial and commercial business to grow modestly. Based on these factors, we expect revenues to be in the $80 million to $85 million range for our second fiscal quarter ending September 30, 2010.

So with that, I'll turn it back over to Steve for the Q&A portion of the call.

Steve Pavlovich

Okay. Thanks, Gill. Now we will take your questions. The operator will provide instructions on how to submit them. Go ahead Sonia.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from Ajit Pai.

Ajit Pai – Stifel Nicolaus

Yes, good afternoon.

Gill Bouchard

Hi, Ajit.

Ajit Pai – Stifel Nicolaus

Couple of quick questions, I think the first one is just looking at your breakeven cost structure, especially you've seen your R&D expense line go down, the other expenses seem to holding in line. So could you give us some idea at what revenue level do you expect to be breakeven? Then also at what point do you expect to be generating cash?

Bob Nobile

Hi, Ajit. It’s Bob. As I said in my prepared remarks, the non-GAAP adjusted EBITDA breakeven point is a revenue level of $90 million per quarter.

Ajit Pai – Stifel Nicolaus

Cash generation would be at?

Bob Nobile

Well, when we look at our cash situation – let's first talk about this past quarter. As we said last quarter, we expected to use cash in the first half of this year. For this quarter, we had two items that significantly impacted our working capital. We had a growth of about $9 million in receivables and $5 million in inventory. On the receivable side, most of that really had to do with just quarter end timing, and again we’ve collected most of that in the early part of July. So we don't expect that to reoccur.

Likewise on the inventory side, we talked last quarter about building some buffer inventory and most of that, the $5 million increase, was associated with that. Some had a little bit to do with the lower revenues that we had this quarter. And again, we expect both of those to not reoccur next quarter.

Ajit Pai – Stifel Nicolaus

Got it. Then two other questions. One is to do with the 40 Gig subsystems. I think you mentioned that there is inventory at one of your customers that’s providing to be an issue, but you’re guided down sequentially, again, going into the September quarter. So if inventory was already an issue at that customer, why would revenues be going down again, going into the September quarter? What about other customers? Are there no additional wins or any kind of growth there that could be offsetting this one particular customer’s inventory?

Gill Bouchard

Yes. Let me clarify this, Ajit. The inventory issues in 40G subsystem, (inaudible) hampering our results the last two or three quarters and we’ve talked about this before. This, I would say, has not completely worked themselves away, but mostly worked themselves away, and will through the rest of this quarter. So we are doing now is – we are seeing new orders as this inventory issues work themselves out.

Now, the impact of those new orders, from the revenue point of view, is most likely to be solved mostly in the second half of the year. So we are in an inflection point now where the decrease has essentially stopped or it might go slightly down for this quarter. But again from a low level, so in absolute dollars, it's very small. And then, we will see this inflection point where we will see some growth resuming in the second half as those inventory issues now are clearing up.

Ajit Pai – Stifel Nicolaus

Okay. Then just shifting over to the component shortages and supply chain, a vast majority of the other companies in this space have also been talking about supply chain constraints but have been able to show some decent upside in the top line. So would you say that – you’ve looked at your competitors’ results and your peers’ results, would you say that the trends that you're seeing outside of the issues that you have with your 40G and above – 40G subsystems, outside of that do feel that your growth rates and your access to components and your shortages are comparable with your competitors and peers? Are they greater than your competitors and peers or less than your competitors and peers?

Gill Bouchard

Couple of comments on this one. Clearly, supply chain issues and component issues have been very acute the last couple quarters. In a broader market and for more commoditized components, we definitely see some progress. On the other hand, as I mentioned, we are ramping a lot of new products which rely on lot of new technologies, the leading-edge technologies and that's where our focus is now, for the next quarter is to make sure this ramp can be accelerated.

In terms of comparison, again as I mentioned earlier, our 10G business grew 14% this quarter and our module business grew 32%. So I would say that the growth was decent in the view of those constraints, unfortunately it wasn't big enough to compensate some of the negative supplies as we had on subsystems.

Ajit Pai – Stifel Nicolaus

Got it. But you said that outside of subsystems most of your growth rate on the sequential basis was consistent with what you think that you are – in terms of getting access to components from your vendors that you're getting equal access to those components as your competitors are? It's not like they are giving your competitors at a greater rate than they are giving you.

Gill Bouchard

I don't have an indication of this. Again, in aggregate, we are talking like 20% growth. So that's still pretty decent.

Ajit Pai – Stifel Nicolaus

Okay. I will get back in queue.

Steve Pavlovich

Next question?

Operator

Your next question comes from Paul Bonenfant from Morgan, Keegan.

Paul Bonenfant – Morgan Keegan

Yes, hi. Good afternoon. I want to start off with a couple of housekeeping questions. You’ve in the past typically disclosed the StrataLight sales in the quarter and I'm wondering if you were planning to give us that number.

Bob Nobile

It was a little bit above $8 million this quarter, about $8.5 million.

Paul Bonenfant – Morgan Keegan

Thank you. We've talked about, again, pulling on the last question the fact that you were top line supply constrained. Can you give us a ballpark figure for how much was left on the table in the quarter?

Bob Nobile

Several million.

Paul Bonenfant – Morgan Keegan

Okay. Regarding the customer list, it's encouraging to see Huawei is the first time there. Did they buy across product lines or is there any particular product line or rate that they buy from?

Gill Bouchard

They buy broadly across our telecom lines, I think, XFPs are strong. We are starting to see some interest in 40G as well. I think the bulk is in the 10G XFPs, and some legacy products, 300-pins and others as well.

Bob Nobile

Paul, if you look at the historical growth our Asia Pacific region, over the past four quarters to six quarters, it's grown very nicely, and Huawei has been a continuous piece of that growth.

Paul Bonenfant – Morgan Keegan

Okay. You are talking about an inflection point in the 40 Gig subsystems market and I'm wondering what it is that gives you confidence that this business is coming back? Do you attribute this mostly to the inventory lead down and you are confident that this isn’t share loss?

Gill Bouchard

Yes, there are two things really, Paul. Frankly, the business at such a low level now, then its decrease will not hamper the growth in the rest of the business, even if it continues to decrease, number one. Number two, indeed as I mentioned in Ajit’s question is the inventory issues are starting to work themselves out and for the first time in several quarters we are seeing some orders from customers who are experiencing excess inventory for a while.

Now again, we expect to see this effect mostly in the second half, but those orders are starting to come in.

Paul Bonenfant – Morgan Keegan

Okay. Because you had talked last quarter about, I think, a significant increase in orders for chassis versus line cards. So I guess there were some expectations that at some point we would see line card sales to populate those chassis.

Gill Bouchard

Yes. We are starting to see that trend. Remember those are fairly long trend and again the inventories of chassis were much lower than those of line cards, so there is a lag effect.

Paul Bonenfant – Morgan Keegan

I got it. Now, again, pulling on the response to your earlier question. Should we expect there to be cash generation in an inflection point beginning with the second half of fiscal-year ‘11?

Bob Nobile

When we get to the second half, I think, you are going to see an improvement there, Paul. As our adjusted EBITDA improves, we will continue our working capital management to be fairly in line with what you've seen us do in the past. You will start to see that point turn.

Paul Bonenfant – Morgan Keegan

Okay. Last question, you're investing pretty heavily on the CapEx line for capacity increases and growth. Is your expectation that the 100 Gig market is going to take off here in the second half of the fiscal year or are there any particular products that you have in mind when you talk about the growth ramp?

Bob Nobile

There is a portion of the growth that – or say the CapEx growth that you’ve seen here that is 100G related. Most of it is for the CFP modules coming out of Japan. The other spending – if you recall last quarter, we talked about a 40% increase in capacity for our 10G and 40G modules, and that's what we are really spending this money for. Some of it on the 100G coherent side, but that spending would come more towards the latter part of the year.

Gill Bouchard

I think to complement what Bob said, the spending really reflects some of the market comments where except few products 10G are very hot, and then all our new 40G and 100G CFP products. So that’s where most of our CapEx investment has been going.

Paul Bonenfant – Morgan Keegan

Okay. Thank you for taking my questions.

Steve Pavlovich

Next question please?

Operator

Your next question comes from Bill Choi from Jefferies.

Rahul Khanwalkar – Jefferies

Hello, this is Rahul Khanwalkar calling in for Bill Choi. You had talked about supply constraints so I was wondering if you could quantify the supply constraints in terms of your supply component lead times. What they were in March quarter and whether they have worsened this quarter or improved?

Gill Bouchard

As I said Rahul, we've seen general improvement of lead times across most of the supply chain and also a decrease, what I would call, de-commits or last minute surprises and this is reflected in the growth we were able to show in the module business. This is a gradual process. We are still experiencing some increased lead time and some de-commits. But overall, I think, the problem is slowly working itself out. Whether I can quantify it overall for you, I don't think I could do justice to it, but this is what we are absorbing right now.

Rahul Khanwalkar – Jefferies

Same relative comment on backlog, you said that backlog doubled this quarter. So was it something that you have already experienced or is it something out of bleak this time for backlog?

Bob Nobile

Just to clarify Gill’s comment. It's doubled over the last two quarters. Over the last year, we would say that the backlog has been growing continuously.

Rahul Khanwalkar – Jefferies

Okay. Finally, for your 40G subsystem business, do you think that the subsystem business maybe facing competition from the system vendors themselves that they are increasingly doing subsystems in-house versus buying from merchant suppliers.

Gill Bouchard

I think the main challenge we’re faced with subsystem is in the carrier deployments where they were deployed, the rate of deployment slowed down and the level of inventories were very high at our customers. Most of those big deployments that we know of there hasn’t been any competitive displacement, in other words they are still deploying solutions based on our subsystem, is that that we went through a very brutal bollard [ph] effect where two years ago, basically we didn’t ship enough so people really ordered a lot of products. And at the same time, through the financial crisis demand slowed down and people find themselves with level of inventories which were in months or years as opposed to weeks.

So that's the main effect. The main deployments that we are tracking we don't necessarily have seen any competitive displacement as opposed to this bollard supply chain effect.

Rahul Khanwalkar – Jefferies

Finally, in terms of industry consolidation, what does Opnext see itself? Will you be the consolidator looking for acquisition in some technologies such as RODAM, which is very fast growing sub-segment of the market? Or would you be ready for proposals from other companies?

Gill Bouchard

As we’ve always said, we always open and look around and we do believe as a long-term trend industry consolidation will continue. But to be very frank with you where we are today, we are extremely focused on cash preservation. It has to remain our top priority until we get to that breakeven EBITDA point Bob has talked about.

Rahul Khanwalkar – Jefferies

Okay. Thanks a lot.

Steve Pavlovich

Next question?

Operator

We have a follow-up question from Ajit Pai with Stifel Nicolaus.

Ajit Pai – Stifel Nicolaus

Yes, just looking at the quality of that backlog and one of the fears that investors have at this stage is there's a lot of double ordering that's been happening because of the supply constraints or the constraints with the supply chain. Could you give us the terms of that backlog? I know that it's shippable within one year but are they firm orders, non-cancelable, non-returnable, are there any penalties on the backlog that you have, or if they manage to get those components from elsewhere could you actually see cancellations?

Bob Nobile

All of the orders that we are referring to here, Ajit, are firm commitments. But remember that anywhere from 35% to 40% of our business doesn't have – we don't have backlog associated with it because it comes from the VMI programs that we participated. Yes, we are seeing the growth. We’ve seen it double over the past two quarters. But really it’s only representing 60% to 65% of our total business.

Gill Bouchard

I’ll add a couple things, Ajit. First on some of the more high-volume products, we haven't seen supply has eased up cancellations or push-outs. So we haven't seen that affect when in cases where indeed the supply has gotten better. We also have a lot of orders in more leading-edge products in the 40G and 100G area where frankly there are very few market choices for customers. So we do believe this is real.

Ajit Pai – Stifel Nicolaus

Okay. As supply constraints ease further, you’re not expecting any cancellations, let’s put it that way, because demand can be satisfied by – I mean the same customer that are placing orders, they could be placing orders with other folks, trying to see where they get it earlier. Is that something that you think could potentially impact things in the next couple of quarters? Or do you think that most of the designs where the backlog is are either sold sourced or it’s highly improbable that there is any kind of double ordering that’s taken place there.

Bob Nobile

You can never be certain, Ajit. But history will show us that cancellations of firm backlog are rather limited. You've had – go back to the 2001 year, obviously at that point in time you had cancellations there. But it's more so I think what you would see is our customers giving us forecasts that maybe higher than their expectations or putting their double ordering into their forecasting process. And therefore we are cautious when we look at the forecast numbers that we are receiving to take that into consideration.

Ajit Pai – Stifel Nicolaus

Got it. Okay. Thank you.

Gill Bouchard

Thank you.

Steve Pavlovich

Any other questions, Sonia?

Operator

There are no further questions at this time.

Steve Pavlovich

All right. Well, thank you very much. So if no more questions, that concludes our call today. Thanks for joining us this afternoon, and we look forward to talking to you soon. So, Sonia, please provide the replay instructions for everyone.

Operator

Thank you, sir. If you would like to dial-in and listen to the replay you may do so by dialing 1-800-642-1687 and reference the conference ID number 87049046. The replay should be available within one hour the call ends. Thank you and have a great day.

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