Key Tronic Corporation

Good day and welcome to the Keytronic Corporation first quarter fiscal 2022 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Brett Larson. Please go ahead, sir.

Thank you. Good afternoon, everyone. I am Brett Larson, Chief Financial Officer of Keytronic. I would like to thank everyone for joining us today for our investor conference call. Joining me here in our Spokane Valley headquarters is Craig Gates, our President and Chief Executive Officer. As always, I would like to remind you that during the course of this call, we might make projections or other forward-looking statements regarding future events or the company's future financial performance. Please remember that such statements are only predictions. Actual events or results may differ materially. For more information, you may review the risk factors outlined in the documents the company has filed with the SEC, specifically our latest 10Q, 10K, and 8Ks. Please note that on this call we will discuss historical, financial, and other statistical information regarding our business and operations. Some of this information is included in today's press release and a recorded version of this call will be available on our website. Today we released our results for the quarter ended October 2, 2021. For the first quarter of fiscal 2022, we reported total revenue of $132.8 million, up 8% from $123.2 million in the same period of fiscal 2021. We are excited to see measured success in revenue growth in new and existing customer programs. While demand has remained strong for both new and existing customers, revenue for the first quarter of fiscal 2022 continued to be significantly constrained by challenges related to the global materials supply chain, transportation, logistics, and the pandemic. The global supply chain issues and pandemic continued to cause factory downtime, overtime expense, and increased transportation costs, which had an adverse impact on our margin in earnings. In the first quarter of fiscal 2022, gross margin was 7.6%, an operating margin was 1.6% compared to a gross margin of 8.1% and operating margin of 2.3% for the same period of fiscal 2021. For the first quarter of fiscal 2022, net income was $800,000 or 0.8 million or 7 cents per share compared to $1.7 million or 16 cents per share for the same period of fiscal 2021. Earnings for the first quarter of fiscal 2022 were also impacted by legal and other professional services expense related to the previously disclosed internal financial reporting investigation of approximately $0.4 million during the quarter. Turning to the balance sheet, we continue to maintain a strong financial position. As a result of supply chain related production delays in the first quarter of fiscal 2022 and the continued ramp and transfer of new programs, our inventory terms decreased from the prior quarter. We are carefully balancing customer demand and the likelihood of successfully bringing in parts in time for planned production. The production planning now requires that we look out much further in the future than in historical periods. In future quarters, we expect to see our net inventory turns increase to be more in line with the expected revenue. At the end of the first quarter, trade receivables were up $16.1 million from the prior quarter, reflecting the timing of shipments later in the quarter. Our DSO increased to about 83 days. up from 65 days a year ago, which of course reflects both the timing of shipments during the quarter and some delays in payments from customers who were also impacted by pandemic-related slowdowns and restarts in their respective markets. Overall, our balance sheet has total working capital of $184 million and a current ratio of 2.3 to 1. This is largely due to growing customer production requirements and onboarding new programs. Nevertheless, we feel it is prudent to preserve cash and expand liquidity where possible. To this light, you will recall that we increased our credit facility with our existing bank up to $120 million of total availability subject to our borrowing base. This gives us more flexibility to potentially ramp up production and to manage potential pandemic-related risk and other risks in coming periods. Total capital expenditures were $1.8 million for the first quarter of fiscal 2022. We're keeping a careful eye on expenditures during fiscal 2022 and expect our capital expenditures for the full year will be around $8 million. We plan to continue to invest selectively in our production equipment, SMT equipment, and plastic molding capabilities. as well as make efficiency improvements in our facilities to prepare for growth and add capacity. Despite growing customer demand and new program launches, we expect that delays in the supply of key components will continue to limit production and adversely impact operating efficiencies. For the second quarter of fiscal 2022, we currently expect to report revenue of approximately $125 million to $135 million and earnings of approximately 3 to 8 cents per diluted share, which includes an estimated 3 to 5 cents of legal support expenses from the previously disclosed financial review in a week of holiday shutdown later in the quarter. That said, we cannot predict the outcome of any regulatory actions related to the subject of the internal investigation. We're also working closely with our customers, key suppliers and employees to minimize the effects of delays attributable to the continued global pandemic, increased global freight and logistics costs and limited availability of key components. While our facilities in the US, Mexico, China and Vietnam are currently operating while following current health guidelines, Uncertainty as to the possibility of future temporary closures, customer fluctuations in demands and costs, future supply chain disruptions during the rapidly changing COVID-19 environment, and other potential factors could significantly impact operations in coming periods. In summary, we continue to see increased demand and new customer wins. However, supply chain disruptions and the pandemic continue to impact our business during the first quarter, and remain risks in future periods. But we are encouraged by our growing backlog and by our prospects for future growth. New sales prospects and recently won programs continue to increase our customer demand to unprecedented levels for Keytronic. The overall financial health of the company appears strong and we believe that we are increasingly well positioned to win new EMS programs. and continue to profitably expand our business over the longer term. That's it for me. Craig?

Okay. Thanks, Brett. While we continue to face the stiff headwinds from worldwide supply chain challenges and the pandemic, we're pleased with our positive momentum moving into fiscal 2022. We reported 8% year-over-year growth for the quarter and continue to ramp up new programs and win new business. During the first quarter, the industry continues to face persistent worldwide shortages in the supply of key components, particularly for electronic parts. These shortages have extended production timing and caused transportation costs to triple. Had it not been for the supply chain issues, we believe burgeoning customer demand would have driven revenue for the first quarter in excess of $160 million. Unfortunately, we do not expect the supply chain disruptions to improve significantly in the near term. We also struggled with increasing labor costs and shortages of production staff at some of our sites as a part of the broad-based labor shortages. In the face of all these challenges, we continued winning new customers and ramping new programs. During the first quarter, we won new programs involving industrial testing equipment, medical diagnostic products, and pharmaceutical water treatment. We would not have won this many programs without the opportunity to first ramp the programs in our U.S. plants and subsequently transfer to our lower-cost plants offshore. You will recall that last year we increased our capacity to over a million square feet in Mexico. Moreover, production in our new Vietnam facility continues to grow, doubling its workforce from a year ago and generating profits. We continue to expect big things from our Da Nang facility in the future. As we've discussed on previous calls, the pressures on our customer base to lessen their Asian supply concentration remain very powerful. Demand for North American production continues to grow, with no foreseeable end to tariffs, intensifying political tensions between China and the U.S., increasing Asian production costs and time to market, and a weakening U.S. dollar. These factors have driven a significant increase in our business. Keytronic has emerged as the ideal answer to over concentration of Asian supply and for onshoring to North America, particularly for those companies with programs in the range of $5 to $100 million. We provide everything needed to make supply chain diversification easy, less risky, and less costly. Our solution set provides companies with both local sources for low volume products and low cost sources close to geographic markets for higher volume products. We also attract the companies that have been overly concentrated with an Asian source and hence have lost engineering control of their product. We can facilitate the move of production from a competitor to our site, enabling the smooth transfer by providing design and production engineering services to those companies who no longer have that capability. Our vertical integration can lessen the risk, time, and cost involved in a transfer. Moreover, after decades of developing custom processes for a staggering array of products, we can onboard just about any product imaginable. Moving further into fiscal 2022, significant uncertainty still surrounds the continuing disruptions to global supply chains for key components and the threat of a pandemic. At the same time, we believe that these challenges will continue to force our customers to weigh carefully the degree to which they concentrate their supply chain on any one region and cede their design control to their outsourced partner. The recent Macroeconomic events continue to force many companies to more fully recognize the significant impacts an elongated supply chain can have on both costs and availability, the risks of IP appropriation, and the attractiveness of doing business with an outsource partner who can minimize their risks on all of these factors. These market trends and our capabilities should continue to power our growth over the long term. This concludes the formal portion of our presentation. Brent and I will now be pleased to answer your questions.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad, and if you're on speakerphone, please make sure the trimute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. And we will hear first from Bill DeZellum of Taichung Capital.

Thank you. Let me start with my normal, with your three program wins. What size are each of those, please?

First two are about $10 billion. The third is about $5 billion.

And would you give some perspective on kind of how these wins came about? And as you do that, to what degree are they leaving a Chinese supplier to circle back to the U.S. versus some other story?

I'd say just about everybody who's talking to us today is trying to deleverage themselves on Asia. I think two out of three of these are examples of that. The narrative remains the same. They went there over the last 20 to four or five years ago. They were happy when they went because they were able to lay off their factory people, lay off their production people, eventually lay off their engineering people. And now that the time has come to try and reverse all that, they really don't have the wherewithal to bring a product back on their own. So we end up being ideally situated to help companies in that set of circumstances survive the issues that are happening today.

And the component issues that you've spoken heavily of, and frankly almost every company out there is talking about, when are you expecting that you will have enough components and I'm actually going to ask the question in two parts. For A, meaningful sequential growth and then B, to fully meet your customer's demand.

I don't have an answer to that. I think anybody who tells you they do is wrong. We are continually surprised by suppliers that call us up very late in the game, as in the day the product was supposed to ship, and tell us that they've been shorted by one of their suppliers, they're not going to be able to supply us. We are seeing lead times of up to two years for a new PO for certain ICs, and We see nothing in sight that says it's going to end soon, and everything I read confirms that view.

So you just said two years, which is quite unusual period, but it's certainly an extension from, I think, the one year that you had mentioned in the past. What proportion are your revenues now? would you say are constrained by these lead times of one to two years?

What portion? You mean which? I don't know how to answer that question because I'm not sure what it is. Are you asking which of our customers use electrical components that are constrained?

I'm specifically thinking you did about $130 million of revenues. You could have done $160 plus million of revenues. What proportion and percentage of those revenue numbers are currently constrained not by just components but by components with lead times of one to two years?

Almost every customer has parts that have lead times a year out or more. Some customers are doing a better job of reacting to our efforts in finding those components on the gray market. Some customers are doing a better job of forecasting out and started doing a better job a year ago of forecasting out their requirements. And some designs have lent themselves to being quickly respun to take advantage of a component we can find on the marketplace as a replacement for one that we can't. So there's an incredible amount of effort and I'm not sure this is widely known. It has been amusing to watch the press catch up to the shortage situation and watch our government attempt to address logistics with a fine of $100 a day for late containers, but that's another topic for another day. But as we see people catch up to how bad it is, it just depends how far gone they are on how soon we're going to be able to help them.

That's insightful. Thank you. Let me take a slightly different angle on this same topic. What level of revenue are you currently buying parts for today and and recognizing that that doesn't equate to revenue because you just said that we have one year plus lead times.

That's an interesting question to answer because what we've been able to do is convince a number of our customers that they should sign up to covering us in the event that The vast majority of the parts that we need for their product are available, but one or two of them are not. So we've got a number of customers who said that, go ahead and buy components out to a year ahead of when you think you're going to need them for my product, but if you can't get one or two or three or four or five or whatever those components, we will pay, we will buy the inventory from you in order to make it a low enough risk that Keytronic will do this on our behalf. So there's that mix. There's our own judgment calls on the availability of parts for customers who aren't yet to that stage. And there's our bets on things that we're working right now that we think are going to pay off but may or may not. So right now, my best answer to your question would be that we're driving about $145 million worth of parts. We're driving that amount of parts to support that amount of revenue, I guess is the right way to say it. We're driving parts to support about $145 million in revenue. How much of that we are going to be liable for is still being reduced as we educate our customers and they educate themselves on the severity of the situation and the right ways to address it.

And so that's what you're doing today. How long or when did you start buying? How long ago or when did you start buying at this level, call it the 145 per quarter level?

We were actually buying at a higher level previously, and that's why we have been hit so hard with inventory levels that are above where we want them to be. So two quarters ago, we were probably buying at around $160 million equivalent revenue worth of parts. because we thought we were going to be able to convince our customers to pay PPV for parts that we found on the gray market. We thought that suppliers were going to miss their commitments by a reasonable amount, but not an unprecedented amount. But it just continues to get worse rather than better, so we've backed off on what we're buying.

And I want to tie that to something that Brett had said relative to accounts receivable increasing sequentially, that that was simply due to timing of when business shipped in the quarter. Does it have anything to do with customers not being willing to follow up on their commitments? Because it's easy to say that they will buy parts if you don't have a full bill of materials. But it's another thing to write a check when they don't actually have product coming out of the factory.

Well, Brett said that was due to two reasons. He said one was, as you say, but the second one he mentioned that you missed was that some customers are having difficulties in paying on time because they're not getting paid on time. The whole supply chain is bound up by people not paying in time from one end to the other. As far as the answer to your question, when we ask for commitments from customers to pay for inventory that we can't complete, we don't get it with a handshake. We get it with a written agreement. So we haven't had anybody renege on those agreements, although it does take more than just an email that says, hey, we missed pay up before they write you a check.

I'm going to have a little fun with you here. You had in your annual letter said that there was about $700 million of demand, and when I cut that by four for a quarterly run rate, that's about $175 million per quarter run rate, which is higher than the number you mentioned this quarter. not to split hairs too tightly here, but would you reconcile what you were saying here today versus the annual letter?

Annual is not the same as quarterly. Things don't run flat, although you and I have had a number of discussions where you can't believe they don't run flat. Things don't run flat.

Flat, though. Did we lose you, Bill?

Nope, I'm here. I just made a quip that it was easier to run things flat in a spreadsheet.

Yeah.

Okay, so that's really the difference is just looking at a full year versus just quarterly fluctuations.

Yep.

Excellent. All right. Thank you for the time.

Thanks, Bill.

And we'll hear next from Sheldon Grodzki of Grodzki Associates.

Hi. It's a little demoralizing hearing what you go through quarter after quarter, but I think you mentioned something today that I haven't heard before. You mentioned something about whether there might be something about some possible regulatory fines or something like that. If you can elaborate on what that was, is somebody at the SEC pissed off or is there some other regulator?

We have no comment on that other than what's been in our 10-Ks and 10-Qs.

Yeah. Continuing to go through our internal investigation.

Is it ever going to end, do you think?

Pardon me, what did you say? Will it ever end?

Is it ever going to end? Yeah.

Sure.

Yeah.

It seems like it should be over by now.

No, that's unfortunately a rookie response to this situation as I've been educated by all the people who make money off of these situations. They typically go for a year to two years.

Even though it didn't have an impact on net income?

It's just a case of whether it's finished goods or goods in process or raw materials. Okay, I'll let it go with that. Thank you.

I appreciate it because I have strong opinions that I'm struggling to not express.

Okay.

And we'll go next to George Melas of MKH Management. Hi, Greg.

Hi, Brad. Hey, George. Congrats for running the business. You had a quick question on the internal investigation. This quarter was roughly 400,000. It seems to be a little higher next quarter. Is it roughly 500,000 this quarter, you think?

Yeah, we're expecting over time that it will go down. You know, it's Unfortunately, we're going to continue to have some professional services and legal support over the coming quarters. I wouldn't expect at this point any real ramp-up at this point. We're expecting those to go actually decrease over time, but again, we just can't forecast that.

Now, the 3 to 5 cents, that's roughly $400,000, right? It is. It is. Okay, great. And Craig, you mentioned labor shortages. I think that last quarter, the last two quarters, those had eased somewhat, but they seem to be coming up again. Is it mostly in Mexico? Is it mostly in the U.S.? What's the nature of these labor shortages?

We're okay in Vietnam. We're okay in China. But the U.S. is horrible. It's as if we're in some different country that I don't recognize. And Mexico is tight, but not as tight as I've seen it in Mexico before.

Okay.

I mean, I don't know about you, but I've never driven down I-94 and not been able to get off at an exit because I wasn't sure McDonald's would be open.

Right, right. Yeah, I think there's like 6 million people who have not quite returned to the workforce. I think workforce participation will come down. On the inventory, is there any way you guys can quantify how much of the inventory is really backed by the customer? And how much is it that where you make bags, bring in inventory at which you are at risk. I'm not exactly sure how to ask the question. I mean, how it is now and how it was a couple years ago.

George, it's our business model and it's the contract manufacturing business model industry as a whole that we don't bring in material on our own risk. It's always purchased per a contract, per either a forecast or a PO that is binding. Where the risk comes into it is timing. So if we were to buy something and not be able to get a part for a year, then we have our cash tied up in the rest of it for a year. That hits our balance sheet and our loan and everything else. But we aren't out buying stuff that we may not be able to use for certain intentionally, and all of our business is covered by contracts.

Okay. So then how much of your business is covered by timing clauses where after a certain period of time, the customer pays you for the inventory that's basically in process?

Almost all of it has timing clauses in there. But most of these contracts were written well before anything like this ever occurred. So those timing clauses are much longer than what we need to operate in this environment today. So in essence, we're going back and getting agreements with certain customers that state that during this time of horribleness in the supply chain, instead of a 180-day period that we have to hold it, I guess the new norm is that the amendment to the contract says that day that we would have been building and we can't build, that's the day that we're allowed to invoice for all the parts that are sitting in our dock. Okay.

Okay. And how much of that? So in that case, your inventory would shrink. The cash would go up, but you would still hold the inventory for the customer, but it would be customer-owned inventory.

Correct. Yep.

And how much of that would already happen?

Oh, what do we got? Probably 30, 30, 35, 40 million. Yeah. Yep.

Wow.

Yeah, I can't stress enough that people don't understand what's going on in this world. It's unbelievable.

So that's $35 to $40 million of work in progress that your customer has actually paid you for?

No, that would be four components they've paid us for. So it's inventory, it's not WIPP.

Okay. Oh, because you only really start to build a part of the product once you have it.

Right. We wouldn't start building until we had all the components on hand. Okay.

And that's what we did last quarter or a year ago.

It has increased substantially over the last year. I don't have the exact numbers, but it has grown significantly in the last year. and I expect it to only grow further. Okay.

Are you more at risk of that because you have, you are so vertically integrated and you have sort of, you have a much bigger bond than most of the competitors?

I wouldn't say that we're more at risk for it. I wouldn't say that our numbers in that respect are any bigger than our competitors. A number of our customers are served by more than one contract manufacturer, and these deals are not unique.

Okay. Okay, great.

On the gross margin, I think your target is roughly 9%. Is that still a target? But if you were to do 160 million in a revenue, would that target go up?

Yeah, that target would, we would, the target wouldn't go up, but our performance would certainly exceed the target.

Okay. Okay. At some point, I imagine you would exceed the target. Okay. So what would it, what do you think it could be?

It's a, well, to stick with the analogy, it's a moving target, George. Right now what's happening is that the cost of materials is going up so fast that we can't keep up with raising our prices to our customers quick enough. As you can imagine, customers don't say, oh, you feel like you need to raise your prices? Sure, go ahead, send me a new invoice. Every time we have to raise our price, we have to do a hell of a job with proof that we've done everything we can to mitigate that price increase. So we are in a delayed position where materials have gone up, logistics have gone up, and we have to go argue with every customer to say that, well, your price has to go up 4% or 5%. Those arguments are getting easier because The world is now becoming aware of the situation that we all face, but there's still arguments and they still take time. So we're caught in a bit of a squeeze until inflation abates a bit, which I have no actual faith that will actually happen, but until it does, we have to get faster at moving price increases through to our customers in order to get our margin back up where it needs to be. A little bit of that and a few more parts would move us back to our target easily. Okay.

Okay, great. So that's something that you haven't had to do really in many years. Okay. It's sort of a new initiative and it's not easy to do.

I've been doing this for 35 years and I've never seen a situation where across the board we were continually going out and succeeding at raising prices.

Yeah.

Ever. I've never seen a situation where we can't get our stuff through a port. I've never seen a situation where you call up and say, hey, I got an order. And they say, well, we're not accepting orders. And if we do accept your order, even though our part is standard, it will be at non-cancellable, non-returnable. And if we decide to ship it to you, it might be two years from now. Never seen that.

Right, right.

And I've never seen, have you ever seen, have you ever seen a situation where F-150 pickup trucks are parked in a parking lot waiting for an I.C.? ?

Yeah, yeah, no, it's mind-boggling. Yeah, yeah. Do you see sort of a segmentation in your customers, some that are really willing to work with you and sort of, you know, see you as a real partner in our business or more transactional?

Sure. As you may or may not know, we run our business through program managers. who are much like miniature CEOs of their portion of the business. And these people will typically be running a business between $10 and $80 million a year in revenue. And each of these people have a whiteboard in their cubicle. And on each of those whiteboards, I draw a round circle and I put a dashed line through it. And that is the moral knob of their customer. Some customers get a 10 out of 10. We'll do things for those customers verbally on a handshake because they've proven themselves to be upstanding customers and they've proven to be trustworthy. Things go much faster for those customers. We have other customers who are essentially untrustworthy. We won't do anything for them without a signed agreement on whatever it is that they want us to do. So our business and our people have to be flexible and some of our program managers will have customers at both ends of the spectrum they have to talk to one guy on the phone who they know they can't trust have to hang up the phone and talk to the next customer and know that he's their best friend and they can trust him as long as the day is so an answer to your question is yes there are significant differences in the ways customers have responded to this the ones who have responded You know, the ones who have the tens on their moral knobs have been hurt the least, and the ones who have the ones or the twos have suffered the most, not out of vindictiveness, but because agility determines how well this goes for you in this kind of unprecedented situation, and agility is hampered by untrustworthiness.

Yeah, yeah.

And is there a way to say,

What proportion of your customers are in the trustworthy category as opposed to not?

The nice part about our business is that our big customers, I'm thinking, just give me a minute here. All of our big customers fall into the trustworthy category.

Yeah. Yeah.

There are a lot of these customers that I've known for, we've known for over a decade. We've gone, we go way back on battles, fought together and won and crises he staved off. And so we have a great relationship with all of our big customers. Some of our smaller customers, not so much, but I'd say the majority of our customers fall into the, these are good guys. The majority of the revenue, The majority of the revenue falls into these are good guys and you can trust them mode.

Okay, that's good to know. Okay, that's it for me. Thank you very much.

All right, thanks, George. Thanks.

And we'll go to a follow-up from Bill DeZellum of Teton Capital.

Thank you. I'd like to jump to Vietnam. Would you elaborate on your comments that you made that Vietnam has, you know, showing nice signs and one day will be quite meaningful for you all? And just provide some more detail behind that, please.

We've had a number of big accounts.

I don't know why. Are you getting that, Bill? Bill? Bill? Yes. Are you getting an echo when I speak?

Yes, I am. I'm going to put you on mute to see if that makes any difference. I'll put me on mute. Sorry.

Okay, test.

Nope, that didn't fix it. Well, I'll ignore myself speaking, which is pretty easy to do. Not went away. So Vietnam, right before COVID hit, hit, had a lot of customer interest, a lot of customer visits, and had two or three nice wins. But Vietnam's national response to COVID was a hard lockdown on people in and out, on people going to work. And very few customers are willing to put business into a plant they've never seen. So that has slowed down Vietnam's growth, our Vietnamese plant's growth. But even with that massive limiter, they've managed to grow, they've managed to win accounts that have never actually seen the inside of their factory, and they've managed to become profitable. So we expect that when the limiters to visits and business are overcome by vaccines or whatever's going to do it, that they should return to a very rapid growth.

And has the country reopened, or are they still in that lockdown mode? I've heard kind of conflicting things.

They change very rapidly. I think right now they're kind of open, but they're very, very reactive. If they see a slight concentration or uptick in cases, man, they shut it right back down again.

It's based on regions.

Okay. Maybe that explains why I feel like I'm hearing different things. It just changes very quickly. So with it now open, once again, does this increase your, I guess, A, your confidence or, pardon me, comfort at having new business move into that facility and, B, Does it increase prospective customers' interest and desire in putting new business in that facility?

I don't think the customer's desire or interest has ever diminished. They haven't been open big enough and long enough that we've seen people start to schedule trips there to review the factory.

This may be a silly question, but is that review something that can be done via video?

We try that, Bill. We've done all kinds of video walk-arounds, and we've been able to gain some traction from that. But there doesn't appear to be any substitute for going and actually seeing the facility.

Right. OK. Thank you. And then, Brad, I don't want you to feel left out. So relative to SG&A, it was down versus last quarter by 800,000 or so. Would you talk to us about how you were able to do that?

Yeah, a couple of things. One is we are carefully managing new hires during this time, and the other is that there was some confusion performance-based compensation that was accrued in the last quarter of last fiscal year.

All right. Well, thank you both, and thank you for all the detail behind the logistics supply chain and all of the craziness out there. Really do appreciate it.

You bet. You bet.

And as a reminder, it is star one if anyone has a question at this time. We'll pause just one more moment. And with no other questions in the queue, I'll turn the call back to our presenters for any additional or closing comments.

Okay. Thank you again, everyone, for participating in today's conference call. Brett and I look forward to speaking to you again next quarter.

And so this concludes today's call. Thank you for your participation. You may now disconnect.