Mentor Graphics' (MENT) CEO Walden Rhines on Q1 2017 Results - Earnings Call Transcript

| About: Mentor Graphics (MENT)

Mentor Graphics Corporation (NASDAQ:MENT)

Q1 2017 Earnings Conference Call

May 19, 2016 5:00 PM ET

Executives

Joe Reinhart - VP, IR and Corporate Development

Walden Rhines - Chairman and Chief Executive Officer

Gregory Hinckley - President

Analysts

Ugam Kamat - JPMorgan

Tom Diffely - D.A. Davidson & Co.

Richard Valera - Needham & Company

Zack Ajzenman - Griffin Securities

Jason Celino - Pacific Crest Securities

Martin Ji - ClearBridge Investments

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Mentor Graphics First Quarter Earnings Release. At this time, all lines are in a listen-only mode. Later, there will be an opportunity for your questions and instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded.

I’ll now turn the conference over to your host, Joe Reinhart. Please go ahead, sir.

Joe Reinhart

Thank you very much, Cathy, and good afternoon, everyone. Welcome to Mentor Graphics fiscal first quarter 2017 conference call. As Cathy said, I’m Joe Reinhart, Vice President of Investor Relations and Corporate Development. This afternoon, Walden Rhines, CEO and Chairman will open with a discussion of key trends in our business. Gregory Hinckley, our President will then follow with operational and financial highlights along with guidance. Wally and Greg will then take your questions.

As a reminder to everyone, this conference call contains forward-looking statements. While these statements reflect our best current judgment they are subject to risks and uncertainties that could cause actual results to vary. In addition to factors noted later, these risk factors can be found in our most recent 10-K, 10-Q and Annual Report. For a reconciliation from GAAP to non-GAAP measures used in this presentation, please refer to today’s financial release. This information is available online at the Mentor website. Wally?

Walden Rhines

Thanks, Joe. Well, revenue of $227.6 million for the first quarter of fiscal 2017, modestly exceeded our guidance of $220 million, as did the earnings of $0.02 per share versus break-even guidance. Continued weakness in semiconductor-related design software, including emulation was offset by strength in system design-related products. Bookings and revenue from automotive customers were an all-time record for Q1.

As reported last quarter, the time required for emulation evaluations lengthened substantially, probably due to the desire by customers to evaluate all the major suppliers unlike the past two years when there was only limited competition. The industry adoption megatrend toward emulation appears to be continuing with the total industry emulation revenue has stalled in the $300 million to $315 million range per year, likely due to price erosion after rapidly doubling from the previous long-term run rate in just two years from 2010 to 2012.

The number of evaluations in which we are engaged continues to be at very high-levels. Mentor Veloce users from Qualcomm, Broadcom, Micron, HiSilicon, and Marvell gave presentations in May at the Mentor User2User Conference highlighting the unique value that Veloce brought to some of their most challenging design projects.

This week, Mentor and ARM are sponsoring a summit in San Jose to highlight advanced design debug techniques using emulation, and second quarter emulation has already started off much stronger than first quarter. Because Mentor recognizes revenue that is characteristic of the software industry and international accounting standards rather than the ratable approach used by most EDA companies, many analysts have noted that our reported bookings provide insight into EDA industry trends earlier than it’s available from other sources.

Weakness in bookings from semiconductor companies in Q4 of fiscal 2016 accurately reflected what has become general weakness in semiconductor revenue and R&D spending. This trend continued in first quarter, but as our guidance will show, we expect to see some strengthening in Q2 of this year. Similarly, ongoing strength in system-related bookings suggests that the semiconductor component-related weakness is not carrying over to the markets of electronic systems companies.

Geographically, with the benefit of hindsight, our Japan bookings in fiscal year 2015 reflected weakness in EDA demand by Japan semiconductor companies before it became more broadly apparent. Fiscal Q1 2017 bookings in Japan were relatively strong suggesting that weakness in EDA demand has reached the bottom and is now growing again.

The growth in Japan bookings this quarter was largely driven by semiconductor companies, including a major wafer manufacturing company that replaced its previously existing optical proximity correction methodology with Calibre/Resolution Enhancement product.

However, system companies, particularly automotive, continue to be a strong driver for the recovery of the Japan EDA market. Mazda, for example, generated worldwide attention with the introduction of their new MX 5 roadster, a vehicle that was designed with Mentor’s capital family of electrical design products. And the acceleration of development of electric and hybrid vehicles worldwide is causing an increase in the complexity of wiring systems and a consequent growth in the breadth of capital family tools that are required.

This quarter, our 10 largest automotive orders included major OEMs in Europe, Japan, and the PAC RIM. My visits with leading semiconductor and system companies around the world this quarter reflect the caution we’re experiencing in our semiconductor chip design software, but also the growing adoption of complex electronics and embedded software in system design worldwide.

Now, let’s look at the details of the quarter, as well as our outlook. Greg?

Gregory Hinckley

Thanks, Wally. The quarter closed pretty much as predicted during our prior earnings conference call with non-GAAP earnings a little better than forecast on revenue that was moderately higher.

Earnings per share non-GAAP was $0.02 and revenue was $227.6 million. Much of our commentary on the state of the global electronics industry also remains little changed. Worldwide smartphones were up only 0.2%, PCs down 10%, tablets down 15%, and ICs down 01%. Fortunately, for Mentor, automotive electronics exhibited continued strength.

Electronic driver assistance and in-vehicle infotainment have captured the attention of the automotive industry, and as a result, we enjoyed record automotive bookings in the quarter. Emulation was challenging in the quarter, although, activity remains robust. We’re engaged in lots of opportunities in the pipeline, but as said before, evaluations now take longer to close and pricing is more difficult. That said, we see better results beginning in the second quarter.

Achieving near record levels of cash flow from operations, we retired a little over 8% of our shares outstanding at a cost of $146 million and paid a $6 million dividend.

Now for more financial details. Booking volume was about average for first quarter, down 10% from last year, yet 25% ahead of what we had embedded in guidance. With a light renewal base for the quarter and a large amount of the renewals being with companies who have shut down a large portion of their design business since their last renewals, we didn’t have high expectations.

Scalable verification was down 45% compared to last Q1, or quarter one, when the category grew 65%. This quarter’s volume is pretty typical of what scalable verification have seen in the first quarter. New and emerging was down 30% on lighter cabling business than last year. Services were down 20% from last year, when the category grew a 190% on our largest ever services contract. This quarter, the momentum continued with key wins at a major silicon vendor and a key Japanese OEM.

IC Design to Silicon was down 10%, somewhat impressive considering the weighting towards Japanese semiconductor activity. And finally, integrated systems design grew 30% to a 10-year first quarter high on strong growth from a European systems contract.

Book-to-bill was less than one as is seasonally typical. By geography, bookings were down in all regions except Japan. Pac Rim was down 45% on lower IC design to silicon business and North America down 25% on lighter scalable verification business. Europe was down modestly at 10%, largely due to the previously mentioned record services contract booked last year. Japan grew significantly at a 100% year-over-year with four of the company’s top 10 customers coming from Japan this quarter.

Product bookings were 65% term, 20% perpetual, and 15% subscription versus 70% term, 20% perpetual, and 10% subscription last year. Top 10 customers were 50% of bookings compared to last year’s 40%. Average deal length was 2.5 years, well below the 3.0 years last year, as we had a significant proportion of renewals at two years and none above three years in length.

Now to leading indicators, customer support metrics were favorable with software and support reinstatements flat and declines down. New customers were up in count and an average transaction value returned to historical levels after unusually high quarter last year. Growth of the annual run rate in the top 10 this quarter was a negative 45%, largely influenced by corporate divestitures and business closures.

Revenue mix by geography was 40% North America, 25% Europe, 20% Pac Rim, and 15% Japan. Currency, principally the yen was favorable to revenue by just over $1 million versus our guidance rates.

Gross margin of 82.3% was above a half a point lower than last year and a higher mix of service and support revenue versus last year. Non-GAAP OpEx was effectively flat to last year at 0.3% growth. Currency was unfavorable to expenses by just over $1 million versus the rates we embedded in guidance, offsetting all of the currency upside on revenue. Special charges of $3 million for the quarter were about two-thirds restructuring-related and one-third litigation-related. The non-GAAP tax provision remained at 19%.

Now to balance sheet. Cash, cash equivalents and short-term investments decreased to $119 million sequentially to $216 million. Operating cash flow for the quarter was a $45 million inflow compared to $46 million inflow last year. Trade accounts receivable were $87 million, down $89 million sequentially. Short-term unbilled receivables were $324 million, up $7 million sequentially.

Trade DSOs or days sales outstanding were 35 days, a decrease of 12 days from last quarter and an increase of five days in last year. Total DSOs were 163 days, an increase of 31 days from last quarter and an increase of 18 days from last year. The quality of receivables remains excellent with no receivables net of reserves greater than 60 days past due.

Factory receivables were $15 million in the quarter compared to $600,000 last quarter and $12 million last year. Capital expenditures were $10 million for the quarter compared with $15 million last quarter and $7 million last year. Depreciation of property, plant and equipment was $9 million for the quarter equal to last quarter and last year.

Now guidance. We currently expect a 1.5 percentage point improvement or about $18 million in first-half fiscal 2017 seasonality versus initial guidance offered in early March. It appears much of the challenges that our IC customers experienced in recent quarters have stabilized or are reflected in our current bookings activity. We are seeing a firming of business within our North American accounts.

As a result, we are increasing second quarter revenue guidance to approximately $245 million from the $235 million level provided in March. We expect second quarter non-GAAP and GAAP earnings per share of about $0.09 and break-even, respectively. The majority of second-half fiscal 2017 scheduled renewals are system companies and we have a strong funnel of new and add-on opportunities, some of which include major transportation accounts.

We’re maintaining our full-year revenue guidance of approximately $1.215 billion. Fiscal 2017 non-GAAP earnings per share remains at about $1.68 and GAAP earnings per share is expected to be approximately $1.19. For non-GAAP EPS calculation purposes, we are forecasting approximately $112 million fully diluted shares outstanding in fiscal 2017.

Finally, we affirm our previous cash flow from operations guidance of approximately $200 million for fiscal year 2017. Wally?

Walden Rhines

Thanks, Greg. Well, thanks to growth in the systems part of our business, Mentor was able to exceed guidance this past quarter. We’re projecting improvement in our first-half revenue compared to our last earnings call and affirming our full-year guidance. Automotive design capabilities continue to be a major opportunity. It is offsetting much of the weakness in semiconductor industry growth.

Now, let’s take some questions.

Excuse me, one other thing. Finally, the Mentor Board of Directors has approved a dividend of $0.055 per share for shareholders of record on June 10, and payable on June 30, 2016.

So now, let’s take some questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question will come from Sterling Auty with JPMorgan. Go ahead please.

Ugam Kamat

Hi. This is Ugam Kamat on for Sterling Auty. So my first question is, you talked about healthy number of system companies coming up for renewal this fiscal year. Are you concerned that this renewal could be smaller, given the environment, or because they are system companies you expect this renewals to be up versus your last contract?

Walden Rhines

Is it Ugam? How do I pronounce your first name?

Ugam Kamat

Ugam.

Walden Rhines

Ugam. Ugam actually, we have experienced strong renewal growth rates in our systems business that was true last year. And we expect that to be the case through this year as well.

Ugam Kamat

Okay. And secondly, I had a follow-up on it. You released some new features on your emulation products. What are you seeing in terms of the competitive dynamics for some of the customers that they had paused their spending following the Cadence emulation product release?

Walden Rhines

I didn’t quite get the last part.

Ugam Kamat

Yes, following the Cadence emulation product release?

Walden Rhines

Okay. Well, anyway, you’re right. We had some major product announcements, they were tied into DVCon this year. And fundamentally, they dramatically enhanced the capability of the emulator to do a lot of other things that emulators weren’t dependent upon for.

We had previously announced the ability to do power analysis with the leading tool for that capability from ANSYS in fourth quarter. And then this quarter, of particular interest were Deterministic In-Circuit Emulation and our design for test software, lots of customer interest, but too early to say whether there will be bookings directly related or related to other factors.

Ugam Kamat

Okay, great. Thank you so much.

Operator

Thank you. Our next question will come from Tom Diffely with D.A. Davidson. Go ahead please.

Tom Diffely

Yes, good afternoon. So first, getting back to your guidance for the full-year, you’re raising the first-half. I’m surprised you didn’t take the full-year up, especially since the second-half business is driven by the systems, which, if anything might provide even more upside?

Walden Rhines

Well, I’m glad to have you reflect that confidence. We’re – first quarter is not typically representative, it’s a light bookings quarter and while it was better than what we had embedded in our plan we’re not ready to declare that improvement strongly enough for the full-year.

Tom Diffely

Okay. Have you seen any movement on the renewals that were pushed out last year through some of the consolidation of your customers, have you seen any of those guys come back to the table yet?

Walden Rhines

Yes. Well we had, as was noted earlier, a very weak level of renewal growth in the first quarter. And as Greg highlighted, there are some anomalies in there in that most of the negative came from companies that divested a very large share of their businesses or even shut it down. So they had very small renewals.

Now on the consolidation side, as we had mentioned last quarter, not much effect. But we do anticipate that that’s a negative for the industry and we will see some effect in second quarter, but it’s embedded in our guidance for the quarter.

Tom Diffely

Okay. Are you referring to an impact in the second quarter that is negative or one that would be positive, because some of the renewals that would have happened last year are coming about?

Walden Rhines

No, in almost all cases of consolidation, it’s a negative effect that is, it either slows the growth rate or even causes a negative growth rate.

Tom Diffely

Okay. All right. So moving over to the pricing environment, you’re seeing at least on the emulation side. Are you seeing that high end of the market or the low-end of the market, and how would you describe the tool – the market for tools this year versus last year?

Gregory Hinckley

Mentor is best positioned for really big chips, really high gate count. We have arguably the – well not even arguably, it’s true, we have the highest capacity for a true emulator. What we’re seeing today is most of the opportunities currently that are available to close are among a small to medium size chip designs and so there is more competition there, because all three vendors have viable products.

Tom Diffely

Okay. And then when you look at your emulation tool itself, how would you describe kind of the long-term philosophy as far as how often you refresh the hardware versus have the software upgrades?

Walden Rhines

So the philosophy is to do most generations with software upgrades. We actually have more capacity than most customers want. We have, at least, two installations of two billion gates, and that’s very rare that a customer wants that. Over time, I would expect that will eventually need to be improved. But right now, we’re twice the capacity per box of our leading competitor. So there’s not a great deal of pressure on that right now.

Tom Diffely

Okay. And then is this just a normal year, or do you think that market is going towards lower end solution over time?

Walden Rhines

No, the market will always move upward, while there is certainly growth in FPGA verification as well. As far as full-up emulation goes, people are doing more and more of it with time, the systems are getting bigger. They consume a lot of power, but they – Mentor is at about half of the power dissipation of others. And most people will move to the next-generation of emulation, that is with virtual stimulus and high-level testbenches and doing hardware software co-verification, and that’s where we have our biggest differentiation and our biggest lead in the industry.

Tom Diffely

Okay. And then just finally on the market size on your business outlook for this year, the automotive very strong in the first quarter. Do you – has your view of the mix has that changed for this year, given the revenue flat?

Walden Rhines

So you’re talking about our overall revenue guidance?

Tom Diffely

Yes, keeping the revenue flat for this year, is the mix more heavily weighted towards the auto now than it was previously?

Walden Rhines

Yes, no, we’re growing our overall revenue 3%. Systems business is stronger than that and semiconductor-related is weaker.

Tom Diffely

Okay. When I said flat, I just meant the – versus last quarter’s guidance for the full year?

Gregory Hinckley

Oh, I’m sorry, okay. Yes.

Tom Diffely

Okay. And then last one Greg for the cash, what is your onshore, offshore percentage? And the $200 million that you’re going to generate this year, what is the percentage of onshore, offshore with that?

Gregory Hinckley

Well, what we have today about 10% of our cash is onshore, which leaves the remainder offshore. And until I get further into year and predict deal by deal what is closing when, I’m not in a position to give a number for how much of our cash flow is domestic as opposed to outside the U.S.

Tom Diffely

Okay. But you’re comfortable with the dividend and the onshore percentage for that?

Gregory Hinckley

That’s correct.

Tom Diffely

Great. Okay, thank you.

Operator

Thank you. We’ll go next to Rich Valera with Needham and Company. Go ahead please.

Richard Valera

Thank you. You mentioned that auto, I guess, was at an all-time high, I think, in terms of, I’m not sure that was bookings or revenue. I was wondering if you could kind of size that relative to the overall business, I think it’s been maybe around 15% historically, if you could kind of give us that rough size?

Walden Rhines

Yes. So it’s been 15% to 20% overall. And as we said, this was a Q1 record, so it’s towards the higher end of that range.

Richard Valera

Got it. And I guess, would you see that continuing to grow as a percent of revenue, if you’re looking out a couple of years?

Gregory Hinckley

Absolutely.

Richard Valera

Great, perfect. And then Greg, if you could just quickly go through the leading indicators, you went through them real quick. And I think that most of them were positive, but I had a hard time following, if you can just quickly review those, that would be helpful?

Gregory Hinckley

Yes, I’d be pleased to do that. So one of them is, it has to do with customer support related to our perpetual license install base. And those have renewal contracts that expire each year. And we still have from the 1980s and 1990s a substantial install base of perpetual licenses. And we said that and what we find is during when the economy gets weak, we have a decline, people choosing not to sign up for support, those typically increased during economic difficulties.

And we also track reinstatements, which is when someone drops off of maintenance, what is the level where they return. And so we said this quarter reinstatements were flat, which makes sense, because we’re long past 2008/2009 and declines were down. We also track new customers, both in count and average transaction, because we’ve seen through the years that small customers react more quickly to economic changes than the larger companies do.

And they were up in count and essentially flat in terms of the transaction value. But for the fact that we had some unusually large new customers in the first quarter of last year. And then the last thing, which was not positive was the growth in the annualized run rate in the top 10 transaction merely because of the mix of what accounts we had to renew this quarter was down 45%. And that was caused by the all the customers that we – that were down had either material corporate divestitures or in fact total business closures, and then that was compounded, where four out of our 10 – top 10 were Japanese accounts. And the yen since – all of our contracts or most of our contracts in Japan are denominated in yen and the yen has depreciated almost 20% over the life of the – those previous contracts.

Richard Valera

So, is it safe to say you’d expect a pretty significant rebound in your top 10 average as you move into balance of the year?

Gregory Hinckley

Yes, as we go through the balance of the year absolutely, Rich, this, I think is an aberration.

Richard Valera

I know you don’t usually forecast this, but you think it’s back into your historical kind of 20% plus range, or you’re not willing to kind of go there?

Gregory Hinckley

I’m not willing to comment right now.

Richard Valera

Fair enough. So on the emulation pipeline, it sounds like you still have a healthy pipeline, but wanted to try to understand, has there actually been attrition there, or is that pipeline should have up or down versus a quarter or two quarters ago?

Walden Rhines

Well, the pipeline is big enough that we have to be pretty selective on what we actually chase. The decrease in deals we’re working on is very small really, but the – as we mentioned, the length has stretched out. So, in general, I’d say, it’s modestly down from the end of last year.

Richard Valera

But you still feel pretty good about converting, I mean, has your sort of success rate change much, obviously, you seem to be suggesting there’s more competition, which would suggest you have maybe a lower success rate or lower pricing. So how do you view that funnel and kind of the likely success rate relative to historical levels?

Walden Rhines

Well, and so as I highlighted earlier, there’s a lot more competition than before. A couple of years ago, we were the only game in town at the kind of size we were at. We were the next-generation. I’d say, the most difficult for us is customers who are already using emulation and they’re comfortable with it, and they have no desire to move to the next-generation of capability, that’s hard for us to displace an incumbent.

Our best opportunity is new applications, or as Greg said, at the high end, where we have much less competition and where we can go through an evaluation much faster.

Richard Valera

Got it. That makes sense. Okay. Thank you, gentlemen.

Operator

Thank you. We now have a question from Jay Vleeschhouwer with Griffin Securities. Go ahead please.

Zack Ajzenman

Hi, thanks. This is Zack Ajzenman in for Jay. Our first question is in respect to 2Q 2017 outlook. In 2Q 2016, you had one customer account for 24% of revenues. Would you anticipate anything that could offset or help to mitigate or might be a difficult year-over-year comparison?

Gregory Hinckley

I haven’t – you know more about what happened in the second quarter of last year than I do. Why don’t we follow that up on a telephone call after this conference call?

Zack Ajzenman

Sure, no problem. For the next one, would you expect to be able to increase cash flow year-over-year over each of the next two to three fiscal years?

Gregory Hinckley

Well, it is – that’s really a top line question. And we’re not prepared to forecast what the top line is going to do beyond the current year.

Zack Ajzenman

Okay, I’ll try another. Could you comment on the mix of software versus services in your automotive contracts to-date and on the software only pipeline in automotive?

Gregory Hinckley

No.

Zack Ajzenman

All right. And how about if we move over to maybe commentary on the recently announced Veloce emulation services. Do you believe that new business has an effect as a material substitute for the sale of emulation hardware?

Walden Rhines

Yes, that’s the hosting part of the business. We’ve offered that in the past and we’ve had some success, but I think it’s a small part of the total.

Zack Ajzenman

Okay. And then lastly, could you remind us of your current offerings in IC implementation and what your expectations are for that category and how is the integration of collateral helped to generate an incremental business for GTS overall?

Walden Rhines

Caliber?

Zack Ajzenman

Caliber, caliber, yes.

Walden Rhines

Caliber, yes, so you’re talking about the implementation side. So that’s all the way from RTL-to-GDSII and where we have our greatest strength of courses in physical verification analysis. We do have an integration there with our place and route, and – it’s the modest part of the business overall. And then we’re a much further back in terms of the actual synthesis and routing part of the business.

Zack Ajzenman

Okay, thank you.

Operator

Thank you. [Operator Instructions] Our next question is from Monika Garg with Pacific Crest. Go ahead please.

Jason Celino

Hi, this is Jason on for Monika. Thanks a lot for taking my questions. So your two competitors just supported good emulation quarters. How should we reconcile those comments if – what you’re seeing today?

Walden Rhines

First of all – emulation purchases are large purchases. So there is a lot of fluctuation quarter-to-quarter, certainly we would like to have had stronger results – so far this year. But as I’ve highlighted before, the – our greatest strengths comes with big challenging signs, it comes with people who want to go to the next-generation of capability and there is no lack of opportunities. We seemingly use up all our resources for evaluation purposes just that it takes more resources over a longer period of time.

Jason Celino

Okay, great. Thanks for the color. And the next question, so I think last – on last call, you said that evolution time is lengthened from one quarter to three quarters. Is this pretty much consistent or has it lengthened even further?

Walden Rhines

Well, we had one where we had an engineering win that actually went 18 months that’s not normal. But it certainly more than the three months to six months typical engagement we had a year or so ago.

Jason Celino

And then – so last year in fiscal 2016, we saw revenue down and then for this year for fiscal 2017, we – you’re projecting 3% growth. Can we see revenue reaccelerate this year?

Walden Rhines

We have forecasted what we forecasted and what we forecasted is 3% growth.

Jason Celino

Okay. Okay, great. And then last question, so autos is executing really well. How big do you think that this market can be for you?

Walden Rhines

So this is an enormous business. There are two big parts of that we have that a large share of which is reported in new and emerging, but not all of it. And one is embedded software, which is growing at a phenomenally strong rate and the other is our traditional wiring business, which is good solid growth, but it’s more in line with the systems part of our business growing in the team.

Jason Celino

Okay, great. Thanks a lot.

Operator

Thank you. Our next question is from Martin Ji with ClearBridge Investments. Go ahead please.

Martin Ji

Hi, I was just wondering, you mentioned just before this. The average contract term is dropped to 2.5 years. Can you explain to me why that’s the case, and if so will that be a big enough issue that becomes a revenue growth headwind? Thank you.

Walden Rhines

Okay, not really. Our targets are typically three years, sometimes we didn’t have some that are longer, occasionally we have some shorter, and 2.5 years right now is what Cadence and Synopsys are reporting. So it’s pretty similar to what they’re experiencing. I don’t think there is anything very interesting about it.

Martin Ji

All right. Thank you very much.

Operator

Okay, thank you. And gentlemen, we have no further questions. So please go ahead with any closing remarks.

Walden Rhines

Sure, thanks. Cathy, thank you very much. Ladies and gentlemen, thank you for joining us this afternoon for our conference call. If you have follow-up call, both Greg and I will be available. And the best way to reach us is by calling Julie Cimino at 503-685-1462 and she will make sure that we get back to you in a timely fashion. Cathy, if you could please provide the listening audience, the replay data that would be wonderful. Thank you and have a good afternoon.

Operator

Thank you. And ladies and gentlemen, this conference will be available for replay after 6 PM today to midnight May 26. You may access the AT&T Executive Playback Service at any time by dialing 800-475-6701 and entering the access code 393161. International callers dial 320-365-3844, using the same access code 393161. And that does conclude our conference for today. Thank you for your participation and for using the AT&T executive teleconference. You may now disconnect.

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