Diodes Incorporated's (DIOD) CEO Keh-Shew Lu on Q2 2017 Results - Earnings Call Transcript

About: Diodes Incorporated (DIOD)
by: SA Transcripts

Diodes Incorporated (NASDAQ:DIOD) Q2 2017 Earnings Conference Call August 8, 2017 5:00 PM ET


Leanne Sievers - Shelton Group IR

Keh-Shew Lu - President and CEO

Rick White - CFO

Mark King - SVP of Sales and Marketing

Laura Mehrl - IR


Gary Mobley - Benchmark

Tristan Gerra - Baird

Shawn Harrison - Longbow Research


Good afternoon and welcome to Diodes Incorporated Second Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instruction will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded today, Tuesday, August 08, 2017.

I would now like to turn the call over to Leanne Sievers of Shelton Group, Investor Relations. Leanne, please go ahead.

Leanne Sievers

Good afternoon, and welcome to Diodes' Second Quarter 2017 Financial Results Conference Call. I'm Leanne Sievers, President of Shelton Group, Diodes' Investor Relations firm.

Joining us today are Diodes President and CEO, Dr. Keh-Shew Lu; Chief Financial Officer, Rick White; Senior Vice President of Sales and Marketing, Mark King; and Director of Investor Relations, Laura Mehrl.

Before I turn the call over to Dr. Lu, I'd like to remind our listeners that the results announced today are preliminary as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are subject to revision until the company files its Form 10-Q for its second quarter 2017.

In addition, management's prepared remarks contain forward-looking statements, which are subject to risk and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today, and therefore we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission. In addition, any projections as to the company's future performance represent management's estimates as of today, August 08, 2017. Diodes assumes no obligation to update these projections in the future as market conditions may or may not change.

Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details.

Also, throughout the company's press release and management's statements during this conference call, we refer to net income attributable to common stockholders as GAAP net income. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 60 days in the Investor Relations section of Diodes' website at www.diodes.com.

And now, I'll turn the call over to Diodes' President and CEO, Dr. Keh-Shew Lu. Dr. Lu, please go ahead.

Keh-Shew Lu

Thank you, Leanne. Welcome everyone and thank you for joining us today. I’m very pleased with our second quarter results, which were highlighted by achievement of record revenue and gross profit, as we continue to capitalize on the strength in global market and gain market share. All of our target end markets and geographies grew sequentially, resulting in record revenue in both Asia and Europe. Additionally, Pericom attained its highest quarterly revenue and gross profit since the acquisition, further contributing to Diodes’ strong growth and gross margin improvement in the quarter. In fact, gross margin exceeded 34% in the second quarter, which is the highest level since the first quarter of 2011. Next quarter, we expect to approach our target model of 35% on continued improvements in product mix and utilization across our manufacturing facilities. Additionally, our KFAB facility is on schedule to be closed November 15th with all production transfers efficiently in process.

As a result of this quarter’s solid performance, we have surpassed the $500 million revenue mark for the first half of the year, positioning Diodes to achieve our billion dollar revenue goal in 2017. This quarter also brings us one step closer to our target operating model of 20% for SG&A plus R&D and the gross margin of 35%. As we look to the second half of the year, we remain focused on expanding revenue and improving gross margin during this growth cycle as we benefit from our increased operating leverage in order to further expand earnings.

With that, I will now turn the call over to Rick to discuss our second quarter financial result as well as third quarter guidance in more detail.

Rick White

Thanks, Dr. Lu and good afternoon, everyone. Revenue for second quarter 2017 was $264.2 million, an increase of 11.8% from the $236.3 million in the first quarter 2017 and an increase of 11.7% from the $236.6 million in the second quarter 2016. Revenue in the quarter increased sequentially, reflecting continued strength across the company’s target end markets and geographies, combined with higher growth of Pericom products, collectively resulting in market share gains in the quarter.

Gross profit for the second quarter was $90.1 million, or 34.1% of revenue, compared to $73.9 million or 31.3% of revenue in the first quarter 2017 and $74.8 million or 31.6% of revenue in the prior year quarter. The sequential increase in gross profit margin was due primarily to regional strength in North America and Europe, and improved utilization and product mix, including a higher contribution from Pericom products.

GAAP operating expenses for the second quarter 2017 were $66.3 million or 25.1% percent of revenue, and $59.8 million or 22.6% of revenue, on a non-GAAP basis, which excludes $4.6 million of amortization of acquisition-related intangible asset expenses, $1.7 million of KFAB restructuring charges and $200,000 of retention costs. This compares to GAAP operating expenses of $64.6 million or 27.3% of revenue last quarter, and $63.5 million or 26.9% of revenue in the second quarter of 2016.

Looking specifically at selling, general and administrative expense for the second quarter, SG&A expenses were approximately $39.7 million or 15% of revenue, which is our operating model. This compares to $39.7 million or 16.8% of revenue last quarter and $41.4 million or 17.5% of revenue for the second quarter 2016.

Investment in research and development for the second quarter was approximately $19.8 million or 7.5% of revenue compared to $18 million or 7.6% of revenue the last quarter and $17 million or 7.2% of revenue in the second quarter 2016. Combined, SG&A plus R&D for the second quarter 2017 was $59.5 million or 22.5% of revenue compared to $57.7 million or 24.4% of revenue in the previous quarter and $58.4 million or 24.7% of revenue in the second quarter 2016.

Total other expense amounted to approximately $4 million for the quarter, including a $1.6 million negative currency impact. Income before taxes and non-controlling interest in the second quarter 2017 amounted to $19.9 million compared to $2.1 million last quarter and $8.8 million in the second quarter 2016.

Turning to income taxes, our effective income tax rate for the second quarter 2017 was approximately 30.4%, which is slightly higher than our expectations, due mainly to two discrete items. One, related to the adoption of ASU 2016-09 regarding stock compensation and the other to the internal restructuring we have recently concluded.

GAAP net income for the second quarter 2017 was $13.2 million, or $0.26 per diluted share, compared to $1.2 million, or $0.02 per diluted share in the first quarter 2017 and $5.8 million or $0.12 per diluted share in the second quarter 2016. The share count used to compute GAAP diluted EPS for the second quarter 2017 was 49.9 million shares.

Second quarter 2017 non-GAAP adjusted net income was $17.8 million, or $0.36 per diluted share, which excluded, net of tax, $3.8 million of non-cash acquisition-related intangible asset amortization costs and $800,000 of restructuring costs related to KFAB closure accruals. This compares to non-GAAP adjusted net income of $7 million, or $0.14 per diluted share last quarter and $9.8 million or $0.20 per diluted share in the second quarter 2016.

We have included in our earnings release a reconciliation of GAAP net income to non-GAAP adjusted net income, which provides additional details. Included in the second quarter 2017 GAAP net income and non-GAAP adjusted net income was approximately $4.8 million, net of tax, non-cash share-based compensation expense. Excluding share-based compensation expense, both GAAP EPS and non-GAAP adjusted diluted EPS would have increased by an additional $0.07 per diluted share in the second quarter.

Cash flow generated from operations was $19.8 million for the second quarter 2017. Free cash flow was a negative $5 million for the second quarter, which included $24.8 million of capital expenditures. Net cash flow for the quarter was a positive $1.5 million, including the pay down of approximately $15.7 million of long term debt.

Turning to the balance sheet. At the end of the second quarter, cash and cash equivalents totaled approximately $266.6 million and short term investment totaled $16.4 million. Working capital was approximately $541 million. At the end of the second quarter, inventory increased by approximately $16.4 million from the first quarter 2017 to approximately $207.7 million. The increase in inventory reflects a $5.1 million increase in finished goods, a $4.7 million increase in work in process and a $6.6 million increase in raw materials. Inventory days were 104 in the quarter compared to 107 days last quarter.

At the end of the quarter, accounts receivable was approximately $223 million, an increase of $18 million from last quarter. AR days were 74 compared to 80 last quarter. Our long-term debt, net of the current portion, totaled approximately $383 million. Capital expenditures again for the second quarter were $24.8 million or 9.4% of revenue with the majority of expenditures related to capacity expansion in both CAT and SAT as well as 8-inch equipment in SFAB2. We believe 2017 will be slightly higher than our 5% to 9% revenue model, due mainly to capacity expansion related to the current favorable market environment and growth projections for 2018. Depreciation and amortization expense for the second quarter was $23.4 million.

Now, turning to our outlook. For the third quarter of 2017, we expect revenue to range between $270 million and $290 million, or up 2.2% to 9.8% sequentially. We expect gross margin to be 34.5% plus or minus 1%. Non-GAAP operating expenses, which are GAAP operating expenses adjusted for KFAB closure costs, retention costs and amortization of acquisition-related intangible assets, are expected to be approximately 22.5% of revenue, plus or minus 1%. We expect interest expense to be approximately $3 million. Our income tax rate is expected to be 30%, plus or minus 3% and shares used to calculate diluted EPS for the third quarter are anticipated to be approximately 50.3 million. Please note that purchase accounting adjustments of $4.5 million, after tax, for Pericom and previous acquisitions plus KFAB closure costs are not included in these non-GAAP estimates.

With that said, I will now turn the call over to Mark King.

Mark King

Thank you, Rick and good afternoon. Our record second quarter revenue was driven by strong sales across all end markets and regions, including record revenue in both Asia and Europe. Industrial revenue was up 33% sequentially, due to solid revenue increases in North America and Europe. In fact, each of our industrial, automotive and communication end markets reached quarterly revenue records on a dollar basis in the second quarter. Distributor POS also set records both globally and in each region and was up 12.7%, while distributor inventory rose 6%.

Inventory in the channel expanded in preparation for continued growth in the third quarter. Lead time increased on several product lines, in line with industry patterns. Design and customer activity also remain strong across all regions as we continue to penetrate our key customer base with expanded sales footprint and broader product lines. We continue to see significant customer synergy and cross-selling opportunities with the Pericom products.

And as Dr. Lu mentioned, Pericom reached the highest quarterly revenue since the acquisition. From a product perspective, we set revenue records on timing, signal integrity, protection, MOSFETs and CMOS LDOs with strong momentum on switch products due to recent design wins on new products. As we look to the second half of the year, we expect to continue making progress with expanded revenue growth, new product introductions and design wins.

Turning to global sales, Asia represented 79% of revenue; Europe, 12% and North America, 9% during the second quarter 2017. In terms of our end markets, consumer represented 26% of revenue; communications, 24%; industrial, 25%; computing, 18% and automotive was 7% of revenue.

Let me now provide more detail within each of our end markets. In the consumer market, we expanded our audio product line with a family of Peizo Sounders designed to drive ceramic and Peizo speakers for application such as location tracking within the IoT space. We also continue to grow our product offering, targeting the emerging asset tracker application space. Additionally to further expand our presence in the USB Type-C Connector market, we released a proprietary integrated cross bar mux and switch solution that offers excellent signal integrity. This device was commissioned by a major consumer electronics leader for use in their next generation wearable device and is an example of the continued strong market acceptance of our Pericom products.

In the communications market, we released several additions to our AC to DC product line, including two new constant voltage, constant current controllers that support quick charge 3.0 specification for mobile charging. We also saw continued market adoption of our CMOS LDO products in smartphones with major wins at three leading accounts, helping to drive another quarter of record revenue for this product line.

Also for smartphones, we are aggressively ramping a micropower hall sensor at a major customer in support of a very significant design win. Also for mobile communication applications, including charging portable devices and wearables, additional products were launched to meet the needs of Diodes’ major customers, including six PVS low capacitance and general protection devices. Additionally, our low voltage MOSFET technology enabled the launch of three common drained MOSFET pairs used as bidirectional load switches for battery pack applications.

For computing applications, Diodes launched two additional USB power delivery switches for USB Type-C applications that also support fast swap of USB power delivery. We also released MOSFETs package in the PowerDI5060 targeted at motherboard and Notebook Vcore applications as well as 100 volt Trench Schottky parts aimed at power supply applications in notebook and servers. Additionally, our new products from the signal integrity line continue to perform very well in the computing market with notable penetration of our USB3V drives in desktop and server applications.

In addition, we achieved several significant wins for our translators and USB charging controllers and notebooks as well as a PCI-E card reader win for our connected ASIC line. Also in the computing market, we have significant content across multiple customers and multiple platforms based on the Intel Purley processor. We saw initial production ramp in support of this architecture on a multichannel PCI-E read driver and two crystal oscillators and we will ramp several interface logic devices, including in I2C level shifter and I2C mots and a translator in the coming quarter. We are well positioned to capitalize on the market opportunity tied to the Purley process adoption.

For industrial applications, we launched five new devices in our family of high voltage gate drivers, aimed at industrial motor driving as part of the green initiative for increased efficiency and power conservation. Also new for Q2 were two devices featuring a family of MOSFET load switches with integrated control functionality. These products reduce component count and board area, while enabling fit efficient switching. This voltage range of MOSFETs is also suitable for medical, computing and consumer applications.

Also in the industrial market, we once again extended our range of LED lighting products with the release of several additional products, targeting mobile lighting applications, including commercial lighting. Design wins in this space include several standard linear wins and white goods and power adapters in addition to expanding our sensor penetration in the e-meters. We also continue to develop our position in the China HVAC market with positions in multiple platforms for our linear regulators, voltage references and interface products.

And finally, in the automotive market, we continue to make significant advancements in this space with several new product introductions from our innovative MOSFET and bipolar transistors, TVS and SBR platforms. The MOSFET portfolio continues to expand in this area based upon Diodes’ state of the art gateway for technology, power packaging and extended 175 degree C. Temperature rating. Auto qualified MOSFET products from this family continue to drive customer qualification activity and designing across our automotive customers.

Also in the quarter, we launched three IntelliFET devices that were developed and qualified for a range of automotive switching applications. Additionally, we launched a 40-volt trench SBR device for reverse polarity protection based on Diodes’ proprietary trench SBR technology for a wide range of demand in auto applications. New design wins in the auto space included a ceramic speaker driver for a car audio as well as an increased traction for our standard linear products with wins for a central modem for automotive communications in automotive lighting. We are also in discussions for a new opportunity for our watchdog timers for use in charging pile for an electronic vehicle platform.

In summary, with our achievement of record revenue and gross profit in the second quarter and guiding for continued growth and margin improvement, we are solidly on track towards achieving our billion dollar revenue goal for the year. Our new product initiatives, design win momentum and customer expansion efforts over the past several quarters are key factors for our continued growth combined with the increasing revenue contribution from Pericom as a result of the success from our cross-selling opportunities.

With that I'll open the floor to questions. Operator?

Question-and-Answer Session


[Operator Instructions] And our first question is from the line of Gary Mobley with Benchmark. Your line is now open.

Gary Mobley

Well, I wanted to start out with a question about gross margin and I understand the dynamics that drive typically deals with when industry conditions are good as is the case now. Essentially you have one foot on the gas pedal, one in the brake and trying to figure out the right mix and maximization of the gross margin. So I'm just wondering looking at the healthy gross margin in the quarter and well perhaps your outlook for Q3. Maybe if you can parse out the contribution between the mix, pricing on a like product basis and then as well leverage on the fixed expenses?

Keh-Shew Lu

Well, you know Gary, our gross margin affected several items one is utilization and I think in the second quarter now we probably most of our capacity is fully utilized, especially the advantage of the advanced packaging capacity is all fully utilized and therefore the pent-up from capacity utilization probably to the end. Our future is really going to come in from the KFAB consolidated with SFAB because then, you know, I think I announced that before the synergy coming from the consolidation of KFAB into the SFAB will significantly improve our gross margin due to that capacity and output in SFAB. So those will be the future improvement. And then another one is product mix. And I think would continue adjust the price mix, the product mix and this will continue given the advantage in the gross margin and we’ll continue to focus on that area.

Gary Mobley

Mark, judging from your comments relating to distributor point of sale in the delta in the distributor inventory, it sounds like the days of diodes products held in the distribution channel has gone down in light of the ramping revenue? Can you verify that and do you share at all with Wall Street, similarly the consensus, healthy degree of skepticism about sort of inventory restocking and what sort of impact that might have once we answer seasonally weak part of the year.

Mark King

Actually, I think our inventories if you balance the last two quarters is relatively flat, I mean as I said it was up 6% in the channel, but it's still just under three months. So we - that's on a global picture. So I think our inventory is actually in pretty good shape right now. There's a tendency in the second quarter to bring inventory up in preparation for the third quarter. And as we're guiding continued growth we expect our POS to grow again in this quarter. So the inventory should balance out by the fourth quarter comp. So it's a pretty natural pattern for us. So I don't think that that the inventories, this is just a restocking event.

Gary Mobley

Last, can you speak to the competitive environment after what seems to be a pretty massive wave of consolidation and talk about perhaps specifically which of your historical competitors might be pulling back the reins on some of the products that you specialize in?

Mark King

It's a pretty complex mix of competitors and product line, so it's hard to be really consistently. Obviously the pricing environment is firm. I wouldn't say there's a significant amount of price increase, but the typical erosion doesn't exist there. Some of the commodity product areas are stabilizing, but there are still products, key focused products that are under contention, the ones that everyone wants to sell. Even the consolidation, everybody out there is strong, so you might want to look at it and say Xperia has gotten stronger, not being related to NXP then it was, [indiscernible] is still very aggressive competitor in the space and so forth. And then you still have the emerging Asian suppliers. So I think our space will always remain very, very competitive.


Thank you. And our next question comes from the line of Tristan Gerra with Baird. Your line is now open.

Tristan Gerra

I think you've mentioned that you were pretty much at full capacity. Is that the case for backend as well and also if you can give us maybe the utilization rates blended on your [indiscernible] capacity? And also if you could give us an update on your 8-inch post qualification at fab 2 - BCD fab 2.

Keh-Shew Lu

So let me talk about first, the big gain, we are about 95%, but Rick can give you more detail, we are above 95.

Rick White

So SAT is over 95%, 96% and CAT is 92%.

Keh-Shew Lu

You know we said it up 95, assume it’s fully diluted. So, for the back hand, in my mind, we are almost there. Okay. And from the wafer fab obviously KFAB, we are on the process to finish it up, so I’m really talking about capacity, full capacity because we try to get as much wafer build as possible before we shut it out. So it’s not capacity limitation, we just should be. It’s fair. I would say we almost fully loaded because we are increasing the capacity of the SFAB, but not now, after KFAB shutdown, the KFAB equipment will move to SFAB in that SFAB capacity. So I would say next year, at the beginning of next year SFAB capacity will increase. And I think we shut down in September and moved equipment the install qualify. So that addition of capacity won’t start until beginning of next year. Today, current capacity because we start to qualify KFAB material at the same time we start to view some material to support the customer who currently use KFAB, when we shut down KFAB, they can start buying from SFAB. So today, SFAB 1 is at full speed, fully loaded at the current capacity. Now, at the beginning of next year we’ll have enough additional capacity muted by the equipment shipping from KFAB.

SFAB 2, we are above 91%. So SFAB 2 today is a fully loaded to the capacity base. That’s talking about 6-inch capacity at SFAB 2. Now 8-inch we already finished the development. We are now quantify the product, the process is already quantified. Now we are starting to quantify the product. And then after quantify the product, we will give the sample to the customer and we will start to rent. So my expectation will be probably end of, close to end of second quarter will start to ramp, it depend on customers’ acceptance and keeping the customer acceptance if we didn’t accept. So I would say probably the last month of the year might be the one we start to ramp up the production. That’s current schedule. But basically process development is done, it’s quantified. Now we quantify the product.

Tristan Gerra

Could you give us where your blended lead times are currently and whether you see any signs of ordering from some customers?

Rick White

Some - any signs of what some -.

Tristan Gerra

Orders that exceed the all-in demand.

Keh-Shew Lu

I can you answer you on this one. Since we are very careful, we actually make sure the customer tell us or our distributor tell us who is their customer and we go to check their run rate. And so, we view the capacity constraint, we are supporting issues of supporting to our customer, we’re going to make sure we only ship the one that really needed. We are not going to ship to our distributor for their inventory. And therefore if they cannot tell us who is their customer and what is their run rate, and we cannot notify, we are not going to accept the order. And so from the top order point of view, I think it’s not there, maybe here or there a little bit, but I don’t think you’re going to see a attach double order because we kick them out. Okay. And lead time.

Mark King

From the lead time perspective, we definitely had some extension in lead times in certain product areas. As Dr. Lu mentioned earlier, some of our newer packages are much tighter. Some of our product launches are better than we expected and we haven’t been able to bring capacity as fast as we like. So we’ve even seen some of our products reach 20 weeks. But in general we're probably ranging anywhere in the six to 20 week range, so balanced out. I would say a very few of it would go out that far, some places where we just have foundry and package constraint together where some of those products are going out so far. So I think we have it under control. Certain products we can deliver just based on the decision and so forth. So I don't think it's too bad except for a narrow range of parts.

Keh-Shew Lu

We have got materials and reaching some shortage, we can resolve it with our purchasing power, our relationship and like a [indiscernible] material they see some shortage but with our purchasing power, our relationship with our vendor, typically we can solve it. I don’t think that’s a major issue. But some of the very advanced packaging which we are ramping up more than what we expected, quicker than what we expected than we could have, some to support that majority like a mux sale, meantime, stretch a little bit but it’s not that terrible. And we make sure no double ordering, not the order [indiscernible] we don’t accept the order if they don’t meet it.


Thank you. [Operator Instructions] And our next question is from the line of Shawn Harrison with Longbow Research. Your line is open.

Shawn Harrison

First question if I may, if memory serves me right, at the point in time of the Pericom acquisition, gross margins were maybe in the mid 40% range, is that accurate to kind of think about where they are now and how you benefited from that mix this quarter?

Keh-Shew Lu

Well, [indiscernible] if you remember you know one is the general IC, one is a frequency product called FCP that crystals those kinds of products. So FCP is somewhere around 40% and IC is running above 50%. So you are correct, if you average out, is above 45% but that is when we bought it…

Rick White

That’s what it was.

Keh-Shew Lu

But it dependents on the growth and if the IC growth is faster than FCP product growth, then the GP will be higher because that is higher GP. So what we see right now is the IC growing faster than FCP portal.

Shawn Harrison

The second question I had was just you know end markets into the September quarter, the growth of 6% sequentially at the midpoint is much better than seasonality we've seen for the past couple of years. Are there any markets where you would be a consumer or computing your communications or even a continuation of industrial where the growth is going to be substantially better than the seasonality you've seen over the past couple of years?

Mark King

I have to say that the marketplace is pretty solid in a lot of areas. I think North America and Europe are going to continue to have a strong quarter. And so the industrial will stay strong, but it will probably get minimized by, it seems like the consumer people are rolling pretty strong going into third quarter. And then you have the communications group that's going to start ramping or continue ramping in that period. So I would say in those areas, a lot of molded number is still growing and probably a record again next quarter. But it just won't look as good because the other things are growing faster. So I think I think it's in pretty good shape. And then actually our computers are doing relatively well. We have the new stuff coming out on Pearly, on Pearly stuff and some of our Pericom products that are focused and that are doing quite well. So actually we're seeing kind of all boats rising right now going into third quarter.

Keh-Shew Lu

And if you want to compare this one they’re thinking about third quarter typically for Europe is you know we call the casing quarter, right. So if you look at more of the years, European in the third quarter slowdown more and the other region is going up and so that caused the seasonality. But last year and this year, European continue strong through the third quarter and therefore in our overall quarters, third quarter is better than expectation or better than sequential seasonality is because Asia normally grows faster in third quarter and Europe supposed to go down, they’re not really slowed down, then it bring us, the growth better than seasonality or better than he past.

Shawn Harrison

And just a I guess a reminder, does most of the industrial business go through distribution or does any of that go on a direct basis to the customers?

Mark King

I think some of it goes to the - but our industrial marketplace is North America and European based and North America is about 80% channel and Europe is about 69% channel . So I would say that lends itself to be distributor based business. We do have industrials in Asia but that's not our strongest numbers in Asia.


Thank you. And I’m not showing any further questions in the queue. I will like to turn the call back to Dr. Lu for his final remarks.

Keh-Shew Lu

Thank you for your participation today. Operator you may now disconnect.


And thank you ladies and gentlemen for participating in today's conference. This concludes the program and you may all disconnect, have a wonderful evening.