Frequency Electronics (NASDAQ:FEIM) Q1 2020 Earnings Call

0:00 Greetings and welcome to the Frequency Electronics fourth quarter fiscal year 2020 earnings release conference call. At this time, all participants are in a listen-only mode. A brief 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. Any statements made by the company during this conference call regarding the future constitute forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause actual results to differ materially from the forward-looking statements.

0:45 Factors that would cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic reports filed with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this conference call. It is now my pleasure to introduce your host, Martin Block, Executive Chairman of the Board of Frequency Electronics. Sir, the floor is yours.

1:15 Martin Block Thank you. As usual, I will turn the first part of this presentation to Steve Bernstein who will give you the detailed update and then Dan Sloan will give you the update from his view and I'll summarize some other thoughts for everybody and then open the discussions to every one of you. So Steve, go ahead.

1:46 Thank you, Martin, and good afternoon. For the three months ended July 31, 2019, consolidated revenue was $12.6 million, up 14% from $11 million for the prior fiscal year. The components of revenue are as follows. Revenue from commercial and US government satellite programs was $3.9 million compared to $5.5 million for the same period of the prior fiscal year and accounted for approximately 31% of consolidated revenue compared to approximately 50% in fiscal 2019. Revenues on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the FDI New York segment.

2:35 Revenues from non-space U.S. government and DoD customers which are recorded in both the FEI New York and FEI Zipher segments rose to $6.7 million compared to $4.8 million in the prior fiscal year. Other commercial industrial revenues was $1.9 million compared to $700,000 in the prior fiscal year. Intersegment revenues are eliminated in consolidation. For the three-month period ended July 31, 2019, the gross margin and gross margin rate both decreased over the same period in fiscal 2019. The decrease is primarily due to higher engineering costs on several current programs which relate to products that are pushing state-of-the-art technology.

3:24 For the three months ended July 31, 2019 and 2018, Selling and administrative costs were approximately 20% and 23% respectively of consolidated revenue. There were no accounts or type of expense that represented a significant portion of the change in expense. R&D expense for the three months ended July 31, 2019 and 2018 increased to $2.3 million from $1.6 million, an increase of $700,000 and were approximately 18% and 15% of consolidated revenue. The company expects to maintain a high level of internally funded activity relating to R&D through the balance of the current year and beyond to address new large opportunities in secure communication, command and control applications, next generation satellite payload products and additional DoD and commercial applications.

4:24 For the three months ended July 31st, 2019, the company recorded an operating loss of $780,000 compared to an operating profit of $85,000 in the prior year. The operating loss reflects improvements in revenue offset by both lower gross margin and increased research and development costs compared to the same period of fiscal 2019. Other income consisted primarily of investment income derived from the company's holdings of marketable securities. For the three-month period ending July 31, 2019, investment income included $125,000 dividend for Morion. Other income included the sale of a fixed asset for a gain of $50,000.

5:10 This yields a pre-tax loss of approximately $570,000 compared to a pre-tax income of approximately $38,000 for the prior year. For the three months ended July 31, 2019, the company recorded a tax provision of $20,000 compared to $7,000 for the same period of fiscal 2019. Consolidated net loss for the three months ended July 31, 2019 was $591,000 or $0.07 per share compared to income of $31,000 or a fraction of a cent per diluted share compared to previous year. For the period just ended, the company generated positive cash flow from operations of $153,000.

5:56 Our fully funded backlog at the end of July 2019 was $35 million. The company's balance sheet continues to reflect a strong working capital position of approximately $45 million as of July 31, 2019, and a current ratio of over 8.5 to 1. The company believes that its liquidity is adequate to meet its operating and investing needs for the next 12 months and foreseeable future. I return the call back to Martin, and we look forward to your questions later.

6:27 I will turn over at this moment to Stan Sloan for his remarks. Stan, please.

6:34 Thanks, Martin. As I stated in our press release, I'm very encouraged by the amount of new business activity we are seeing. I believe on our last call we mentioned that we had over $450 million of bids outstanding. As of today that number is around $490 million. We are seeing some delays in award of new space programs, but our win rates are solid and overall the new business picture is very promising. Revenue was also up from Q1 of last fiscal year. We have several development programs which we feel will have substantial production tails and in which we have made a decision to invest. I feel the short-term effects on gross margin are well worth the investment, particularly since we have already received initial development contracts for several of these that could potentially result in $200 million plus of revenue.

7:25 Overall, I believe we are making progress on improving operations with an eye to long-term growth of the business, both top and bottom line. We also continue to generate positive cash flow. Martin?

7:39 Okay. I think to see clearly the future, we should examine a little bit the past and what happened. Over the past three years, all our customers have suffered severe decrease in satellite business, which was our main area. And to give you examples, an average of 33 geosynchronous satellites were bought on the average year. Over the past three years, the average was less than 10. So when our customers lost a lot of business that affected our big portion of our backlog. Second thing that happened is new technology was introduced and this is instead of getting 15 year to 20 years commercial satellite, the cheaper launch cost, they are now happy to use automotive parts and expect five year of life in orbit. All of this had an effect on our satellite business. However, during that time we weren't sitting on our tush and waiting for a miracle. We invested a lot in research and development and products which Stan has mentioned has brought our proposal backlog the first time in numbers which we have never expected to do.

9:13 And what Stanis mentioned is that some of these programs, although they have a slow start, our customers have given us initial R&D funds in order to protect schedule. I want to relate another effect that happened that promises a great opportunity to frequency electronics. In July, The second most significant navigational system to GPS called Galileo, which is the European GPS, failed because of ground station problems and was off the air for eight days. If God forbid that would have happened to GPS, we wouldn't have police, ambulances, homeland security, all of the critical factors that DOD and in many cases affect many of the commercial operation as well.

10:11 What this has created is the necessity for having local time available so in case it happens you can operate for a certain amount of time before it can be repaired and you're back on the air. This offers frequency enormous amount of opportunity for especially the DOD market where our technology Low G and good hold of our clocks is unique and we're probably one of maybe three companies in the world that have the technology to meet that demand. I'm very encouraged that the reality is going to set in that we need to have local time and give us a great opportunity for the investment that we have made.

11:01 So I am with Stan, I'm very encouraged. with the business that we're getting and with what we see forward, we can see a very profitable future. I'd like at this time to turn over to question and answer. Please be kind enough to address the question to Steve, Stan, or Martin so we know how to answer you properly. Go ahead. The floor is now open for your questions. If you do have a question, please press star 1 on your telephone keypad at this time. If you're using a speakerphone, we ask that while posing your question, you pick up your handset to provide favorable sound quality. Again, ladies and gentlemen, if you do have a question or comment, please press star 1 on your telephone keypad at this time. Please hold while we poll for your questions.

12:00 We'll take our first question from Brett Reese with Janie Montgomery Scott. Mr. Reese, please press star 1 again, sir.

12:19 Does that work? Yes, your line is now open, sir. Okay. Good afternoon, gentlemen. Good afternoon. Hi. In the press release, you talk about bookings. Can you just explain that versus, you know, when you say, you know, bids which have gone from $450 to $490?

12:47 Okay, either me or Stan, both of us have the same answer. What happens, this is open proposals to our customers on our type of equipment in many cases. that we are sole source and the only ones that can supply it. Okay. So the way we get future business is the customer has a requirement, they come to us, and we write them a technical proposal and come up with a price to do it.

13:19 Okay. Can you give us some sense, the $490 million in bids outstanding, Okay, that's it.

13:57 That's a good question. I would say that probably the majority come from about a half a thousand customers. Wouldn't you say, Stan?

14:06 Yeah, it's a whole range, you know, from very small orders for small oscillators to big satellite programs. In terms of the total numbers, it's probably the 30-ish number of fishhooks, if that was the question.

14:23 Okay. So, on the last call, In response to kind of a similar question, you answered that you've provided the technology to about a dozen programs, and in many cases we've delivered the engineering models to the customers. So three months have elapsed since you've done that. Have you heard back from any of these customers yet? negatively. I assume if we heard positively, we would have had a press release on firm orders. But have some of these customers come back and said no, or are they still thinking about it?

15:11 Well, I can tell you that there's only one customer that said no, and the majority of them said yes, and as a matter of fact, turned us on to new business. What did we book, about 10 million in the past month? 10.6. 10.6 is 10, correct?

15:31 I'm sorry, that's not the last month, that's the quarter.

15:34 Yeah, but the majority came at the very end.

15:37 Yes, but we've also announced additional orders subsequent to the quarter end.

15:45 So, to answer you, the majority of our customers think that we are quite unique and are able to provide the accuracy, the reliability, and what's most important, the ability to provide a clock that can operate in the both space and terrestrial environment.

16:09 Okay. You know, the point of all these questions, I know the company does not give guidance, and fair enough because how do you know when you're going to get these orders? But, you know, you do... tease us a little bit or give us information of how many fish hooks are in the pond and a broad estimate of the decision makers will be taking 12 to 18 months to make the decision. We're just trying to get a sense of playing the probabilities of when order flow is going to start to come in the next 1, 2, or 3 quarters? I mean, that's the gravamen of these questions.

17:00 Well, like I say, we announced a couple of weeks ago a fairly substantial order. It was after the quarter end, so it's not in first quarter. But to your question about when the orders flow, that's a good start.

17:15 Okay. You're referring to the August 29th wide area augmentation system order? No.

17:22 No, to the VCXO contract for 8.7 million, I believe was the amount of press release.

17:28 Yeah, something around between 8 and 9 million for a very unique product that we are extremely suited for. And there are a couple more orders that we expect in the very near future. So we see it coming in. And like I said, the majority of this of this proposal that we have outstanding. We have a unique capability to supply the technology that's needed.

18:01 I don't doubt it, and I'm a friend of the company. Now, the $8.7 million water... Yes. Over what period of time will that be executed on?

18:15 Well, as fast as we can do it. I think we have about a year and a half but we are trying to do it faster because the faster we do it, the more we're going to get on the next phase. So we are really focusing on how to get it done as quickly as possible.

18:33 Great. Thank you for taking my questions. I'm going to drop back in queue. I may come back, but I'm sure others have other questions. Thank you. You're welcome. We'll take our next question from Sam Rubatsky with, S.E.R. Asset Management.

18:52 Good afternoon, Stan and Martin and Steve. The press release that went out on August 29th, is there, this I assume is shipped in the August quarter, is there a number of in the next quarter, which will be October. Is there a dollar number relative to how much that was, or is that significant or insignificant?

19:20 I'm not sure I understand the question. Yeah. Sam, could you repeat the question?

19:25 Yeah, yeah. It says Frequency Electronics announced it has delivered its fourth in a series of wide area augmented systems to Northrop Grumman. So if we ship something to Northrop Grumman, there's a dollar amount relative to this. Is this part of a major contract? What kind of dollar? And I assume that it was announced August 29th, so it's going to be a sale in the October quarter?

19:56 No, we don't disclose the details on that. The point of the press release was just to let you and everyone know that we are delivering very critical hardware information that happens to be an FAA program that provides navigation for commercial aircraft. So that was the purpose of the press release.

20:13 Okay.

20:15 Sam, just to let you know, there are two reasons why we don't do it. First of all, most of the costs of these programs are classified, and the ones that are not classified, we don't want to tell possible competition what our pricing is.

20:32 So, in the backlog, how many more of this thing that we ship to Grumman, do we have a number or more of these things we're shipping?

20:42 Yes.

20:44 Okay, okay. And we're not going to quantify the number more, I guess.

20:51 That's correct. I give you the two reasons why it's not wise. One, we cannot because of the sensitive nature, and the second is We don't want to quantify because I'm sure some of the possible competitors are listening.

21:09 Okay. The $490 million that were bids, presumably based on the R&D that we're spending, there will be more bids. Do we see... 600,700. I mean, the question of a number in the bids and then we spoke of a 12 to 18 month time frame before they make decisions. If we're so fortunate to get even 50% of this, this would be astronomical. It's like it's ended up in the satellite. I mean, the frequency will explode.

21:55 Could we handle that? What's the story there?

21:58 We're not going to explode. We can handle it. Obviously, when we bid jobs, we do the planning associated with production and engineering loads, so we know that we can execute them. We would not bid on something that we could not execute.

22:12 That we cannot deliver. We do have significant other opportunities, and like I said, Sam, as I said, mentioned that the big area that will now be addressed is that people will recognize the importance of having their own time so they can survive in case there's a GPS interruption. And that will open a significant, in my opinion, other opportunities to FEI.

22:42 Okay, we had about 200 employees at the end of the last quarter. I know we're trying to hire more people. Do we have more than 200 now, or where are we on the hiring process?

22:55 We are kind of taking a look on our population, what we have and what we need, and the specialties that we need to add on.

23:07 So do you think we need to subcontract some of this if we get big orders?

23:12 We're looking at that possibility very good because that's much more cost-effective than adding people to the routine job. So the assembly, anything that we can get done outside, that will be our first choice.

23:32 Are we looking at any companies to acquire or merge that would give us... All the time. Yeah, yeah. Yeah, yeah. Well, I guess... You guys are trying. I'm very happy that you're bidding on the number of dollars on the contracts. It's really wonderful. And hopefully soon some of these contracts will come to fruition and become backlog in sales so profits will reward the stock. Okay. Yeah. Are we ready to make presentations or when are we going to start doing that?

24:11 We're ready and we will do them.

24:13 Okay. All right. Good luck, everybody. You're doing wonderful. Thank you. We'll take our next question from Richard Johns, private investor.

24:27 Hi. I'm wondering, in dollar terms, what percentage of your business has generally been fixed price versus cost plus?

24:39 A little higher, 70, probably 70, 30 fixed price, 30% cost plus. That'll vary a little bit over, you know, period to period, but that's roughly what it looks like.

24:50 Do you expect it to be roughly that mix in the future?

24:56 That's an ideal mix for us. We don't want too many cost plus jobs with just a high risk development jobs as a is those value to cost plus. But the others, we are much more efficient on a fixed price basis.

25:13 OK. OK. And what roughly has been your win rate over time? And what do you expect for that in the future?

25:28 Win rate recently run at about 70%. It'll vary over time. I would say anything in the 50% range is pretty good for this kind of business.

25:40 50 plus. Okay. You look over a long period of time. And many that we did not win ended up to be not programs. Some programs look very hot and all of a sudden the government decides that that isn't what they want to do. We have a good rate in our technology because we don't We don't bid from D.C. to life. We bid on areas where we have great expertise.

26:12 Okay, okay. I have a couple of questions for Steve. I wondered, once you start really going and get profitable, what sort of combined federal and state income tax rate would you expect?

26:32 Well, we think it'll go, you know, proportionally back up to where we've always been in the 20-30% range once it'll, you know, again, once we start to show profits.

26:43 Yeah. Well, now, Trump lowered the corporate rate, and the number in my head is somewhere around 21%.

26:50 21% is the corporate rate, but then you have other things that play into effect. So, you know, it's hard to say, given the exact number, what it'll be.

26:59 Yeah. Yeah. So if you add in the state income tax and the other things you're referring to, it might get up to 30 or higher? About 30. Okay, okay. There's a new line in your assets in the July 31 numbers. It's called right of use assets. Can you tell me what those are? Sure.

27:28 There's a new pronouncement for leases. So you'll look on the balance sheet for the assets and the liabilities. So for all leases, we're required to calculate the asset side and the liability. It was for more, they believe it's for clarity. So we have a right to use asset, and then we also have a liability that corresponds to it, both current and long term. All it really is is the leases that we have.

27:58 Now, the liability on the right side of the balance sheet, should an investor think that is comparable to long-term debt?

28:08 No, because you could say yes, no. It's not long-term debt. It's the same. Before this pronouncement, we have to pay rent per month, right? So now what they're doing is they're telling you you have an asset to use the building and you have a liability to pay the rent. It's no different than it was.

28:25 Yeah, I understand. Yeah. Okay, thank you. You're welcome. We'll take our next question from Michael Eisner, private investor.

28:38 Hi, I have a question. Did you say we were sole source on the $490 million?

28:46 Are we sole source on all of it? The answer is no. Are we sole source on a good portion of it? Yes.

28:53 All right, thank you. And then you said something about to bring $200 million in revenue. Was that on top of the $490 million?

29:04 I don't know. I don't understand the question. Can you repeat it?

29:08 Stan said something about $200 million, and I couldn't hear him good.

29:14 Oh, of the $490 million of outstanding bids, some of those have contracts where we have already won the development part, and we're doing the first part. There may be production options later which add up to the $490 million, but about $200 of that... we have the initial contracts and they have production options and other things associated with them that would add up to that 200.

29:43 Which is a good thing, Mike, because we've gotten those early turn on in order to protect schedule. So if our customers have issues in getting their contract finalized with the government, they took the initiative of giving out the initial development so schedules get not too badly impacted.

30:07 All right, and Martin, you're doing all the scientific part now.

30:12 That's my job.

30:14 All right. I think that's perfect for you.

30:17 Well, thank you. I didn't know it was perfect for me much.

30:23 And that 8.7 million contract you just received, how big can that get? I mean, long term.

30:31 That's potentially 25 to 30 million dollars.

30:37 Over a couple of years?

30:38 Over several years.

30:40 Well, same thing. Several years, couple of years. And how's the GPS3F coming along?

30:48 Very good.

30:49 GPS3F is progressing. Are you allowed to announce that, if you get that?

30:57 If we get orders for that, certainly we would make that announcement.

31:03 I don't know, will they let us refer to GPS when we get the order? We'll have to get a clearance from our customers, but we will try to announce it.

31:12 And the $37 million Air Force contract, any color on that? How's that going?

31:20 It's standing still. The Air Force is deciding which way to go. As a matter of fact, we had a meeting yesterday. and meeting in Washington just a few days ago, and that was one of the discussions on this, which way the Air Force is going to go. At this moment, it's standing still.

31:40 Well, when you say which way it's going to go, do you mean they're going to lean forward? or if they can do it, what do you mean?

31:49 Well, that's it. Are they going to fund the rest? We still have the order. The question is are they going to fund it or are they going to decide that this equipment is too advanced? Those are all questions above my pay grade, but it's being evaluated by some serious people in the Department of Defense.

32:11 All right, so they're trying to figure out what they're going to do, I guess.

32:17 will let you know as soon as they let us know.

32:22 And on the low G sensitivity technology, you said there's only three companies in the world.

32:32 Well, it's not only on the G. I'm talking about the ability to provide precision time in production quantities There are very, very few worldwide companies that have that ability.

32:49 All right. Are you the only U.S. one?

32:53 No. We are the best, but there's another one and a half that are still operating in the United States, but we consider ourselves considerably advanced in the performance especially when it comes to providing timing on a dynamic environment. For them, they're the best in the world.

33:20 What about the price? Because last conference call you said they are still price sensitive.

33:28 When they need performance, price goes sideways. For this clock that are required for moving platforms like Remote Pilotless Vehicles, Airplanes, Helicopters, Ships, Performance is number one and Price is number two.

33:47 And final question. The new backlog since the end of this quarter, you said two numbers. I know you got the $8.7 million contract. Was there something else in there? Because you said, I think, $10.6 million. Was there another backlog? Maybe Stan can... Stan?

34:08 I didn't hear the question. The 10.6 is as of the end of the first quarter.

34:14 10.6 as of the end of, that includes the 8.7.

34:19 No. Yes.

34:21 One yes, one no.

34:23 Well, I mean, Steve, go ahead. No, no. He was asking the 10.7 includes the $8.7 million contract plus others.

34:34 Yeah, no, the 10.6 includes everything. I think you said 10.6 or 10.7 includes everything.

34:44 You're talking backlog.

34:45 Yeah.

34:47 So that's the current backlog.

34:50 Since the end of the quarter.

34:52 That would include the bookings that happened in the second quarter.

34:56 Yeah, backlog, all right. So it would be whatever the $35 million plus the $10.6, whatever you did so far this year, this quarter and the last couple of months, you have to take out.

35:12 Yes, so the numbers we reported, the $35 million doesn't include anything for Q2. That's a Q1 number for July.

35:20 Yeah, all right. Thank you.

35:23 We'll give you an update for Q2 next time.

35:27 Thank you for putting out more press releases. I think you put about three out in the last six weeks.

35:34 Thanks, Stan. He's the press release expert in the company.

35:39 Stan, are you going to plan on putting out any more?

35:42 and we'll put out everyone that... Thank you. Again, ladies and gentlemen, Star 1 if you do have a question. Star 1 at this time, please. We'll go next to David Starkey with Morgan Stanley.

36:00 Hi, guys. This is for anybody that can answer it, I think. The question I had was on the engineering costs in the quarter that you kind of alluded to some technical issues with some of these things. Can you get a little more detail on that? Is this permanent extra costs, or are these working your way through something?

36:18 This is working through major performance issues. We are pushing the envelope all the way, and all of this our future projects. products. So we have to solve the problems as they come up and we solve so far in the history of frequency electronics. We deliver it on every project we have ever undertaken. So we are pushing the envelopes, but they give us more capability and make us more competitive, especially in the dynamic environment.

36:56 So these costs could continue a few more quarters or is it something that you think you'll work through sooner?

37:02 I think they shouldn't dramatically change, right?

37:12 It will improve over time, but I think we're not quite through the development on a couple of these key programs.

37:20 As your sales pick up, though, obviously that gross profit margin will rise again overall. Okay, and you had about $23 million in inventory in the latest numbers here. It looks stable from last time, but is that all 100% usable inventory that we don't have a write-off coming or anything?

37:40 No, that includes the reserve. That's a net number, so yes, that's the net number. We've looked at it, and we believe it's good.

37:49 Okay, great. And one other small one. I noticed about 25,000 more shares in the share count. Was that an award or something that occurred in the quarter?

37:59 Isn't that the option that I applied? It's options. It's treasury. Okay. Little things that added up to it, yes.

38:07 Okay. All right. Okay. Well, good luck going forward. Appreciate it. Thank you. Thank you. We'll take our next question from Michael Cooper, private investor.

38:19 Hi, Michael. Go ahead.

38:22 Hi, guys. So my first question is around the gross margin, and there was a note in the news release that some of the R&D expenses compress the gross margin. Can you tell me how that works? Because I'm not... normally thinking about R&D expenses being in the cost of goods sold line.

38:51 Now, there's no research and development in the COGS. Research and development increased quarter over quarter, or quarter over the previous year.

39:05 I think there was a comment in there that the gross margins were compressed. because of new technical developments?

39:16 Yes, correct. Like Martin said, and we said in the press release, that we're pushing state-of-the-art technology. So there's work we're doing, extra engineering, that's in the COGS line. There's also R&D increased almost 700K as well, but that's not in COGS yet.

39:38 I think I can give you some call-offs. on the demand involved. You know, during the Second World War, we were happy to bomb a town. As goes on, the need was to attack a house. Nowadays, we want the accuracy to put it into a window, and that requires enormous amount of precision on our clocks and also to make them immune from environmental effect, and that's the development. To improve the accuracy, and improve their accuracy on the dynamic environment. That's the major investment that we're making.

40:22 My confusion is around where it's sitting. As opposed to increasing your R&D line by 700, I would have thought you would have increased your R&D line by whatever that number is that compressed the gross margins.

40:37 Well, let's make a distinction between R&D costs and developmental costs, which are contract related. We have contracts that have non-recurring engineering costs for development as part of the contract. That's totally separate from what's called internal R&D, which Steve explained the accounting on that, but those are two different things. Sometimes we spend money on internal development for products that are perhaps generic. Those would get charged to internal R&D. When we're doing work on a specific contract, that's typically charged to the contract.

41:20 Okay, okay, thank you. And my second question is around your news release on the BP XTR 6000 and that new product line. And I was... looking into that a little bit and I was reading some stuff on what the U.S. military is looking for and part of that I think your new product line answers their requirements for open source systems and I think your system there is open source. Can you tell me if I'm right there and is open source a new emerging trend in bidding for government contracts?

42:15 And is that open source? Is that on the software side?

42:19 Yeah, typically I think of open source as software. The government is pushing that. The VPX, of course, is a standard. VPX, VX are standard formats, physical formats. So the units are compatible with anybody who has sort of that standard Okay,

42:37 great. Thank you. Thank you very much. Mr. Block, there appears to be no further questions at this time. I'll turn the call back over to you for any closing comments.

42:54 Okay. I want to, as usual, express the thanks to our stockholders and to all the employees at Frequency Electronics that are wearing hard Thank you all. Have a good day. Thank you, ladies and gentlemen. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.