AudioCodes (NASDAQ:AUDC) Q2 2021 Earnings Call

0:00 Greetings and welcome to the Audio Code Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Roger Chuchen, Vice President of Investor Relations. Thank you. You may begin.

0:29 Thank you. Hosting the call today are Shabtai Adlersberg, President and Chief Executive Officer, and Niran Baruch, Vice President of Finance and Chief Financial Officer. Before we begin, I'd like to remind you that the information provided during this call may contain forward-looking statements relating to Audio Code's business outlook, future economic performance, product introductions, plans, and objectives related thereto, and statements concerning assumptions made or expectations as to any future events, conditions, Performance, or other matters are forward-looking statements as the term is defined under U.S. federal securities law. Forward-looking statements are subject to various risks and uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. These risks, uncertainties, and factors include, but are not limited to, the effect of global economic conditions in general and conditions in audio codes industry and target markets in particular.

1:22 Shifts in Supply and Demand, Market Acceptance of New Products, and the Demand for Existing Products, the Impact of Competitive Products, and Pricing of Audio Codes in its Customers' Products and Markets, Timely Products and Technology Development, Upgrades and Ability to Manage Changes in Marketing Conditions as Needed, Possible Need for Additional Financing, the Ability to Satisfy Covenants in the Company's Loan Agreements, Possible Disruptions from Acquisitions, the Ability of Audio Codes to Successfully Integrate the Products and Operations of Acquired Companies, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg Thank you Roger. Good morning and good afternoon everybody.

2:46 I would like to welcome all to our second Quora 2021 conference call. With me this morning is Niran Baruch, Chief Financial Officer and Vice President of Finance for Decodes. Niran will start off by presenting a financial overview of the Quora. I will then review the business highlights and summary for the Quora and discuss trends and developments in our business and industry. We will then turn it into the Q&A session. Niran?

3:18 Thank you, Shabtai, and hello, everyone. As usual on today's call, we will be referring to both GAAP and non-GAAP financial results. The earnings press release that we issued earlier this morning contains a reconciliation of the supplemental non-GAAP financial information that I will be discussing on this call. Revenues for the second quarter were $60.6 million, an increase of 13.2% over The amount of deferred revenues as of June 30, 2021 was $73.4 million. Up from 65.1 million as of June 30, 2020.

4:19 Revenues by geographical region for the quarter were split as follows. North America 43%, EMEA 34%, Asia Pacific 17%, and Central and Latin America 6%. Our top 15 customers represented in aggregate of 62% of our revenues in the second quarter, of which 47% was attributed to our 11 largest distributors. GAAP results are as follows. Gross margin for the quarter was 69.4% compared to 66.7% in Q2 2020. Operating income for the second quarter was 10.1 million or 16.7% of revenues compared to 8.8 million or 16.5% of revenues in Q2 2020.

5:08 Net income for the quarter was 8.2 million or 24 cents per diluted share compared to 6.6 million or 21 cents per diluted share for Q2 2020. Non-GAAP results are as follows. Non-GAAP gross margin 49.7% compared to 66.9% in Q2 2020. Non-GAAP operating income for the second quarter was $13.6 million or 22.4% of revenues. compared to 10.7 million or 20.1% of revenues in Q2 2020, an increase of 26.3%.

6:02 Non-GAAP net income for the second quarter was 12.7 million or 37 cents per diluted share compared to 10.5 million or 32 cents per diluted share in Q2 2020. At the end of June 2021, cash, cash equivalents, bank deposits, and marketable securities totaled $191.9 million. Net cash provided by operating activities was $17.1 million for the second quarter of 2021. Day sales outstanding as of June 30, 2021, were 56 days.

6:48 During the quarter, we acquired approximately 236,000 of our ordinary shares for a total consideration of approximately 7.1 million. On July 2021, we received court approval in Israel to purchase up to an aggregate amount of $35 million of additional ordinary shares. The court approval also permits us to declare a dividend of any part of this amount. The approval is valid through January 3, 2022. Earlier this morning, we declared a cash dividend of $0.17 per share. The aggregate amount of the dividend is approximately $5.5 million. The dividend will be paid on August 26 to all of our shareholders of record at the close of the trading of August 11.

7:42 Now to providing an update on our guidance. We are raising our guidance for revenues to be in the range of $243 million to $250 million compared to the previous range of $240 million to $250 million. We are reiterating our guidance for non-GAAP diluted net income per share for 2021 to be in the range of $1.45 to $1.65. I will now turn the call back over to Shabtai.

8:30 Thank you, Niran. We are very pleased to report strong financial results and continued progress in our business in the second quarter of 2021. This is the second quarter in a row where our revenue grew 13 percent plus year over year. As a comparison, growth in the second quarter of 2020 last year was about 8.2, so quite a leap in terms of revenue growth rate. Now, the majority of this growth came from the enterprise business, which has provided close to 85% of the company revenue in the second quarter. To remind us all, enterprise business consists of our UCAS and contact center market operations.

9:15 Bottom line of this is that while the company revenue grew 13.2, enterprise-related revenue grew above 20% year-over-year, which clearly points to the potential of the of increasing our company annual revenue growth rate in coming years well beyond 13% a year. During the quarter, we continued to execute in all of our three strategic business areas in the enterprise space. First, Microsoft Teams business grew well above 20% year over year. I should add that in general, we saw robust demand in the U.S. enterprise market Much along the same trend we saw in the first quarter of 2021. This is a direct result of the decline in the pandemic in the U.S. and other markets.

10:05 Contact center operations grew nicely year over year. We'll touch that later on, and we will talk about developments, new developments that we've seen in certain areas. And in conversational AI, we saw nice progress in several business lines. Most important, Booking and revenue growth of more than 100% year-over-year. In summary of the progress made in the UCAS and contact center, and in view of similar such trends in several past quarters, second quarter industry dynamics further underscores the fact that collaboration hybrid work and work from home remain key industry trends, not only in 2021, but well beyond.

10:51 And thus, they do present for us long-term growth potential. Also, it's important to say that our decision made at the end of last year to increase our investment in R&D, sales and marketing, and services on account of trading off for lower operational margin and profitability proves to be working well. and should fuel our success in the market in coming years. And much along the same line reported in the previous core, we experienced strong demand and performance in North America services operation and continued SBC business strength. And so the outlook for 2021 in the second half of the year looks positive and promising.

11:43 Going back to the various business line performance during the second core, here is a breakdown. UCAS and UC, which contribute about or above 70% of revenue, grew above 20% year-over-year. Contact Center, which provides for between 10% and 15% of revenue, grew above 25% year-over-year. So, all in all, if we take Enterprise as a whole, which provides close to 85% of revenue, we grew above 20% year-over-year. In view of that, we should have been growing faster. However, there's one business area, the service provider CPE business, which really suffers substantially from the pandemic, much along the same lines that we've seen in previous quarters.

12:42 Service provider CPE, which was top of $10 million a quarter last year, was substantially below that in the second quarter, and we have extreme decline. If you take Service Provider CP, that's about between 10% and 15% of revenues. So that basically is the difference between the growth of 20% plus in the enterprise and the overall company growing only about 13%. Last, I'll mention two other business lines which are really minor at this stage. First is the voice AI business, which is just about 1.5% of business, but grew year-over-year 100%. Technology business continued to decline. It is now about 2% to 2.5% of overall revenues and has declined about 15%.

13:36 But all in all, a very strong core in terms of our enterprise performance. Now, getting to our long-term financial model that we presented in the last two courses, Generally, we're looking for the current three years, 21 to 23, to provide for revenue growth of 13% to 15%, non-GAAP gross margin 67% to 70%, OPEX as percentage of revenues. We said it would be capped at 47%, and then non-GAAP operating margin to be in the range of 20% to 23%. If we Look at second-core performance. We seem to be well within those ranges, except for OPEX.

14:24 OPEX came at 47.3%. And we believe that, indeed, going forward, we will fix that range, and I think we will probably target 47% to 49% or even 50%. It all comes to investing more in areas where we feel that There's a lot of potential, and we should increase our investment in this area. Now, touching on several more important financial data points for the core, OPEX increased substantially, more than 5% sequentially, mainly due to two key factors. One is increasing aid count. I'll touch that immediately. And then the impact of much lower new Israeli shekel versus the U.S. dollars exchange rate.

15:15 I should say that we basically were edging that conversion rate up to the end of the first quarter of 2021, and we enjoyed a very good rate of 3.7 new Israeli shekels per dollar. However, in the second quarter, no edge was available, and therefore we were at 3.3%. So there's a big gap of about 11% between The exchange rate used up to the second quarter and in the second quarter. That explains a surge of more than $1 million in our OPEX expenses. Ad count increased 31 positions to 821 full-time employees in second quarter 21, growing 9% year-over-year and 999% sequentially.

16:05 Obviously, adding more than 70 positions over the year-ago quarter clearly demonstrate our confidence in our continued expansion of our business. Cash flow from operating activities. We generated $17.1 million in the second quarter and more than $30 million in the first half of 2021. That compares with just $17.5 million in the first half of 2020. On an annual level, we can now plan on annual cash flow from operating activity of 55 to 60 million in 2021, generating a lot of cash and allowing us to allocate capital for various targets that we see. Deferred revenues continue to grow and mounted to 73.3 million versus 65.1 million a year ago, an increase of 12.6%.

17:13 over the second quarter last year. Now let's go to the key business area that present the most potential for us. Let's talk first about Microsoft. So Microsoft business grew above 20% in the second quarter. We have seen accelerating mid-market opportunity that we had access to. We have been leveraging GotiCodes live services. I'll talk more of that later on for Microsoft Teams. mostly around die crowding as a service. And at this stage, live contracts, total contract value pipeline equals several tens of millions going forward. So we have generated for us quite a potential going forward.

18:01 Within the Microsoft Teams space, IP phone business came back from 2020 and was stable and showing plenty of room for growth. That was a very nice comeback as compared to 2020, where we all suffered from the pandemic and the fact that there were no purchases of devices for premises. Though the mechanism of recovery is somewhat encouraging, we all know about the ongoing chip supply constraints, and therefore we believe that we could be heard in the third quarter from a shortage of Chips. We continue to certify our devices for video conferencing in the Teams environment. Also invested quite a lot in the Microsoft Teams environment. We have been investing in a new proprietary development for that ecosystem.

19:00 Invested substantial R&D to come up with an offering that's new to the market. We assume that we will talk more about it as we launch it Early 2022. About our live cloud operation where we try to provision and help our service provider provide a live service themselves. We saw some progress in that space. We are releasing a major release in the September timeframe. and that will allow us to add multi-tier and reporting, make it more powerful for the go-to market. We have one big OEM that has signed up to live cloud and is now introducing it in their channels.

19:52 Another program that is very important to us is Microsoft Operator Connect. Microsoft introduced API for Teams allowing operators to integrate to the Teams marketplace and offer their plans and DIDs. Lab Cloud testing with Operator Connect API started already and we expect an introduction to the market in the first half of 2022. In terms of growth, we've seen definitely growth in the Teams space. Teams has grown 90% year over year compared to the second quarter in 2020. Skype for Business continued to decline All in all, if we compare it to the second quarter of 2020, the decline was about 45% year-over-year.

20:42 All in all, we continue, as I've mentioned before, to grow on overall Microsoft business 20% year-over-year. At this stage, Skype for Business really is down to a level where further decline will not contribute much to the decline of Skype for Business. I'm sorry, Microsoft. It was also a very successful core in terms of new business created. We've seen a lot of business created mainly in the Teams space. We've seen an increase of more than 100% year-over-year and more than 20% sequentially. So definitely quite active area for us. In terms of some of the wins we enjoyed, I can talk about one big We're in Western Europe where we provided a managed services solution in that space.

21:44 The significance is that managed services providers finding RD codes live is an easy way for them to accelerate time to service. We also enjoyed a large contract with a leading Tier 1 Operator in Asia Pacific. Basically, we believe that large service providers continue to roll out Teams to the SMB and mid-market accounts through those type of services. Also, we've seen large enterprises, which we acquired as customers in Skype for Business many years ago, they keep placing purchases and expansion as they migrate to Teams. And we've got such examples both in Japan, and the U.S.

22:32 Now to our live offering, which is really the key to our success going forward. So let's talk about Teams Voice as a Service. This is where we focus. Teams Voice as a Service is our, you know, best offering today in the market. In 2021, we have significantly stepped up our efforts and accelerated the introduction of AdiCodes Live Teams Voice as a Service. addressing critical challenges faced by medium- and large-sized businesses as they adopt Microsoft Teams phone system. Teams voice as a service removes complexity from the integration of Teams collaboration, unified communication, and enterprise telephony and provide a seamless, rapid, and cost-effective migration to Teams.

23:20 In building this service, we have brought together our SBC, Network and User Management, This allows our customers to quickly integrate SIP trunk contracts, integrate with legacy solutions, and roll out globally, including on premises devices such as phone, video rooms, and analog adapters. Our consulting services team can help address planning, design, and discovery together with our partners or to complement the capabilities of some Office 365 partners who have expertise in the Microsoft software solution but lack telephony knowledge.

24:06 Since introducing the concept of LiveMid last year, we experienced good reception to the offering. We talk about this in the following and gross in our annual recurring revenues from this activity. It is important to know that using this software as a service offer We are able to extend this offer to other markets. We have already won first accounts for similar such service with Zoom phone customers. I'll talk about Zoom in a minute. We are successful also in winning first such offering in the context of the market. So Audicodes Live is the key to our success going forward. As we continue to grow very fast our recurring revenues and make good progress in second quarter 21, We have exceeded by more than 10% our stated 10 million AOR target for June 2021. Hence, we now expect this type of business to go above the target of 15 million AOR by the end of the year, growing 2.5 times above 2020 levels. Our booking or total contract value of this business on end is already several tens of millions of dollars.

25:24 by a large number of enterprises that have already started or are about to start their UKS deployments with us. Also, there's a nice pipeline that's growing steadily and building up. This fast-growing business is a tangible proof to our superior technology in the areas of connectivity, management, automation tools, services, and adjacent application to the UC solution majority of it. I'm confident that this business will keep growing and represent a significant portion of RD codes value in coming years. Now let's talk a bit about Zoom. Zoom starting to show up in our activities in 2021. We already reported in the first quarter of 2021 about growth in the Zoom phone area. The second core was also a good one.

26:22 We all know that Zoom reported about two months ago that they have grown from 1 million Zoom phone users to 1.5 million Zoom phone back when they announced it. Although we made quite a big leap over 2020, the core could have been substantially All in all, we are building our presence in the Zoom phone area. The amount of new opportunities developed in the second quarter was substantially above anything we saw ever in the Zoom phone area, amounting to several millions just in the second quarter.

27:13 Just to remind you that also in the first quarter, We had about 1 million of business created. So all in all, we start to see some enterprise Zoom phone deals that are rolling out over a prolonged period. We're also talking about introducing more of what we do in the Microsoft Voice space to be applicable to the Zoom phone area. Basically, we try to position ourselves as the best Voice Go-To Partner for successful collaboration players such as Microsoft. And now we start to see that with Zoom too. Talking a bit about OSBC business, which was great in second quarter, we grew above 20%. Actually, at this stage, we are well into our plan to reach 120 million of SBC Revenues in 2021.

28:15 Side by side with our ability to deliver a good core, we've seen nice growth in booking going forward, both in live and non-live environment. And also we've seen similar such phenomena in the contact center and in the Microsoft business. So all in all, very good core. Again, from a geo split, I'll mention that It split almost one-third in North America, one-third in West Europe, about 17% in APAC, and the rest in KALA in East Europe. So all in all, we are well on plan to execute on our plan to grow this year by more than 20%.

29:04 Most important, our services business. As we have mentioned before, We grew above 32% year-over-year. The majority of the growth really comes from the professional services area and mostly from managed services. Very strong. I would say that the complexity of launching a new voice service within an enterprise, usually our ability to provide those services provides Both the products and the accompanying services so that we can basically provide the enterprise with quick time to deployment and operation is much appreciated by our customers. Already have a very nice pipeline of opportunities in this area. So professional services and managed services is becoming key. All in all, it represents about 38% Just to touch on some of the developments in the contact center market, so we're starting to see WebRTC as a key successful technology.

30:20 As we have mentioned before, when you start to place agents at home, or a lot of the communication goes from home, there's a need for good, you know, high-quality A voice solution to be transported over internet clients. WebRTC provides that. It's being used mostly in the contact center area, and we have seen a record core in terms of WebRTC operations. Also, we focus in the contact center market mainly on collaborating with Genesys. So we have invested quite heavily in transitioning some of our solutions into the cloud environment.

31:09 We have already registered four leading applications in Genesys App Foundry solution in the cloud, namely VoiceBot Connectivity, WebRTC, Teams Integration, and Advanced Bring Your Own Carrier. So all in all, we're starting to see some developments here. Already saw some first few projects with our WebRTC and live operation in contact center. Last, I'll touch on the development in the voice AI area or conversational AI. We have been able to grow revenues and booking by more than 100%. I would talk mainly about our voice AI connect activities, which have shown great growth. And also a lot of success for SmartApp or compliance recording solution.

32:09 The transition of communication and collaboration platforms into Teams really make it necessary to move all of the old compliance recording solution to Teams too. So we enjoy a lot of business in that area. So SmartApp has been growing fairly fast. and basically it has shown almost 100% year-over-year growth. Touching on VoiceAI Connect, as I've mentioned in the past, this is a solution that allows to connect the voice world, telephony, contact centers, SIP trunks, PBXs to cognitive services such as speech-to-text, text-to-speech and more.

32:57 We made quite a progress in the second quarter. In terms of revenue, we have more than doubled first quarter revenue. Booking grew 10 times more than the first, I'm sorry, the same quarter in 2020. We have created a lot of opportunities, and roughly we are above and beyond the plan we had at the beginning of the year. So at this stage, we are in a fairly accelerated mode in that. Out of all the different projects we have in that space, I'd like to touch on one very specific, which is key to our success going forward. I'll talk about Vodafone.

33:43 Vodafone has a bot called Tobi. Tobi is a Vodafone multi-channel digital system that is in use in multiple Vodafone countries, many markets. It is used by Vodafone to be constantly engaged with its customers, offering persistent assistance and customer experience. Now, Vodafone has selected Otico's Voice AI Connect to enable its customers to talk to Toby, their chatbot. Voice AI Connect not only facilitates voice interaction with Toby, but also integrates with Vodafone multi-vendor customer support system, including Genesys, Avaya, and Cisco. Initial rollouts started earlier this year in South Africa with positive feedback and plans for rapid expansion to additional countries and later also other use cases including agent assist, speaker verification, and outbound calls.

34:40 The solution is provided as a managed service in Vodafone data centers in a subscription-based model and should be used all over the world. With that, I have completed my introduction to this call, and we would like to take the call into the Q&A session. Operator? Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Samad Samana with Jefferies. Please proceed with your question.

35:26 Hi, good morning, and thank you for taking my questions. Maybe first, Shabtai, I appreciate all the detail that you gave in your prepared remarks, but just, you know, it sounded notable to me that you're seeing Zoom phone more often. That felt like something incremental or new. Can you maybe just help us understand how the economics of that partnership work and Are you seeing customers decide between Zoom Phone and Microsoft Teams for telephony, or just maybe what are you seeing from those two head-to-head?

36:01 So, you know, Zoom, as far as we know, right, much of what I'll tell you really comes from the market. Zoom was very easy and will be successful mostly in the lower end of the market. They're working their way up to the mid-market and the large enterprise. Obviously, we have more value to offer when you come to enterprise. So as Zoom steps into more and more deals with large enterprise and mid-market companies, collaboration with Zoom will pick up. And that's really the source of our better performance in the first half of 2021.

36:48 Great. And then maybe just a follow up question on the guidance. We saw the bump up in the revenue outlook, but EPS was held in the same range. I'm curious, how much of that is due to the FX weakness versus the ramping of actual growth investments? Just can you help us maybe bifurcate that? And if it hadn't been for FX, would you have raised that EPS guidance?

37:18 Yeah, so we had a step function in terms of the FX.

37:24 So all the impact of the US dollar exchange rate going down from 3.7 to 3.3 is now fully embedded. And therefore, we do not expect any further change in coming course. On the other end, I can tell you that we have pressure from both partners and some big customers to perform certain developments. Some of our partners come to us with requests to invest and develop new capabilities, and us serving them says, yeah, we will evaluate it and we will invest in it. So basically this is really what drives our investments. I can tell you that most of the investments really were made in three different areas. It's R&D, developing those, It's sales and marketing to attract and achieve more sales in the market. And then service, because once we focus more on managed services, we need to increase personnel that helps customers deploy those managed services.

38:35 Beyond that, I think that we need to take into consideration Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg, Pushing on all cylinders on growing revenues, but as far as profitability, we need to be more conservative.

39:26 That's where it is.

39:29 Okay, great. And there's just one housekeeping question. I didn't hear if you said teams growth specifically for the quarter. Can you just tell us what teams related growth was, please?

39:41 I'm sorry, can you repeat the question, please?

39:43 Yeah, Microsoft Teams-related growth. I think you said overall Microsoft growth.

39:49 Yeah, we've mentioned, yes. Yeah, I've mentioned the Teams revenue grew 90% year-over-year, 9-0.

39:59 Okay, great. Great, thank you. I'll turn it over to the next analyst. Appreciate the questions this morning, and congrats on the quarter.

40:08 Thank you so much. Thank you. Thank you. Ladies and gentlemen, as a reminder, please press star 1 if you'd like to join the question queue. Our next question comes in the line of Greg Burns with Sidoti & Company. Please proceed with your question.

40:22 Good morning. Is there any potential benefit for you from Zoom's acquisition of Five9? Good question, Greg.

40:35 So on the first glance, not sure. However, Should Zoom be successful in integrating with Five9 in terms of their customer base? With Five9, Zoom is a strong mid-market player. That may help Zoom to win those mid-market players. Now, if that happens, the answer is yes. Meaning that if Zoom is successful in acquiring more mid-market players, You know, customers of 5.9, that would be good for us. Okay.

41:15 And then just getting back to the OPEX and the increased investments you're making, I didn't quite catch it. Did you raise your target for OPEX, that cap from 47, above 47? How should we think about that going forward?

41:36 Yeah, good question. Okay, good question. Originally, when we have established the range for OPEX to be capped at 47%, that was made end of last year. We have not anticipated that the U.S. dollars will depreciate against the new Israeli shekel that much. I'll tell you that the guiding line for us is really increasing investments where needed. Be it in services, be it in R&D, and other areas, or adding sales positions. So in view of that, we'd rather change what we have said that OPEX will be kept by 47%, and basically we want to extend it to be kept by 50%, okay, and increase this 3%. That would mean that if that happens, then Operating Margin will go down towards the 20% rather than stay as they are today above 22.

42:46 So that's a compromise. We give priority to increasing investments over profitability.

42:53 Okay. Okay. And then in terms of the decline you're seeing in the service provider, the CPE area, it's pretty, I guess, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg, Shabtai Adlersberg,

43:37 You know, purchase order for a long time. We started to see towards the end of the quarter some new POs. However, with, you know, the rise of the force wave, hard for me to say. I'll tell you that, you know, plants, because enterprise market goes well, you know, software and services goes well, Most of the company priority and strategy lies in that area. And therefore, at this stage, service provider is still a 10% to 15% revenue source for the company, but we place less importance to that. We'll have to live with what the market provides us.

44:26 Okay.

44:27 Thank you. Thank you. Ladies and gentlemen, once again, if you'd like to join the question queue, please press star 1 at this time. We'll pause a moment to allow for any other questions. Thank you. Our next question comes from the line of Ethan Edsonino with Edsonioni Portfolio Management. Please proceed with your question.

45:20 Yes, I wanted to ask about the interest expense. Why would you have an interest expense if you have so much cash and no debt?

45:32 First, we are investing in marketable securities mostly at the yield of 1% because we don't want to take any risk about our cash investments. With some exchange rate differences, it comes close to zero for this quarter and previous quarter. Of course, if the interest rate at the marketable securities or at bonds will raise, we should expect more. But negative, do you have IFRS 16? Are you impacted by that or you're not subject to, is GAP subject to IFRS 16? No, we are subject to U.S. GAP, not to IFRS.

46:23 Okay, so it's nothing to do with leasing or something like that? No, leasing at Dong Gap, we, you know, Take it out as a reconciliation. You can look at the reconciliation between the gap and the non-gap. So no impact from the leasing. So we should expect a positive finance income over the long term? Yes. Okay. Thank you very much. Okay. Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to management for any final comments.

47:15 Thank you, operator. I would like to thank everyone for attending our conference call today. With continued good business momentum and execution in the first half of 2021, we believe we are on track to achieve another strong year of growth and expansion in 2021. We look forward to your participation in our next quarterly conference call. Thank you very much. Have a nice day.