Electro Scientific Industries' (ESIO) CEO Edward Grady On Q1 2015 Results - Earnings Call Transcript

| About: Electro Scientific (ESIO)

Electro Scientific Industries, Inc. (NASDAQ:ESIO)

Q1 2015 Earnings Conference Call

July 31, 2014 05:00 PM ET

Executives

Brian Smith - Director IR

Edward Grady - Chief Executive Officer

Paul Oldham - Chief Financial Officer

Analysts

Jim Ricchiuti - Needham & Company

Mark Miller - Noble Financial Capital Markets

Tom Diffely - D. A. Davidson

Operator

Good day ladies and gentlemen, and welcome to the ESI Fiscal 2015 First Quarter Earnings Conference Call. My name is Shelley and I’ll be the operator for today. At this time, all participants are in listen-only mode. And later we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Mr. Brian Smith. Please proceed.

Brian Smith

Thank you, Shelley and good afternoon everyone. My name is Brian Smith, Director of Investor Relations for ESI. With me today are Edward C. Grady, our CEO; and Paul Oldham, our Chief Financial Officer. This call will cover our fiscal first quarter of 2015 results.

Before we go into the details of the call, I would like to remind you that some of what we say on this call will include forward-looking statements, concerning customer orders, shipments, revenue, gross margins, expenses and earnings. These statements are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include a number of risks and uncertainties that are discussed in more detail in today’s press release and our filings with the SEC. Actual results may differ materially from those forward-looking statements.

This call also contains time-sensitive information that we believe to be accurate as of today, July, 2014 and which could change in the future. This call is the property of ESI.

Now I will turn the call over to Ed.

Edward Grady

Thank you Brian. Good afternoon and welcome to our first quarter conference call. Overall this was a constructive quarter for us. Several of our end markets improved after periods of slow demand. Orders grew sequentially and we executed well against our financial expectations. More importantly, we completed several actions that began to lay the foundation for the revitalization, and we have continued to develop and validate plans and milestone that have put us on a path towards long-term growth.

I'll discuss our actions and milestones in more detail in a few minutes. But first I'd like to give you a brief overview of the business. Bookings were up sequentially to $47 million, the improvement was broad-based with flex via drilling, advanced microfabrication, semiconductor components all showing sequential growth.

We also drove seasonally strong bookings in our customer service and support business adding new service contracts and seeing strong activity on our on demand support offerings.

The largest sequential increase came from our flex circuit via drilling systems. You may recall that we saw very weak demand in our March quarter and we expected a rebound in this quarter Q1. The demand came even stronger than we had expected. In addition, we introduced two new versions of our model 5335 via drilling system which will extend our capabilities and better position us in this market as we go forward.

We also won a new design in our new advanced microfabrication business. This was smaller in magnitude than we had seen in the past but it represents a new key technology application for us. While recently this business has not contributed as much revenue to ESI as in the past, it remains an area of tremendous growth potential.

With that I’ll turn the call over to Paul for overview of our financial results.

Paul Oldham

Thank you, Ed and good afternoon everyone. The following information includes results from our first quarter of fiscal 2015 which ended on June 28. To improve comparability, we are also providing earnings per share and related income statement results on a non-GAAP basis excluding the impact of purchase accounting, equity compensation and other items.

Bookings were $47 million compared to $32 million last quarter and $58 million a year ago. As Ed mentioned, the increase was across the board and reflected general market improvement. Orders in our interconnected microfabrication business were up significantly from last quarter, particularly in our flex business as we saw OEMs begin to place demand on the supply chain, largely in China and Taiwan. Korea continues to be relatively weak given the continued overcapacity in that market. Advanced microfabrication orders improved sequentially on the design wind, Ed mentioned earlier and modest follow on capacity orders.

Orders in our semiconductor business were also up slightly from Q4 with strong customer pull for CircuitTrim products driven by ongoing demand for censor technology. We also saw sequential improvement in our component test business with strong demand for tooling and a few new capacity orders. We expect to see small capacity orders in this area, but meaningful improvement in demand will ultimately be driven by new technology as we expand into additional chip types. Finally, our service and support business had a strong quarter for both contracts and time and material as customers begin to gear up their capacity. Our service business has grown steadily over the last year, reflecting the strength of our installed base.

Our book-to-bill ratio was 1.26; shipments were $37 million and backlog increased by $9 million to $37 million. Revenue for the quarter was $35 million, down 6% from last quarter and 24% from last year. Revenue levels were consistent with the bookings we saw in the fourth quarter but came in at the high-end of our guidance range.

GAAP gross margin was 38% and included about $600,000 of purchase accounting and equity compensation and cost of sales. On a non-GAAP basis, gross margin was 40% compared to 46% last quarter and 44% last year. We expected to see lower gross margins this quarter on lower volume, competitive price pressures and some favorable items from last quarter that did not repeat. Also we invested in and shipped a couple of development systems at low margin which should benefit us in the future. Looking forward to next quarter, we expect non-GAAP gross margin in the low 40% range.

GAAP operating expenses were $22.2 million including $1.3 million of equity compensation and purchase accounting. Non-GAAP operating expenses in Q1 were $21 million, down from $22.3 million last quarter based on discretionary expense control and cost last quarter associated with the installation of our first glass and semiconductor tools which did not repeat. We expect non-GAAP expenses next quarter to increase about a $1 million on higher volume and timing of project and other expenses. We would expect to expenses around this level for the next few quarters as we invest in our growth initiatives.

On a GAAP basis, operating loss was $9 million, non-GAAP operating loss was $7.4 million, compared to a loss of $5 million in the prior quarter reflecting the lower sales and gross profit. Income tax on a GAAP basis was a benefit of $700,000 largely due to a favorable ruling in Taiwan related to our patent infringement proceeds in fiscal year '13.

On a non-GAAP basis, tax expense was $250,000 reflecting foreign taxes. For fiscal year '15, we expect to pay roughly $1 million to $1.5 million of tax based on foreign income. On a GAAP basis, first quarter net loss was $8.3 million or $0.27 per share compared to a loss of $0.92 per share last quarter which included charges for restructuring and asset impairments. On a non-GAAP basis, net loss was $7.4 million or $0.24 per share compared to a loss of $5 million or $0.16 per share last quarter.

Turning now to the balance sheet. Cash and investments were $106 million at quarter-end. We generated $740,000 of operating cash during the quarter, largely related to working capital improvements. We paid $2.4 million as a quarterly dividend and we spent $1.5 million to repurchase about $208,000 shares and an average price $7.01 per share.

For the quarter, inventories increased by $1.5 million, largely due to pending early Q2 shipments. Inventory turns were approximately 1.5 times. Accounts receivable decreased by $5 million to $33 million and DSO improved slightly to 86 days. Capital expenditures were $1.2 million and depreciation and amortization, excluding purchase accounting was $2 million.

In summary, despite the challenging revenue quarter we executed well; managing discretionary spending and delivering EPS at the high end of our expectations. In addition, we are encouraged by the sequential improvement in orders, which will drive sequentially higher sales next quarter. However we are still in the early phases of our plans to revitalize the company and expect that it will still be several quarters before we see the impact of these actions in sustainable top line growth.

Given the stronger orders and expected timing of customer deliveries, we expect Q2 revenues to be in the $40 million range. Non-GAAP loss per share is expected to improve to between $0.17 and $0.22.

Now I will turn the call back to Ed for a further discussion of our plans as we look forward.

Edward Grady

Thanks Paul. I am encouraged by our financial execution this quarter, but the work to revitalize ESI is just beginning. We believe we have made solid progress in initiating the plans and actions which will enable us to grow in the future. Let me start by discussing some of the actions we have already taken.

First, last quarter I mentioned that we needed to increase the marketing expertise within ESI. I am pleased to report that during the quarter, we brought in several key marketing professional including James Latham, our new Chief Marketing Officer, he is an experienced and well-rounded marketing leader with a demonstrated success in both product development and customer engagement. His role is to drive our market development efforts and ensure that we are both creating products with both, broad market appeal and connecting with customers to demonstrate our competitive advantages.

Next, we hired Gerald Li, to lead our China operation. We feel that China is the largest and fastest growing region for laser systems used in manufacturing of microelectronics. To capture a larger share of this market, we must be more engaged with both contract manufacturers to serve large multinationals and fast growing local companies who are increasingly innovating to bring consumer electronics products to market. In addition, we need to deliver platforms and products utilizing our technology that meets the needs of these customers in China. Gerald has a wealth of experience doing just that for several large global companies and he has already increased our understanding and appreciation for the magnitude of this opportunity for ESI.

The corporate reorganization we initiated this spring is also bearing fruit. We re-organized our product groups around market demand characteristics instead of product family or technology. This focus is improving our understanding of the markets and increasing our speed and effectiveness to bring innovative products and applications to existing and new customers.

Finally, we continue to strengthen our position in our existing markets with the introduction of new versions of our flex drilling system which contributed bookings this quarter.

Now let me discuss our plans going forward. Our plan centers on four key initiatives. The first key initiative is to move away from a focus on a few customers serving as technology drivers and reorient our focus onto large and growing markets. We've begun this initiative by making key marketing hires and we have already felt their impact. However there is much we can do to connect with more customers to discover and meet their needs.

Our second key initiative is to shift from focusing on solving emerging next generation problems to addressing existing adjacent markets where both market and technology risks are lower. Our third initiative is to penetrate new applications by designing for lower costs. Most of the growth in laser micro fabrication come in the mid and lower end applications. We can apply our technologies to win in these markets segments through low cost overall cost of ownership. Our fourth quarter initiative is to better utilize our internal laser capability to create both differentiation and a cost advantage in our systems. As we look to the near future we have identified a set of key actions and milestones that will direct engage our progress towards becoming a market driven growth technology company.

Let me start with the milestones for the current quarter our fiscal Q2. First we expect to launch a new mid range platform with modular design that can address a wide variety of consumer electronics and variable applications. Second we plan to expand our customer reach by utilizing third-party sales channels and expect to sign our first rough agreement in China. This will be our first step towards expanding our access to this large and growing market.

We've invested in commercializing our internal laser technology with the goal of 50% utilization in our products in the next three years. We expect to qualify our first new laser for use in a major ESI platform this quarter.

Now let me discuss the milestones for the second half of our fiscal year beginning in October. We've been making good progress on updating our business plans and addressable markets and we expect to communicate those in early October and we will do that at our analyst meeting.

In addition we will continue our investment in China with the intent to open a localized design center that will focus on developing products to meet the specific needs of both local OEM and contract manufacturers. As a result of these investments we would expect to receive our first order from a new OEM or contract manufacturer in China by the end of this fiscal year. We’re investing and expanding our product offerings into large adjacent markets and we expect to introduce the first of these products in the second half of this year, fiscal year as well.

Next we’re taking actions to drive demand and increase customer engagement. These include updating our customer demo centers in the major Asian markets and developing a small job shop for customers that will open up new applications and systems revenue opportunities. We expect both of these to be completed this fiscal year. We expect to add our capability in 3-dimensional micromachining which will also open up new market applications for us.

In the second half of the year we expect to qualify our second internal laser for use in one of our key platforms. Finally, we planned to introduce a new low cost modular platform by early next fiscal year. This low-end platform will poses technology and flexibility that will allow us to address applications that EIS has not participated in before.

Our management team continues working diligently on a detailed turnaround and long-term growth plan that centers on our initiatives and marketing, lower cost solutions, proprietary lasers and expanding into lower risk markets and applications. I mentioned earlier that we will share some of the details with you in our early October. In fact we’ll be holding an Analyst Day event on October 1st in New York City. We’d love to see you there. Invitations will go out soon and if you’re interested or have questions please contact Brian.

To summarize, we’ve made good progress in all of our strategic initiatives and we now have the right people in place to try each initiative to success. Success for ESI means, we are expanding our application set serving more customers, addressing larger markets and growing our revenues and profits. All our energy is focused on this outcome.

On a personal note, to put this past quarter in context, we've been focused on the turnaround at ESI only for the past 90 days. While we're not satisfied with the current business level, we are making tremendous progress towards getting back on track and revitalizing the company. We’re headed in the right direction and certainly we will hit some challenges as we move forward, but the future for ESI is very bright.

We are up to the challenge. This has been a real team effort and I'm excited to be a part of it. I want to publicly thank all of our employees for the engagement and commitment to see us through this journey.

This concludes our prepared remarks. At this time, we’d be pleased to take your questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). And your first question comes from the line of Jim Ricchiuti with Needham & Company. Please proceed.

Jim Ricchiuti - Needham & Company

Thanks, good afternoon. I had a question on the improvement, you saw in flex market. I'm wondering if there was any change in the competitive dynamics in that market, particularly you alluded to I think in the last call one competitor who I believe you've since initiated, some legal action against. What's happening in that market from a competitive standpoint? Is it just the market improving or are you seeing some easing of the pressure?

Edward Grady

Jim, this is Ed Grady. I would say, we are seeing crosscurrents in dynamics. The first is there is no question that as the new introductions of the next generation cell phones, tablets and so on are coming to market that there an increased demand in the marketplace for the flex circuit. So while there has been an overcapacity in Korea that was driven by an overbuy last year, what we are seeing is a shift in some of the supplier base where a few of the suppliers just don’t have enough capacity. So the supply chain is moving around is I guess the first answer and we are able to fill that gap. The second part of your question is competitive pressure and yes as we mentioned last quarter, we’ve had some competitive pressure. As Paul mentioned, we have seen some pricing pressure from the marketplace. So, I would say that we are doing what we need to do to defend this market. And we -- I would say that’s pretty much where we are.

Jim Ricchiuti - Needham & Company

Okay. Ed, just a one final question and I will jump back in the queue. The new design win in the advanced microfabrication area, was that within existing customer?

Edward Grady

Yes.

Jim Ricchiuti - Needham & Company

And that’s something that’s already work is underway, was that completed and shipped?

Edward Grady

It’s underway right now.

Jim Ricchiuti - Needham & Company

Got it. Okay, thank you.

Operator

Your next question comes from the line of Mark Miller with Noble Financial Capital Markets. Please proceed.

Mark Miller - Noble Financial Capital Markets

Good afternoon. Just want to go back and talk a little bit -- you talked about using internally developed lasers, is this a just for a specific product or could this branch to a number of your products?

Edward Grady

We expect to have our first design and to a new platform this quarter. And we have multiple new laser technologies that we are evaluating from the internal laser group. And again, our goal is to have over 50% of our new products with our own lasers in them within the next two years. So, yes, multiple applications, multiple laser capabilities, all built around high rep rate, fiber based laser technology, this is not old technology, this is new advanced leading edge laser technology, all of our internal stuff.

Mark Miller - Noble Financial Capital Markets

Okay. I imagine now, however a significant impact on margins and can you care to kind of give a range?

Edward Grady

Yes, I think there is two things, one -- I think both of them I pointed out last quarter but let me restate. So yes, we can obviously build lasers at a lower cost than we can buy them and those lasers will have margin that will contribute to our overall margin.

I think the second, maybe one of the most important parts of having our own laser in some of these advanced applications is lasers are getting very expensive. And as we are the follow-on laser supplier, once the tool is deployed, we got not only the revenue and margin at the tool’s sale, but we also get the revenue and margin as the lasers are replaced over time. So I'd say the long-term contribution to the company significantly increases as we have tools with our lasers in them.

Mark Miller - Noble Financial Capital Markets

Your win in China I mean what was predicated upon pricing, performance relationships?

Edward Grady

Well we had a strong quarter in China really across many elements of the business. Our flex business was strong, we saw good microfabrication business in China. Our service business was strong there where we had a large install base. So it's really a broad based strength in China this quarter.

Mark Miller - Noble Financial Capital Markets

And finally I'll jump back in the queue. Your SG&A this quarter compared to other recent quarters with similar revenues seems higher. I am just wondering this is a trend we should model in or was that just due to this quarter? Just trying to understand what SG&A will be running as a percent of sales as we go forward?

Edward Grady

I think SG&A will probably run in this range we had expected it to be a little higher next quarter primarily due to little higher volumes. And also timing of some legal and other expenses. But fundamentally the structure is staying flat. So there is going to be some cost related to volume and what not but the relative structure should stay in this range.

Mark Miller - Noble Financial Capital Markets

When you say higher next quarter, is it higher percentage-wise of sales or dollar wise.

Edward Grady

Slightly higher in dollar amount. Lower as a percentage of sales.

Mark Miller - Noble Financial Capital Markets

Thank you.

Edward Grady

So I think the increase from a percentage of sales is really all to do with the lower revenue. Overall expenses are roughly flat in SG&A from Q4.

Mark Miller - Noble Financial Capital Markets

Thank you.

Operator

Your next question comes from the line of Tom Diffely with D. A. Davidson. Please proceed.

Tom Diffely - D. A. Davidson

Yeah good afternoon. So may be just a follow up on the last question. When you look at SG&A you gave us a nice guidance for the next couple of quarters, but as you look into next year or the second half and some of these investments where do we see the impact of these investments, is it coming out of the balance sheet or is it going to be evident on the SG&A or OpEx line?

Edward Grady

Well the way we think about it generally Tom is that our goal is to make these investments roughly within the cost envelope that we have today. So we’re reprioritizing activity, we’re doing arbitrage on headcount and we’re trying to make the investments we need to make in both product development and marketing within our current cost envelope. Now that will move around a little bit quarter-to-quarter and then there will be some variable costs related to volumes.

But fundamentally, we’d expect to see operating expenses roughly flat or up slightly as we grow the top-line overtime which we have them to come down as a percentage of sales.

Tom Diffely - D. A. Davidson

Okay, all right. And then you talk about expansion using the something an Asian distributor to get a little more aggressive in Asia in general. Do you feel like you have a product portfolio today that you can do quite a bit of expansion with or do you really need to get some of these new tools out before you get ready to bank for your buck with expansion to Asia?

Edward Grady

I’d say the answer Tom is, is two, is both. There is clearly no question that we have some products particularly in the flex area that we can identify new customer and new customer base within China and it’s a very interesting opportunity for us. So, I’d say that the existing products will be run through the channel, but there will be to customers that we just have not had access to in the past.

And the second part is there are certain customers particularly some of the contract manufacturers and the OEMs some of the microelectronic devices who need products that have a lower purchase cost and lower cost of ownership. So those will actually have to wait for this new low costs platform to get in place. But so I'd say both are true and we expect both to see effect from both size of that business as we go forward this year.

Tom Diffely - D. A. Davidson

Okay.

Edward Grady

I don't think we're finished by the way bringing on one rep that's not the case.

Tom Diffely - D. A. Davidson

Sounds good. And also it sounds like laser obviously pretty big focus to source that internally. When you look at this potential over the next year or two, what's the toughest challenge, is it creating system themselves, is it laser know how or maybe is it IP working on guys like IP for electronics out there they have long IP in this area?

Edward Grady

A lot of it had to do is just development of the technology. There are couple of cases whether is IP in place that we have to work around, but fundamentally we've got some pretty advanced IP ourselves both in the take a second and in terms of second area. So I'd say the biggest issue is just getting the products to be robust and deployable in units.

Tom Diffely - D. A. Davidson

Okay. Would you actually by subsystems and assemble them or would you actually from scratch kind of put these things together?

Edward Grady

Laser themselves?

Tom Diffely - D. A. Davidson

Yes.

Edward Grady

We're actually building lasers.

Tom Diffely - D. A. Davidson

Okay. Alright. And then I guess when you look at the cost structure. I mean of the laser themselves. Is there specific technology that is not available today that you could additional the cost benefits, but technology that you're going to be developing that is not available on the market today that will be unique with what you have when you think it is strictly more of a cost issue?

Edward Grady

I think in some cases it’s a form fitting function capability that we design to fit in our applications better, the close working relationship between the process engineers which is the core strength at ESI of designing the process. We can actually work with the laser manufacturer, internal laser manufacture to get the laser to do exactly what we wanted to do and while we work with some third parties, it’s a much longer cycle time, it has been a longer cycle time in many cases. So I think the ability to customize and make these be unique to our process is what is the technical advantage.

Tom Diffely - D. A. Davidson

Okay. And finally Ed when you look your new focus on the broader base of customers how do you not lose focus I guess on your biggest customer today or how do you keep their needs to make sure you don’t lose another customer?

Edward Grady

I think it’s an organizational issue and the way we have designed the organization is we have some specific people that are very focused on making sure that we support our largest customers and not just in the microelectronic space but in the flex drilling spaces particularly as well. So again it’s organizational focus and we have the team in place and we are able to then leverage on the learning, the process learning we do across the full spectrum of capability and drilling and cutting, welding and marking. So I would say that the biggest opportunity we have is to leverage the applications development work that we do in the apps labs where we define the processes and in some cases that's for a single large customer; in other cases, it's for a broader base.

Tom Diffely - D. A. Davidson

Okay, alright. Thank you.

Operator

Your next question is a follow-up question from Jim Ricchiuti with Needham & Company. Please proceed.

Jim Ricchiuti - Needham & Company

Ed, as you move forward with the work on the doing more internal sourcing of lasers, are there any plans for any additional areas where you might become more vertically integrated? And would you be able to do that if you are doing that internally or potentially look outside for some bolt-on type acquisitions?

Edward Grady

Jim, I’d say that most of our focus is on what we have today. We clearly do have some ideas on how we can partner with some other people in the space. And it appears that partnering is a more reasonable approach short term. I would never take off the table the potential of doing some tuck-ins that might make sense. But it certainly is not our number one focus today.

Jim Ricchiuti - Needham & Company

Got it. And just with respect to the booking strength and that you saw last quarter. How would you characterize the market environment, now still got a few months left in the quarter? But just in general, is it are you seeing this kind of broad-based strength thus far in the quarter, if you comment on that?

Paul Oldham

We don't tend to comment that much on the current quarter Jim. But I would say that we've historically seen this window of time being the time when most consumer electronics manufacturers are sort of gearing up their supply chain. And so we're seeing that activity occur. How long that carry through will be -- we'll have to wait and see. But this is the time when that's occurring. It's largely we see those orders in the first quarter but they complete into the second quarter as well.

Edward Grady

Yes. Jim, and the other thing I would add to that is that while we've been heavily focused on the microelectronics and consumer products side, clearly this effort that we have to leverage these cutting and drilling capability into other markets is beginning to have some very significant interest which will create a less of this cyclical based on -- cyclical market demand, based on just a consumer electronics space. So it's going to be very interesting to see how this plays out over the next couple of quarters.

Jim Ricchiuti - Needham & Company

Okay, thanks very much.

Paul Oldham

You bet.

Operator

We have a follow-up question from Mark Miller with Noble Financial Capital Markets. Please proceed.

Mark Miller - Noble Financial Capital Markets

The principal competitor in the cell phone area of one of your largest customers has had some challenges in the last quarter. And I am just wondering that do you anticipate that could show up in any improved business for you from this large customer?

Edward Grady

I think what we saw is that the difficulties at another large cell phone manufacturer were probably more evident in the supply chain in Korea where we saw the overcapacity for past couple of quarters. I think generally as the industry unit demand continues to grow across the board, particularly in some of the newer entries into the cell phone and table markets that we're beginning -- that the growth in these market segments is coming back. And I think that’s what we've seen in the first quarter. Will that repeat in Q2 or beyond, certainly the expectation is that if the demand across the board not with a single customer but across the board continues to grow, that we should be seeing continued demand in this particular area. So, I don’t know if I’ve answered your question but I don’t see a shift in the number of total consumer electronic cellphone and tablet devices doing anything other than growing globally and whether it’s one company or the other the demand is still there.

Jim Ricchiuti - Needham & Company

Thank you.

Operator

Your next question comes from Pete (inaudible). Please proceed.

Unidentified Analyst

Yes, thank you. Just one quick question and that is DSOs were 86 down from 93 in the fourth quarter but that seems like a still high level. What’s the dynamic that contributes to that? And where do you see that going over the next several quarters?

Paul Oldham

Yes, that’s quite high level compared to what we’ve seen historically, but not so high as it relates to the rest of the industry. But the factors that affected us is one we’ve had still a pretty heavy component of our shipments come late in the quarter that tends to leave more dollars and receivables. The second thing is we’ve been more aggressive on terms as one of the competitive weapons that we’ve utilized in protecting our market share particularly in the Flex business. Those are the two primary factors.

Unidentified Analyst

And where do you see it going from here?

Paul Oldham

I think that as we see quarters with more revenues, we’ll see those the DSO come down a bit because the shipments will moderate. And I probably expect to see those in kind of the mid 70s would be our target in the long-term.

Unidentified Analyst

Okay. Thank you.

Operator

We have no further questions at this time. And I would now like to turn the call back over to Ed Grady for the closing remarks.

Edward Grady

Thank you Shelly. I'd like to thank you all of you on the call. Let me remind you again of our Analyst event on October 1st. You're welcome to call Paul, Brian or me, if you have any further questions. And thank you all for attending our call today.

Operator

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect and have a great day.

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