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Super Micro Computer, Inc (NASDAQ:SMCI)

Q3 2008 Earnings Call

April 29,2008 5:00 pm ET

Executive

Howard Kalt - Public Relations, Kalt Rosen Group/Ruder Finn

Charles Liang - Chairman and Chief Executive Officer

Howard Hideshima - Chief Financial Officer

Analysts

Glenn Hanus - Needham

Jeff Fidacaro - Merrill Lynch

John Roth - Argand Capital

Manoj Nadkarni - Chip Investor Group

Curtis Thom - Broadpoint Securities

Operator

Good day ladies and gentlemen. Thank you for standing by. Welcome to the Super Micro Computer, Incorporated Third Quarter Fiscal 2008 Conference Call. At this time, all participates are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for your question. I would like to remind everyone that today's conference is being recorded.

And now, I would like to turn the conference over to Mr. Howard Kalt of Super Micro Computer, Inc. Mr. Kalt, please go ahead, sir.

Howard Kalt - Public Relations, Kalt Rosen Group/Ruder Finn

Thank you, Erica. Good afternoon and thank you for attending Super Micro Computer's conference call on financial results for the third quarter of fiscal year 2008, which ended March 31, 2008.

With us today are Charles Liang, Chairman and Chief Executive Officer; and Howard Hideshima, Chief Financial Officer. By now you should have received a copy of today's news release that was distributed at the close of regular trading. A copy of it also maybe accessed either on the Company's website, www.supermicro.com.

Before we begin, please note that during the course of this conference call management will be making forward-looking statements within the meaning of the Securities Act of 1933, and the Securities Exchange Commission of 1934. These forward-looking statements may involve judgments based on information that is available now, but is highly likely to change overtime. The Company will not necessarily inform you if and when those judgments and the underlying information change. Company policy is to provide material information only in news releases, widely-available conference calls, or filings with the SEC. Additional information concerning factors that could cause actual result to differ materially from those in today's forward-looking statements are contained in the Company's SEC filings, as well as in today's news release.

I would add that the Company operates under the requirements of Regulation FD. As a result, Super Micro Computer provided advanced notification of this conference call by way of a news release issued on April 22, 2008. Like most companies, today we will be taking questions only from securities analysts and institutional portfolio managers, but the complete call is open to all interested parties on a listen-only basis. The Company will continue to talk with investors individually and in small groups, but those discussions will no include discussion of any material non-public information If you're interested in such a meeting; please contact me at 415-692-3059 or via e-mail on the Company's Investor Relations page of the website.

I'll now turn the call over to Charles Liang, Chairman and Chief Executive Officer. Charles?

Charles Liang - Chairman and Chief Executive Officer

Thank you, Howard, and good afternoon, everyone. This quarter our revenue reached 136.8 million, which is an increase of 29.4% compared to the same period last year. Net income of $5 million is 23.4% higher compared to a year ago. The March quarter is traditionally a slower season in our history, as well as in the industry. Moreover, we have seen increasing investments in both our R&D headcount and infrastructure to drive our long-term growth potential.

Nevertheless our year-over-year net income growth was 23.4%, which a wider industry average growth is less than 6%. In this coming quarter I am confident that we will see a consistent growth in revenue. And the net income should be slightly improved from last quarter. Although, we will keep strong investment in R&D.

Super Micro has been a technology-oriented company with multicultural. Although we are having such a strong momentum year-by-year, our company's potential is still underestimated. Yes, we are still a small to medium sized company, but we are continuing to grow at more than three times faster than the average growth rate for a server industry.

We continue to invest aggressively in R&D for long-term growth and profitability. We strongly believe that our technology foundation and leadership have been and will be the key for our customers' success. Our High Efficiency Server Building Block solution, incorporated with our expertise in technology and design, is highly demanded by partner and customers who are seeking for maximum system optimization, performance per watt, and cost-effectiveness.

Our business has never been as strong as it is today. In particular, we continue to invest in improving our Blade server technology. Our Intel CPU-based Super Blade recently achieved an industry beating performance per watt milestone of 290 gigaFLOPS per kilowatt, 290 kiloFLOPS per kilowatt. The performance is about 10% to 30% faster than our competitors' total.

In the 11 billion HPC market, Super Micro's leading performance-per-watt server are the best choice for helping our customers save significantly on their energy bills and total cost of ownership, TCO. As one of our recent wins, Super Blade was selected by CERN, one of the world's largest search labs in Europe for its computing capacity upgrade process. High performance, excellent scalability, and the superior energy reasons where key factor in this competitive selection process.

We are also spearheading to develop of next generation Intel QPI for QuickPath interconnection-based servers. We cannot elaborate on the details of this development for competitive reasons, but for sure Super Micro will play a significant role in the next industry launch of X86 mainstream servers. Our historical record indicated that new technology transition periods always provide a great opportunity for Super Micro to grow our business both in revenue and profitability.

In addition, we are currently engaged with a major partner in the development of Itanium based products for mission critical enterprise applications. This partnership will help Super Micro to gain market share in this higher margin segment. This high-end segment of IEA server technology represents an important new market for Super Micro. We believe this engineering investment will enable new opportunities and drive our huge opportunities, besides our well-known and competitive Intel-based server solutions. We also have a strong AMD-based product line ready for Barcelona process.

As you know from our April 9th release, Super Micro's revenue was briefly delayed due to the hold ups over the processor by AMD, but it is now shipping. Super Micro's high density energy efficient Super Blade, four-way 1U system universal, whisper quiet, 28KP workstation and 1U Twin solution have all been optimized for a Barcelona processor, which is now widely available.

On a separate note, as a sponsor and a Chair of the Asian Pacific Region of the Climate Saver Computing Initiative, CSCI, Super Micro is taking an active role in developing smarter and more efficient technology that will minimize power consumption and therefore reduce CO2 emissions. By the year 2010, the CSCI organization seeks to proactively save consumer over $5 billion in energy costs while reducing CO2 emissions by 54 million tons per year, which is equivalent to take about 11 million cars off the road.

Super Micro's earth friendly computing technology helps our customers save electricity costs and helps to keep our earth green. These are just some examples of our continuing R&D work we are doing here at Super Micro. By investing in our infrastructure and working more closely with our partners, we have improved our ability to deliver leading edge first-to-market products.

I strongly believe this investment will better position the company for strong future growth. I should point out again that our ability to consistently deliver leading edge technology first-to-market has driven Super Micro's growth and profitability over the last 14 years. In this time and in that time, Super Micro has never been as strong as it is today.

With that in mind, let me move let me turn it over to our CFO, Howard, who will discuss the financial results and forecast. Howard?

Howard Hideshima - Chief Financial Officer

Thank you, Charles, and good afternoon, everyone. First, let me point out that our GAAP number's here in the new release, so I will discuss earnings, gross margins, operating expenses and similar items on a non-GAAP basis, which reflect adjustments to exclude stock compensation expense. Reconciliation of GAAP to non-GAAP is included in the financial statements of the company in today's earnings release.

Let me begin with a review of third quarter income statement. Revenue of 136.8 million for the quarter was up 29.4% from the same quarter a year ago. The growth was led primarily by the increase in our components business, primarily motherboards and chassis, which increased 32.9% year-over-year or 22 million to 88.9 million.

Our server business increased by 23.5% year-over-year, or 9.1 million or 47.9 million. Unit volumes on server systems increased 20.6% year-over-year, from 34,000 to 41,000 units. ASPs for servers were about the same on a year-over-year basis of approximately $1200 per unit. The increase in server revenue was primarily due to higher sales of our OEM and bundled server solutions utilizing our high efficiency power supplies, and sales of new products such as UIO and 1U Twin.

We continue to maintain a diverse revenue base, with none of our approximately 400 customers making up more than 10% of our net sales in the third quarter. Furthermore, 58% of our revenues came from the US, and 62.8% from our distributors and resellers.

Internet Data Center revenues was 10.6% compared to 3% in the third quarter of fiscal year 2007. On a sequential basis, net revenues were about the same from 36.9 million in the second quarter of fiscal year '08.

Non-GAAP gross profit was 25 million for the quarter, up 37.5% from 18.2 million in the same quarter last year. Non-GAAP gross margin was 18.2% of revenues, up from 17.2% a year ago. The non-GAAP gross margin increase from a year ago was primarily due to higher revenue mix from complete server solutions.

On a sequential basis, non-GAAP gross margins decreased from 20% in the second quarter to 18.2% in the third quarter, due primarily to a higher revenue mix of component business, primarily motherboards and chassis, which generally carry a lower margin than server solutions.

In addition, we provided aggressive pricing to one high profile customer which we believe has a good future potential. Price changes from Ablecom resulted in a zero basis point change to our gross profit in the third quarter, with total purchases representing approximately 27.4% of total cost that sold, which is down from 33.6% a year ago.

On a year-over-year basis, non-GAAP operating expenses total 15.6 million for the third quarter or 11.4% revenues up 0.7% on the year ago. The year-over-year absolute dollar fees increase 4.3 million was primarily due to additional head count to support the expansion of our product line, the additional work we are doing for our partners and addition expenses associated with SOX compliance.

The company's headcount grew by 219 from 580 in the third quarter of fiscal year 2007 to 799 in the third quarter of fiscal year 2008, primarily in the areas of R&D, a [195] to 306, and production, 244 to 322. This includes overseas headcount during this period expanding from 89 to 143. The increase in SOX expenses went from zero to approximately 600,000 in the third quarter of fiscal year 2008.

On a sequential basis, non-GAAP operating expenses was up 1.4 million or 10.1%. The company's headcount grew by 65, from 734 at the end of the second quarter of fiscal year 2008 to 799 at the end of the third quarter of fiscal 2008, primarily in the areas of R&D and production.

The increase in operating expenses was primarily due to higher salaries and payroll expenses associated with the increased headcount and the higher material costs associated to support product development, offset in part by higher NRE credit from our partners. In addition, SOX expenses increased by approximately $300,000 during the quarter. The company is required to be SOX compliant for the fiscal year ending June 30,2008, after which we do expect expenses from SOX compliance to decrease.

Non-GAAP operating profit for the third quarter was 9.3 million, or 6.8% of revenue, up 2.5 million or 36% from 6.8 million a year ago. The increase was primarily due to growth in our revenues and gross margins, less than the reinvestment in research and development expenses made to expand our product line, support this growth, and overhead associated with being a public company.

Non-GAAP operating profit on a sequential basis was down 3.9 million or 29.3% from 13.2 million in the second quarter of fiscal year 2008, primarily related to the lower gross margins, investment in expansion of our product lines, and support of our partners, and SOX expenses discussed above.

On a year-over-year basis, non-GAAP net income for the third quarter was 6 million or 4.4% of revenue, which is up 1.4 million or 31.6% from 4.5 million non-GAAP net income a year ago. On a sequential basis, non-GAAP net income was down 2.6 million or 30.2% from 8.6 million in the second quarter.

The tax rate in the third quarter on a non-GAAP basis was 36.4%, compared to 30.1% a year ago. The increase in our tax basis where compared to last year was due to catch-ups in our benefits for R&D credits due to Congressional reinstatement of the credit last year. The tax credit expired on January 1, 2008. Should the credit be reinstated retroactively, then the company would adjust in the quarter the credit was reinstated.

Our non-GAAP fully diluted EPS for the third quarter was $0.15 per share, compared to $0.14 per share a year ago. Fully diluted shares used were 39.1 million compared to 32.6 million a year ago. The fully diluted shares increase of 6.6 million shares or 20.2% primarily by the 6.4 million shares offered in the company's IPO, which closed on April 3, 2007. On a sequential basis, our non-GAAP fully diluted EPS decreased by $0.07 cents per share or 22% in the second quarter.

Turning to the balance sheet on a sequential basis, cash and cash equivalents and short-term investments were 41.8 million, down from 64.7 million in the prior quarter. The decrease was primarily due to the reclassification of 18.2 million of short-term investments and option-rated securities into long-term investments.

If we include this into the cash balances above, the decrease would be 5.3 million, which was primarily due to capital investments for the new building we purchased in October of 2007 for expansion purposes, and 2.2 million in cash used in operating activity.

Accounts receivable decreased by 3.6 million to 42.1 million, and DSOs was 30 days compared to 29 days in the second quarter. Inventory increased by 0.7 million to 93.1 million, with days in inventories increasing by six days to 76 days. The increase in days was due to higher average inventory levels as we continue to prepare for ramp of our revenue.

The inventory reserves were 14.8 million compared to 13.1 million in Q2. The percentage of inventory revision decreased by 0.2% to 1.6% in the third quarter. The total inventory reserves as a percentage of inventory increased from 12.4% to 13.7% between Q2 and Q3 for fiscal year '08.

Accounts payable decrease by 14.9 million to 79.8 million with the days payable outstanding increasing from 96 to 72 days. Again, the increase in days is primarily due to higher average inventory levels as we support growth of our revenue.

Now, for a few comments on our outlook. The server industry has historically experienced seasonal revenue strength in the quarter ending June 30, our fiscal Q4. In addition, we have also benefited from revenue traction following the introduction of new products. The company expects both trends will continue this quarter, and that new product introduced during the prior quarter and historical seasonal strength should offset, in part, the impact of economic weakness.

As a result, we expect revenues to be in range of 142 to 147 for the fourth quarter of fiscal year 2008. In addition we believe our non-GAAP EPS on a fully diluted basis will be approximately $0.17 to $0.18 per share for the fourth quarter of the fiscal year 2008. It is currently expected that the outlook will not be updated until the release of the company's next quarterly earnings announcement, notwithstanding subsequent developments. However the company may update the outlook or any portion thereof at any time.

With that, let me turn it back to Charles for some closing remarks.

Charles Liang - Chairman and Chief Executive Officer

Thank you, Howard. I do believe that our strong investments in R&D and infrastructure during the past three quarters will produce strong growth in our near and long-term business. Our 290 gigaFLOPS per k/watt Blade server that outperformed much above the industry standard, and our concern Intel QPI base, it is called [DOT-9], will prove our vision quickly. We have also strength our working partnership with our vendors and customers, both old and new. I am more confident today than any time before on the ability of the company to succeed. Thank you.

Howard Kalt - Public Relations, Kalt Rosen Group/Ruder Finn

Operator we are ready for questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Glenn Hanus with Needham.

Glenn Hanus

Good afternoon. Could you maybe talk about what you're seeing on the competitive front from a pricing standpoint, and what your outlook is on gross margins for this quarter?

Charles Liang

Yes, basically if the competition is strong, however, we have a very strong new product line, that our 1U Twin still growing in revenue, and that is a very unique product. So, for those products we still have a very good margin. With our SuperBlade product, I just mentioned we reached 290 gigaFLOP per k/watt. Those are very outstanding products, and they will allow us to have a good margin from those products. So overall, before market is getting very competitive, especially the soft market. However, here at Super Micro, we foresee our profit, our gross margin, should be still in quite healthy neighborhood. By the way, I mean, back a way I just mentioned our QPI based Intel Quick-Path interconnection, a new product line is getting available. That will help our profitability as well, though.

Glenn Hanus

Thank you.

Operator

And your next question comes from Jeff Fidacaro with Merrill Lynch.

Jeff Fidacaro

Good afternoon Charles and Howard. I am wondering, if you could talk a little bit about the Itanium project, sort of the timing, when we should start seeing product ship, and the impact it has been on R&D in this quarter as well as into the June quarter.

Charles Liang

Yes Itanium as you know, it's the highest-end, it is IA Intel architecture product. So, this year we have co-designed with our partner. And the reason why is we foresee with QPI, a QPI interface in the web is really a high performance platform, and really just choice for a mission critical application. So, we commit to design with our partner a prototype QPI available this year somewhere in, we hope, Q4 this year. And we never really committed to a mission critical risk product, so this is a big commitment from the company. And we feel very comfortable for business we took.

Jeff Fidacaro

Do you think the revenue impact from these products will really ramp? Is it going to be in the back half of this calendar year?

Charles Liang

Yeah, it should be very big this year or earlier next year.

Jeff Fidacaro

Any anticipation of what the impact would be to margins? Is it greater than corporate average? Sounds like these are higher margin type products.

Charles Liang

Will be significantly higher NTO base put out, though, because the -- it is although small [medium], but very high-end, high margin product.

Jeff Fidacaro

Okay. If we shift over to sort of the data center revenues, can you talk a little about the win this quarter? It sounds like you had to be a little bit more competitive to get that customer win, do we see that sort of impact to gross margins carrying into the June quarter as well?

Howard Hideshima

Yeah Jeff, this is Howard. Yeah, we did have this high profile customer come on board. And it just started up this quarter and will continue. We see there's future growth potential in this customer and that's why we did this. And so, it should carry on for the next few quarters, if not longer.

Charles Liang

Yes, it is high efficiency computing architecture, and that's our 1U Twin that operates the -- that help a lot.

Jeff Fidacaro

Great. Thank for your times.

Operator

And our next question will come from John Roth with Argand Capital.

John Roth

Hi, guys. I have a few questions for you. First of all, the tax rate. I understand you had to catch up this quarter. I mean, what would you assume on a sort of normalized basis going forward, assuming that the credit is not reinstated?

Howard Hideshima

Yeah, John the credit actually was -- last year was about 30%, the tax rate, and this year was about 36%. And we anticipate that 36% non-GAAP rate to be about the steady state until and if Congress re-passes the R&D credit, so which time we'll adjust it downward.

John Roth

Okay. And I just wanted to clarify what the previous caller asked. In terms of the high profile data center customer, you said that you expect their presence to have -- to continue to have a negative impact on the gross margin for at least a few quarters going forward, is that correct?

Howard Hideshima

Not exactly John.

John Roth

Okay. I guess I wasn't sure whether you were talking about the negative impact on gross margin or the positive impact in terms of the top line from them being there?

Howard Hideshima

Yes, it had a positive impact, and it's just starting with this past quarter, Q3 and we see great future potential in this customer going forward. And so, it's just the beginning with this relationship.

John Roth

Okay. Well, let me ask the question another way. I mean, if you look at the target model that you guys have spoken about historically, sort of gross margins of 19% to 22% and then working down, I think R&D to 4 and 5%, getting down to an operating margin of 9 to 12. Is that still the company's target model, or is that R&D going to move up from that 4% to 5% range for the foreseeable future? Can you just kind of help me understand what the model is doing, whether it's still kind of static in terms of where you're trying to get or if it's moving around?

Charles Liang

Yes, in theory, we did not change the model basically. However, when a change happen, when a change show up, like a couple quarter ago when we know we have a change to co-design Itanium solution, and when we saw the high efficiency computing become very important so we start to emphasize, dedicate even more in high efficiency breakthrough solution, all of those, we decide to hire more R&D engineer. Although that will increase our expense in short-term, however, for long -term we know we will benefit from those R&D investments. So, other than the Itanium and high performance Blade server, in theory we also are start to cooperate with more potential OEM to design some -- really optimize the system for them. So, we start cut-off of project right away, in last few quarters. This is the main reason we increase, indeed, 57% of our engineering headcount, in last few months. We understand this will increase our overhead expense, but long-term this is a really a very good chance for company, though. So not many companies have those chance.

John Roth

Okay. What was the size of the inventory adjustment on gross margin this quarter?

Howard Hideshima

1.6%, same as Q3 of '07 and about 0.2% of benefit from the prior quarter.

John Roth

Okay. And I guess last of all its just a comment. I said this to you guys before but I would urge you at the board level to think about authorizing a repurchase. I know you have concerns around the liquidity of your stock, but its always good in my view to have the authorization in place so that when you have dislocations like you had over the past few weeks you are able to take advantage of those and ultimately if you do have confidence in where the business in going. You know the repurchases at these sorts of levels will certainly be accretive to shareholders over the long-term.

Howard Hideshima

I understand John and I appreciate the comment.

John Roth

Okay, thanks.

Operator

(Operator Instructions). And next we'll hear from Manoj Nadkarni with Chip Investor Group.

Manoj Nadkarni

Hi good afternoon. Can you please talk more about seasonal factors? Generally the PC market is slower in the second quarter if you look at Intel's guidance their revenue is lower sequentially. So what is different about the server market and about Super Micro that gives you confidence for sequential improvement?

Charles Liang

Yeah I mean that is historically. We have a lower quarter in March quarter and that why just mentioned PC market can be a little bit soft, I mean, recently. However, at Super Micro we are quite different from the industry in last many years. And I believe this year we'll have the same chance because, I mean, our business is pretty much based on technology. So, whenever there are new product lines, new transition of technology, then in that timeframe we usually got a much better trend. This year, basically no exception, right? Our kind of Blade server just available, our QPI solution is getting here and AMD just agreed to ship their Barcelona CPU. So, all of those make us feel very comfortable for this quarter and the coming quarter.

Manoj Nadkarni

Okay. Can you give any color on which end markets and geographies you are seeing strength?

Charles Liang

Pretty much our market is world wide and recently we found a market in Europe and Asia should be a two area, I mean we have big room to grow. But even in the United States recently we have approach some high profile account aggressively. And we are ready reach certain level of success. So we at this moment, I can say we have a good confidence on growing the business in the United States as well.

Manoj Nadkarni

Okay. And about 44% of your sales are international. So how much does the weakness of US dollar help you?

Howard Hideshima

All our transactions are denominated in United States dollars. So that really doesn't affect us from a currency exchange rate.

Manoj Nadkarni

No but I mean you're customers in Europe will find your products much cheaper right?

Howard Hideshima

Absolutely. That is a healthy…

Charles Liang

Yeah in Europe and China yeah that will be a kind of a fundamental -- I mean, a hidden advantage, right?

Manoj Nadkarni

Okay. Thank you.

Charles Liang

Because there cost is low.

Manoj Nadkarni

Thank you.

Operator

(Operator Instructions). And our next question comes from Curtis Thom with Broadpoint Securities.

Curtis Thom

Hello, Howard and Charles. Good afternoon.

Howard Hideshima

Hi.

Charles Liang

Hi.

Curtis Thom

I appreciate what Charles said about the strength of the new products offsetting the macro weakness. I was wondering if you could quantify the macro weakness that you're seeing, and if -- and how we expect that to continue?

Howard Hideshima

Yes. Curtis, this is Howard. Yes, we've given the guidance. Again, we can see that some of these new products the new products that Charles has talked about we've invested on will help us counteract some of this economic weakness. We've given a range of 142 to 147, which is a good growth from prior year quarterly run rate. So, again, we don't see a slowdown with regards to our being able to deliver products to customers given the new products we have and the seasonal strength of the quarter. Curtis?

Operator

Mr. Thom, is there anything further?

Charles Liang

Yes, maybe I can add a little bit more. That 1U Twin, although we introduce that product about one year ago, and today we still almost the only one really strong in 1U Twin kind of high density computing. And recently we just add couple of other form factors, still 1U Twin but in form factor that is to optimize. 1U Twin solution for Siemens application. So, with the new 1U Twin with QPI coming soon, we start our own also with our 293 gigaFLOW per k/watt Blade server. Indeed, the growth will be quite -- we are optimistic about our growth.

Operator

And we move on to a follow up from Manoj Nadkarni.

Manoj Nadkarni

Hi, I have question about this reclassification of about $80 million to long-term securities. Can you give us any details as to what type of securities those are, and if you are taking any unrealized losses?

Howard Hideshima

Yes, we did take about 600,000 of unrealized temporary impairment charges. The securities are primarily, to small extent, student loans, to a large extent closed end option rate preferred shares of municipal funds, tax-exempt. They're very -- they're all AAA-based and well secured.

Manoj Nadkarni

And are they guaranteed by department of education or any state or federal?

Howard Hideshima

The student loan ones are guaranteed by the Federal Family Educational loan, 100%.

Manoj Nadkarni

Okay. And secondly I have question about cloud computing There has been a lot of talk about cloud computing. What type of products do you have and what revenue opportunities do you see in this area?

Charles Liang

What you mean by cloud computing?

Manoj Nadkarni

Cloud, cloud computing.

Charles Liang

What it is?

Manoj Nadkarni

Cloud like Amazon, Google etc, renting their computing facilities to other companies.

Howard Hideshima

Yeah. Yes, we do obviously have we have a lot of different customers that are selling- we're selling to a number of different applications. We have a little less visibility into that space. I do believe that some of our Internet customers would fit the bill that you're talking about there.

Manoj Nadkarni

So, this would be broadly under the data center computing?

Howard Hideshima

That's correct. And we have a fairly high percentage of our sales go through Disc G Network, so we have a little less color with regards to the final end customer.

Manoj Nadkarni

All right. Thank you.

Operator

(Operator Instructions). It appears at this time, we have no further questions. I would like to turn the conference back over to Mr. Liang for additional or closing remarks.

Charles Liang

Thank you. Thank you for joining us today. We look forward to talking to you again at the end of this quarter. Thank you, everyone. Have a great day.

Operator

That does concludes today's conference. We do thank you for your participation. Have a great day.

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