Frequency Electronics, Inc.

Greetings, and welcome to the Frequency Electronics second quarter fiscal 2026 earnings release conference call. At this time, all participants are in a listen-only mode. 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 will now turn the conference over to your host, Thomas McClelland, President and Chief Executive Officer. Sir, the floor is yours.

Good afternoon. and thank you for joining Frequency Electronics' second quarter fiscal year 2026 earnings call. With me today is our Chief Financial Officer, Steve Bernstein. On our first quarter fiscal 2026 earnings call in September, I discussed two near-term factors that produced a quarter with lower revenue than recent trend levels suggested. The first factor was that strong execution in fiscal 2025 allowed the company to produce revenue on certain programs in fiscal 2025 that we had originally expected to produce over a more extended period of time in fiscal 2026, essentially pulling forward some revenue. The second factor was customer-driven delays on a few key programs that pushed revenue recognition out of the fiscal first quarter. Despite those issues, I noted on that call that six weeks into the second quarter, we saw that those delays were behind us making significant progress towards a bigger book of business. I'm pleased to report on today's call that our second quarter performance was very strong across a number of key metrics as we resumed our revenue uptrend and have numerous proof points to support our belief that this will be a strong multi-year growth period for the company. Steve will provide more financial details later in the call, but I want to take a few moments to highlight several important data points and trends. For this quarter, we reported revenue of $17.1 million, up 24% sequentially. This was the third highest quarter of revenue in the past decade, with only two higher in that period having occurred in the third and fourth quarters of last fiscal year. In short, though our business does not proceed in a perfectly linear fashion, we have established a new higher baseline upon which we expect to build in the years ahead. To illustrate that point, our quarter end backlog was $82 million, the highest in company history, and up 17% since our fiscal year end in April, as we continue to book new business that is funded. Many of the contracts we sign have initial funded portions which are only a fraction of the full contract award with additional funding that comes later in the course of the contract, meaning that the funded backlog we show is conservative relative to our bookings and that existing contracts can continue to contribute to backlog in the years to come. While backlog in any given quarter can fluctuate based on newly funded awards and what is converted into revenue in a given quarter, based on what we are seeing coming down the road, we believe it's reasonable that we could see backlog north of 100 million in the not too distant future. Critically, this growth in backlog that we're describing is coming from our strong existing business. We know that many of you are excited for the growth prospects that we have coming in the future in large and growing end markets, such as quantum sensing, proliferated satellites, and alternative navigation and timing, or alt-PNT programs. We share that optimism and expect to participate meaningfully as these sectors expand. Critically, while these white space opportunities are much larger than our historical markets, we're not standing around waiting with nothing to show for it in the interim. These new markets will be additive to what is already a strong and growing current business, as evidenced by our strong performance this quarter and the growth in funded backlog. We anticipate multiple awards in the coming months, some of which are as large or larger than the biggest ones we have historically announced. This is today's core business, which itself has years of profitable growth potential, and upon which the future growth opportunities in quantum sensing, magnetometers, and other alt-P&T technologies and timing solutions as well as proliferated satellites will be additive. In other words, we can be a substantially larger company in the years to come as we layer new growth opportunities which are built upon our industry-leading capabilities on top of a strong and growing core business. It's exciting to work with some of the next generation defense companies and they will be part of our growth story, especially in new technologies. At the same time, our longstanding strategic partnerships with the major prime contractors are also very important for our current and future business, and we have advantaged positions with them on many programs because of our technological capabilities. In multiple cases, We are sole source providers and we're often the partner of multiple primes competing for the same government programs, meaning we can win regardless of whom the government selects as the prime on a given program. Turning to space, this means a significant and expanding market for us. We've been participating in space business for decades and we see a long runway of growth ahead. For example, the U.S. Space Force recently launched Navigation Technology Satellite 3, known as NTS-3, Experimental Navigation Satellite, a major milestone aimed at advancing more resilient next-generation PNT architectures. Our technology is on board this satellite and underscores the strategic relevance of the solutions that FEI provides. We also have a strong and growing defense business that is booming and which we envision growing sharply for many years to come. In our last call, we highlighted the number of the critical multi-domain defense systems we're involved with. We anticipate much continued growth from these programs as well as new ones. Just last week, the Missile Defense Agency announced it has begun phase one of awarding contracts for the Scalable Homeland Innovative Enterprise Layered Defense Program, otherwise known as SHIELD, which is part of the Golden Dome Initiative. We anticipate our technology being part of multiple bid winners programs. Defense spending continues to increase, particularly in missiles, munitions, and other modernization initiatives. As an example of rapidly increasing scale, last week the Pentagon announced plans to procure 200,000 drones by 2027. While not all of those require high-end precision timing, this illustrates the magnitude of modernization underway and the breadth of defense and space technology initiatives we will participate in. As we've shown over the past few quarters, the path there is not likely to be linear on a quarter-to-quarter basis, but the underlying strength in our core business and the growth prospects in our new areas support a consistent multi-year up and to the right trajectory from a market share leader with growing strategic importance in its industry. We look forward to continuing to demonstrate this in the quarters and years to come. Two final notes on scheduling before I turn things over to Steve. Out of respect for our friends in the federal government who could not attend our previously scheduled quantum sensing conference in October due to the government shutdown, we moved the conference to January 14th to 16th in New York City. We have an excellent agenda that will cover quantum policy, multiple military missions that envision utilizing quantum technology application research from leading national and academic labs, as well as updates on clock and oscillator applications. We look forward to hosting this event next month and gathering many of the leading players in the industry, many of whom we're already working with to build out our quantum future. Additional details related to this event are available on our website. In addition, we look forward to meeting with many of you at the Needham Growth Conference in New York City in January. And now I'll turn the call over to Steve to provide some more financial details. And I look forward to taking your questions during the Q&A session following Steve's remarks. Steve?

Thank you, Tom, and good afternoon. For the three months ended October 31st, 2025, consolidated revenue was $17.1 million compared to $15.8 million for the same period of the prior fiscal year. The components of revenue are as follows. Revenue from commercial and U.S. government satellite programs was approximately $4.6 million or 27% compared to $9.4 million or 59% in the same period of the prior fiscal year. Revenues on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the FEI New York segment. Revenue from non-space U.S. government and Department of Defense customers, which are recorded in both the FEI New York and FEI Zephyr segments, were $11.9 million compared to $5.8 million in the same period of the prior fiscal year and accounted for approximately 69 percent of consolidated revenue compared to 37% for the prior fiscal year. Other commercial industrial revenues were approximately $560,000 compared to approximately $591,000 in the prior fiscal year. Revenue for the three months ending October 31st, 2025 was higher than revenue prior fiscal period due to an increase in non-space Department of Defense products in the FBI ZIPR segment This increase was in both shipment-based products as well as products accounted for under the percentage of completion method. For the three months ending October 31st, 2025, both gross margin and gross margin rate decreased compared to the same period of the prior fiscal year. The decrease in gross margin and gross margin rate were attributable to a change in the mix of high margin production satellite programs in the prior year periods versus lower margin programs with significant non-recurring engineering efforts during the three and six months ending October 31st, 2025. We demonstrated meaningful operating leverage in the business as compared to Q1. Our gross margins often have some variability depending on the shipments in a given quarter or the amount of new engineering development versus repeat business throughout a period. but we remain committed to ongoing improvements in profitability across our business. We have made excellent strides in this regard in the past few years and it continues to be an area of emphasis. For the three months ended October 31st, 25 and 24, selling and general administrative expenses were approximately 21% of consolidated revenues. The increase in SG&A expense during the three months ending October 31st, 25 was due to the fluctuation in the various expense accounts that make up SG&A. R&D expense for the three months ending October 31st, 25 decreased to approximately $1.2 million from $1.6 million for the three months ended October 31st, 24, a decrease of approximately $400,000 and were approximately 7% and 10% respectively of consolidated revenue. Fluctuation in R&D expenditures will occur in some periods due to current operational needs supporting ongoing programs. The company plans to continue to invest in R&D in the future to keep its products at the state of the art. For the three months ending October 31st, 25, the company recorded operating income of approximately $1.7 million compared to operating income of approximately $2.6 million in the prior fiscal year. Operating income decreased due to lower gross margin and increased SG&A as described above. Other income expense net is derived from various sources. The majority of the approximately 0.2 million of investing income for the three months ended October 31st, 25 was from interest income and unrealized gain on assets held in the Frequency Electronics Deferred Com Trust. This yields a pre-tax income of approximately $1.8 million for the three months ending October 31, 25, compared to an approximately $2.7 million pre-tax income for the three months ending October 31, 24. For the three months ended October 31, 25, the company recorded a tax benefit of $31,000 compared to a tax provision of $139,000 for the same period of the prior fiscal year. Consolidated net income for the three months ending October 31st, 25 was approximately $1.8 million or $0.18 per share compared to approximately $2.7 million or $0.28 per share for the same period of the previous fiscal year. Our fully funded backlog at the end of October 25 was approximately $82 million compared to approximately $70 million for the previous fiscal year ended April 30th, 25. The company's balance sheet continues to reflect a strong working capital position of approximately $31 million in October 31st, 25, and a current ratio of approximately 2.6 to 1. Additionally, the company is debt-free. The company believes that its liquidity is adequate to meet its operating and investing needs for the next 12 months and the foreseeable future. I will turn the call back to Tom, and we look forward to your questions later.

Thanks, Steve. We're now ready for any questions.

Thank you. At this time, we will be conducting a question and answer session. If you would 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 would 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. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment. The first question comes from George Moreno with Pareto Ventures. Please proceed.

Thank you. Good afternoon, Tom. I have a couple of questions. So I saw the other day, congratulations, you guys won on the first tranche of the Golden Dome Awards. I was wondering if you could provide any color details. on the frequency kind of component and system content and quantities opportunity in that program.

Yeah, I don't think I can provide a whole lot of details. Golden Dome is one of those things that is sort of in the process of being defined as we speak. and it's a little hard to precisely define exactly what is encompassed by that. I think, suffice it to say, just in general terms, we anticipate participating in several different aspects of what will ultimately become Golden Dome. So in particular, they're ground-based missiles, and as we've discussed previously, we're already very involved in both Patriot and THAAD programs. But of course, one of the big things that is being pursued in Golden Dome is a space-based approach to missiles and defense, and there are various aspects of that, and we anticipate, although that's not something that we're under contract for at this point in time. We do anticipate that we will be involved in that in a very significant way in the near future. Yeah, I think that's about as much as I can say at this point.

Okay, and could you comment on your Colorado operations, like what kind of activities are going on there today?

Oh, sure. So, we talked about that a little bit last quarter. I think the starting point for that is that we saw an opportunity to hire several senior scientists from NIST in Boulder, Colorado, as they were part of this federal effort to reduce the ranks there really pretty significantly. So we were successful in that. We've hired several people now. Of course, they weren't interested in moving to Long Island, but if we were willing to set up shop in Colorado, they were interested in joining us. So that's what we did. The focus primarily of the facility that we have started there in Boulder, Colorado, is quantum technology, but we have some key efforts that are really going on there also in some very low phase noise oscillator technology. that was actually started by work at NIST in Boulder. But the primary focus there is quantum technology. So we have magnetometer development that's going on that's there in Colorado. And we have established some cooperative research and development arrangements, or CRADAs, with several different research groups at NIST. And so some of that is in Rydberg sensors, which is a type of quantum sensor. And we also have some efforts in... low phase noise oscillators, etc. So we're pretty excited about the Colorado setup. We have a really talented group of people working there, and of course we anticipate that we, you know, just in case You weren't aware, this is the Colorado, the Boulder, Colorado area is a focus of precision time and frequency technology with NIST there, but also the University of Colorado. There's a tremendous amount of research there, and we hope to be able to attract talent from that area in the years to come. Yeah, that's pretty much the story at this point.

Okay, thank you, Tom. I'll get back in queue.

The next question is from Chris McCoskey with I'm sorry, he's a private investor. Chris, please proceed.

Hello, good afternoon and congratulations on resuming growth.

Thank you.

Um, So you talked about how because this past quarter you had more work in non-space related military applications where your products, your work was apparently required more investigation and more R&D. The margins were lower. It seems logical that as you continue doing that work, less investigations will be required and you'll climb into higher margins. Am I thinking of that correctly?

Well, I would say things just a little bit differently. I think in the last quarter, the results were less than we might have expected. Otherwise, primarily because we had, well, one of the major factors was that we had some significant delays in programs. I think that a lot of the things you're referring to The non-space defense activity that we're involved in is really pretty high-margin programs, and we expect those to be quite profitable. As always, we have a mix of things. When we do new development, And we are involved in some new development programs, in particular in some advanced missile technology. We do anticipate somewhat lower margins. But, yeah, anyway, I think that's what I would say.

All right. So some of the reason for the lower margins was because

interruptions of funding you had to put work down down and then start it over again is that what you're saying well that's correct I think that the it's it's not so much that that resulted in lower margins but it resulted in delays in in revenue revenue that we anticipated during that quarter, we weren't able to realize because we were put on hold on programs and weren't allowed to do any more work.

I see. Now that the shutdown is over, are those programs restarting? Have they restarted all?

Yeah. A lot of that, interestingly... wasn't really due to the shutdown. The programs were ongoing, but it was more about we had actually brought up issues with some of the requirements that were levied on frequency electronics, and it was really because of that that we were put on hold on several programs, and it was necessary for our customers to figure out what they really wanted in terms of performance requirements. What I will say about the shutdown, the government shutdown, is that primarily that affected us because there are new programs that we anticipated getting started that would have started actually by now. which we're still waiting for. So I think the primary thing was that some of the contracting activities that we thought would have taken place earlier hasn't happened yet.

So if it wasn't for the shutdown, you would have even higher backlog.

That's correct. That's absolutely correct. Now, I should point out in that regard, and I tried to, in the opening remarks, I tried to point this out. When we get awarded a new contract, we'll announce, assuming it's a significant contract, we'll announce the full amount of the contract, but we won't add that full contract amount to our funded backlog. We only add the funded portion of the contract. So if we get a $10 million contract and we get funded for a million dollars initially, we would add a million dollars to backlog, although when we make a press release, we'll announce that we got a $10 million contract. Those numbers are all hypothetical. Let me just point out.

Okay. So this back and forth on requirements, is that progressing? Have you resolved most of that by now?

We have resolved most of that at this point in time. There's always a potential for more kinds of issues in that regard in the future, but I think in the particular cases I'm referring to here, those issues have been resolved.

All right. And have new contracts started, new funding started to appear after the shutdown, or are they still trying to figure, trying to catch up?

Well, we've had... a few small things since the shutdown, but we're anticipating some much more significant stuff which hasn't arrived yet.

All right. I guess the major question I was trying to get to in a roundabout way is as these requirements have been cleared up and as hopefully those new missile systems, you're kind of getting into stride after the new learnings. Can we see normalization of margins in the near term?

Yes, I think so.

Okay, this is very good to hear. All right, congratulations again and thanks for taking my call.

Okay.

The next question is from Jeff Vannery with Craig Hallam. Please proceed.

Great. Thanks for taking the questions. Several for me, guys. Congrats, first of all. But, Tom, if you talk to this size or relative size of the initial words versus the scope of the potential follow-on words, you called it out in your opening transcript as abnormal words. I know you won't give us an actual hard number, but can you at least give us a ratio? Does the initial order, the initial order is a dollar and the subsequent order is usually two bucks. Are we talking now initial order is a dollar and follow on orders are four? I mean, what's the scope of the increase that you're speaking to?

Okay. So, so yeah, a little bit of clarification. So typically when, when we get a new contract, uh, I think typically we are funded initially for 10% of the total contract. But another point of clarification, so we get a contract award for a certain amount of money. There are often additional options. So if it's a satellite program, will be funded for three satellites with options for additional satellites, perhaps options to provide products for satellites four, five, and six. But the initial contract is just for the initial three satellites. So that's a you know, let's say $10 million, we get initially funded for $1 million, 10% of that contract. There may be another $10 million later for options for the follow-on three satellites. So that hopefully clarifies that to some extent.

Okay. I'll leave that there. The incremental backlog, still almost the same, very nice sequential bump. Is there anything to call out or commonality in terms of the contract types that drove the sequential increase in backlog, namely the use cases?

I think we can talk about that a little bit. I think we are seeing a big uptick in backlog for non-space defense products. I think that's a very significant portion of that. I think the other thing I would say is that we anticipate a very significant uptick in the very near future on the space end of things. So what I would say is over the last quarter, the big thing has been non-space defense. And over the next couple of quarters, I anticipate that it's likely to reverse, and we'll see that in space.

Got it. That's helpful. And then, Steve, on the margin question, with respect to gross margins, if we think about it over the next couple quarters, do you fundamentally see drivers that are going to push it up or push it down or likely kind of leave it where it is based on what you see in your backlog and likely to be able to take revenue on over the next few years? Not asking for a number, but really just asking directionally what you think the forces are that are at play.

I think all in all, it'll stay flat to going up a drop, but I think uh, you know, it'll take time to go back to where you saw it, you know, in the prior year.

Okay. Um, and then Tom on, uh, turbo, I think last quarter probably wasn't the first time, but I know you've talked a few times about some initial expectation that in the fiscal year turbo could be a couple million. And then in the out year it had the potential for, for 20 million. Um, based on what you're seeing in pipeline and discussions with customers, you feel like those numbers are increasingly conservative, comfortable, maybe a bit more of a stretch than you thought? How do you feel about those numbers?

I think those numbers are pretty much right on. We are seeing a lot of enthusiasm and activity in our Thurbo product. And I think, yes, we see the near term, a few million dollars, and I think definitely the earlier estimate that we made, the 20 million kind of number, is very, very realistic.

Yep, yep. And maybe last for me, the... Obviously, you're feeling very good. You gave some swags at what the pipeline looks like and where it could leave backlog. And if the backlog does surge and you've got to deliver on these contracts, what does that mean for your cost structure? How do you feel about the headcount? How do you feel about facilities, available production capacity? Does it take meaningful hiring? Does it take meaningful CapEx? Just talk about the ability to address the growth without meaningful incremental spend.

Yeah, good question. I think certainly that's something that we're actively looking at. It's very, very important. I think on the one hand, we want to avoid getting out ahead of our skis and taking on too many people. On the other hand, I think at this point in time, we are in a cautious hiring mode. in anticipation of the business that we think we're going to be getting in the near future. I think facility-wise, we are in good shape. I think we're capable of handling the business that we anticipate at this point and even a little bit more. given our current facilities. And of course, we've added a little bit more capability in Colorado, although that isn't anticipated to be a primary manufacturing area. So I think we're in pretty good shape, but it's something that is always a bit of a challenge to try to... to be prepared, but not too prepared.

Yeah, for sure. Yeah, I mean, given the backlog and the other commentary, I mean, just a lot of forward momentum here, so congratulations. Last time, you talked on an answer to a prior question, I think, about the revenue that had pushed out, whereby you had done the right thing for the customer, and they re-specced, and it took a little delay, and then you caught some revenue. Just to be clear, has all that revenue been come back or are we still going to pick some more of that delayed revenue up in the forward quarter? Just kind of curious where we are with that.

A significant portion has come back and we're going to be picking up more in the next quarter.

Got it. Okay. I'll leave it there. Thanks.

Next question is from Michael Eisner, private investor. Michael, please proceed.

They did a great job on the backlog. Was any of that new contracts, or was that just a release from the funding?

It's a little bit of both, but I think more the release of funding than new contracts.

And Colorado, do you think that's going to be profitable in the third quarter?

Yes, actually, I do. It's not going to be a huge contribution, but it's going to be a positive contribution as opposed to a negative one.

Because the people you hired took away from our earnings, but now will come back in the third quarter.

Yeah, they are actively contributing to to externally funded R&D programs at this point in time. And so that is a positive contribution.

All right. And the backlog, most of that backlog all has legs on it to keep on going forward. Am I correct?

Yes, you are.

All right. Thank you very much. Great job.

Okay, Michael. Thanks.

Next question is from Brett Rice with Jenny Montgomery Scott. Please proceed.

Hi, Tom. Hi, Steve. Hi. The growth opportunities which you mentioned, do they continue unabated irrespective of which political party, controls Congress and the presidency?

Well, that's actually a good question. I think that the way we look at it at this point, we think that to a large extent they are independent of politics. You know, that's something that I... I think about a lot and worry about. We know that we see certain trends now, and the question always is, you know, if there's a change of command in the next election, does all of that disappear? I don't think so. So there are kind of two important things. I think when we look at the space business, there's there's just a strong growth in space that has nothing to do with, you know, politics. It's just a technology thing. I guess it's analogous to artificial intelligence. It's not primarily driven by government needs. Space is just growing in general. And I think that's... is good for our business. Then the other part of it is if we just look at defense in general, I think that of course is obviously dominated by the government, but if we look at the world situation at this point and what is happening in China and other places in the world, it's hard to see the defense spending going down dramatically, whether we're talking about a Republican administration or a Democratic administration, I think. And that's the fundamental reason for our optimism in that regard. So that's kind of how I look at these things. But of course, you know, That's a question that we have to keep asking ourselves and pay attention to as we go forward.

Right. Your answer is music to thine ears. Have a good holiday. Okay? Thank you.

The next question comes from George Morema with Pareto Ventures. Please proceed.

Thanks for taking some more. I had a question, Tom, on turbo in terms of drones. With the anticipated upcoming changes in the FAA regulations to beyond visual line of sight, there seems to be a large commercial opportunity in autonomous drones. Do you see turbo playing any part in commercial drones or just military applications?

Well, I think potentially in both commercial and military, but I think in the near term we would anticipate more in military. I think that we have to keep in mind that, and I tried to say this in the initial remarks, that there are huge, huge numbers of drones are going to be coming into play, whether we're talking about commercial or military applications. And it's really a fraction of those which will employ turbo or any of our other products. Our products are pretty specialized and relatively expensive. So when the military, for instance, is talking about these so-called kamikaze drones that are going to fly once and be destroyed in the initial mission, it is unlikely that our products are going to be part of those kind of drones. I've seen recent things where their price tags for those drones of a few thousand dollars. And so it's hard to see our products participating in those cases. But in more sophisticated applications, we think that we will be very important. And as the commercial space gets more sophisticated and people are doing more elaborate things with drones, we do anticipate that our turbo and some other potential products will be a very significant part of that.

Okay. And then in the recent weeks, there's been a lot of talk from folks like Elon Musk and Google and Amazon, et cetera, about putting data centers in space. There seems to be a big push coming up in that. And I was wondering if frequency, if you would be playing in that arena at all, and if so, how?

Well, I think quite possibly. I think that synchronization in data centers is an important thing when those are ground-based data centers that's relatively easy to accomplish. because size is not much of a question. But once we get into space, of course, size, weight, and power become very, very important. And so our products, which are more compact, come into play, but also they come into play because we have radiation-hardened synchronization time and frequency devices which are tailored for use in space. So I think we have to be a little bit careful because I don't think we're going to be seeing data centers in space in the next couple of years, except on people trying to demonstrate some capabilities. But I think to the extent that those data centers and space become a reality, I think we're definitely anticipating being a participant in that. Okay. Thank you, Tom.

Up next is William Bremmer with Vanquish Capital. Please proceed.

Tom, good evening.

Hi, Bill.

Sorry about that, gentlemen.

Just curious, on the international front, whether or not we have any business with any of our allies or any international business going forward?

Good question. We actually do. Of course, most of our business is... domestic, defense and satellite business, but we do have some very significant business overseas with some of our allies and we are actively pursuing additional things in this arena. There are some challenges in that. So just to highlight some of the things, most of our products, there are export controls involved, and so we have to get export licenses in order to be able to sell things overseas. So that's an additional challenge, and it takes typically more time to get those kind of things started. But nonetheless, we do have some active programs as we speak. The other thing is that in particular with Europe, it's a challenge to do business there because they... There are several things that are going on at this point in time in the defense industry in the U.S. There is a strong emphasis on using only domestic sources. This helps us in obtaining business with the U.S. Defense Department. But at the same time, we see sort of similar thing in Europe in particular where there's a strong emphasis on using European suppliers instead of U.S. suppliers. So that's just a couple of thoughts on that topic. Hopefully that sort of answers your question.

No, it does, and I apologize by the doorbell on my dog. But happy holidays, everyone, and keep up the good work, Tom. Thank you. Okay, thanks.

We have no further questions in queue. I'd like to turn the floor back to management for any closing remarks.

Okay, thanks to everybody for taking the time to listen to and participate in today's earnings call. We look forward to providing further updates in the coming months, and we wish everyone happy and healthy holidays. Thank you.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.