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spk01: Good day, everyone. My name is Jamie, and I will be your conference operator today. Welcome to Silicon Labs' third quarter fiscal 22 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touchtone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Giovanni Pacelli, Silicon Labs Senior Director of Finance. Giovanni, please go ahead.
spk05: Thank you, Jamie. We are recording this meeting, and a replay will be available for four weeks on the investor relations section of our website at scilabs.com slash investors. Our orange press release and the accompanying financial tables are also available on our website. Joining me today are Silicon Labs President and Chief Executive Officer Matt Johnson and Chief Financial Officer John Hollister. They will discuss our third quarter financial performance and review recent business activities. We will take questions after our prepared comments, and our remarks today will include forward-looking statements subject to risks and uncertainties. We base these forward-looking statements on information available to us as of the date of this conference call and assume no obligation to update these statements in the future. We encourage you to review our SEC filings, which identify important risk factors that could cause actual results to differ materially from those contained in any forward-looking statements. Additionally, during our call today, we will refer to certain non-GAAP financial information. Reconciliation of our GAAP to non-GAAP results is included in the company's earnings press release and on the investor relations section of the Silicon Labs website. I would now like to turn the call over to Silicon Labs Chief Financial Officer, John Hollister. John? Thanks, Giovanni. Revenue for the third quarter grew 46% year-on-year, ending at $270 million, in line with expectations and well above our target model growth rate. During the quarter, we saw sequential growth in both business units, industrial and commercial, and home and life. Areas of particular strength for the quarter were in smart home applications and commercial automation. Geographically, Q3 revenue growth was strongest in the Americas, followed by Europe, then Asia Pacific. All regions grew in the quarter. Distribution sales were consistent with expectations at approximately 80% of total revenue, reflecting the broad diversity of our customer base. Our largest customer in Q3 was mid-single digits of our mix, and our top 10 customers comprised around 20% of our revenue. Our distribution inventory level at the close of Q3 was slightly lower at 59 days. We continue to see a challenging operating environment in China due to ongoing COVID lockdowns impacting our distributors' ability to shift POS to end customers and resulting in higher-than-average channel inventory. During the quarter, we experienced volatile booking patterns, with some weeks continuing to show above-average strength, while in other weeks, our bookings levels were relatively low. Certain customers have indicated that they have accumulated adequate inventory levels, and while our cumulative backlog declined in the third quarter, it remains high by historical standards. In Q3, even though we began to see signs of foundry capacity opening up on certain nodes, there continue to be lagging process nodes where we have meaningful supply constraints. That said, lead times have come down closer to 26 weeks, which is still above normal levels. Non-GAAP gross margin for Q3 was favorable to expectations on product mix, ending at 61.5%. Consistent with the overall trend for fiscal 2022, Q3 gross margin was down about 90 basis points from Q2, reflecting ongoing second half input cost increases. Non-GAAP operating expenses were slightly favorable to expectations on reduced outside services spending, ending at $112 million. Non-GAAP RMV expenses were $69 million, and non-GAAP SG&A expenses were $43 million. Non-GAAP operating income was $54 million, representing operating margin of 20.1%, which is above our target model for profitability at this revenue level. Our non-GAAP effective tax rate for the quarter was 27%, and non-GAAP earnings for the quarter ended at $1.21 per share. This earnings result is approximately a 250% increase from the same period last year, a dramatic improvement following the I&A divestiture. On a GAAP basis, gross margin for the third quarter was 61.4%. GAAP operating expenses were $135 million. R&D expenses Stock-based compensation expenses were $16 million, and amortization expenses for intangible assets were $8 million, both in line with expectations. GAAP operating income was $30 million, representing 11.2% operating margin. The GAAP effective tax rate was approximately 40%, and GAAP earnings were $0.60 per share. Turning now to the balance sheet, we ended Q3 with cash and cash equivalents of $1.4 billion. Operating cash flow for the year-to-date period ending in September was $127 million. During the quarter, we executed open market repurchases of our common stock, bringing our total year-to-date repurchases to nearly $700 million, and the total completed since the announcement of our divestiture last year to more than $1.8 billion. Our fully diluted share cap declined again in the quarter to 34.8 million shares. Our accounts receivable balance in the quarter increased to $77 million, with day sales outstanding at 26 days. Our inventory balance grew in the quarter to $88 million, representing 4.7 turns. Our debt balance as of the end of the third quarter is unchanged with the principal balance on our 2025 convertible notes at $535 million. The company's balance sheet and liquidity position are very healthy, and we have ample capacity to continue our capital deployment strategies. Before I turn the call over to Matt, I will cover guidance for the fourth quarter. We expect revenue for Q4 to be in the range of $245 to $255 million. We expect the industrial and commercial business to increase slightly on a sequential basis with continued tax supply on certain product lines. We expect the home and life business to decline in Q4 due to a slowdown in customer demand on certain programs. We expect non-GAAP gross margin in Q4 to be approximately 60% We expect non-GAAP operating expenses for Q4 to decline to approximately $109 million. We expect our non-GAAP effective tax rate to be approximately 25%, and non-GAAP earnings to be between 93 cents to $1.03 per share. On a GAAP basis, we expect course margin to be 60%. We expect GAAP operating expenses to be approximately 132%. 35 to 45 cents. I will now turn the call over to Matt. Matt? Thanks, John, and good morning, everyone. Despite a challenging macro environment, Silicon Labs delivered sequential and year-over-year growth in both revenue and EPS in the third quarter. As highlighted in prior quarters, design and momentum is propelling our new business pipeline as we gain share across all of our applications, including Bluetooth, where revenue grew by almost 60% year-over-year. The industrial and commercial business saw eight consecutive record quarters, growing on both a sequential and annual basis. The commercial automation segment delivered strong results with revenue up 12% sequentially and 116% year-over-year. Additionally, smart city applications continued to demonstrate robust annual growth, up 60% year-over-year. Energy conversion and agriculture applications showed strong growth rates both sequentially and year-over-year as well. This past quarter, we were pleased to be recognized as a Supplier of the Year by multiple customers with whom we have partnered to increase industrial adoption by IT. A key tenet of our strategy is being a trusted partner across our diverse customer base. We've demonstrated this throughout the recent supply chain challenges, working closely with our customers to forge even stronger relationships. We were honored to receive Cisco's Emerging Supplier of the Year award, which recognizes Silicon Labs in all of Cisco's core performance areas. including quality, technology, flexibility, and productivity. We were also selected by QE Brand as a finalist for the Supplier of the Year Award, and named Collaborator of the Year and a Top Supplier of the Year by Schneider Electric. We're grateful for those close relationships and proud of these awards, which recognize the significant efforts of our team. As John mentioned, within the home segment, smart home products were a bright spot in the board, up 6% sequentially and 40% year-over-year. It's important to highlight that smart home applications are not confined to single-family homes. Smart solutions are also being incorporated into large-scale building projects, including new neighborhoods and apartment complexes, as well as upgrades that improve value in ROI. We were thrilled with the turnout at our third annual Horsford Developer Conference in September, which drew more than 7,000 registrants from over 1,600 companies, signing up for over 67,000 individual sessions. The caliber of attendees and keynotes, which included speakers from Amazon and Google, among others, underscored our leadership within IoT and our increasing role within the industry. Silicon Labs' Series 2 platform continues to be a growth engine as we extend our leadership position within IoT. Series 2 represents the fourth generation of Silicon Labs' wireless technology and incorporates all the learning from nearly 15 years of work in this space. It's a wireless connectivity platform that's purpose-built for the IoT, with industry-leading security, battery life, and advanced features like the industry's first built-in hardware acceleration for machine learning at the edge. GoTEM IOS has nearly doubled its IoT revenue in the last two years, driven by the first few products on this platform. Building on the strength of our series two product cycle, we announced four new products during the opening work with keynote that will help shape the future of the IOP, including products that support technology such as Matter, Amazon Sidewalk, Wi-Fi, and Wi-Fi 6. We announced a complete Matter development solution providing support for Matter over Wi-Fi, Matter over grid, and Bluetooth low energy. and matter bridges to both levy and delay. We also announced the Silicon MAPS Pro Kit for Amazon Sidewall, the first end-to-end development platform with complete connectivity support for Amazon Sidewall. For YSON, we announced the FT25 SoC and GFF01 front-end module chipset. A new flagship SoC and power amplifier for YSON, which when used together, are designed to provide a sub-gigahertz transmission range up to three kilometers in dense urban environments with no data loss. Finally, we announced significant progress in expanding our capabilities in Wi-Fi and DOE with Silicon Labs' first Wi-Fi 6 and DOE SoC family, called the X907, which is the industry's lowest power, longest battery life Wi-Fi 6 and DOE combo solution. Another significant milestone was the inauguration of Silicon Labs' development center in Hyderabad, India, which has grown to more than 500 employees. The site is focused on being the leading IoT wireless development site on the region. As part of this, SiliconLabs and IIIT Hybrabad launched India's first campus-wide Wi-Fi network as the IIIT Hybrabad Smart City Living Box. This network will support an innovative street lighting application with 30 built-in network nodes connecting to campus street lamps for remote monitoring and control. From closing, we had a great quarter that showcased the strength of our execution and strategy. We are uniquely positioned with our unmatched breadth, depth, and focus in our space. Our breadth of supported wireless technologies, ecosystems, applications, and markets is the largest in the world. Our depth and domain expertise is driving leading wireless performance, battery life, security, and ease of use for adoption of our products. And 100% focus and commitment on driving phenomenal growth in IoT wireless connectivity has enabled us to double our revenue over the last couple of years in the middle of a supply chain crisis. We're confident in our ability to navigate the current challenging environment and continue to extend our IoT leadership. Thank you, Mike. Thank you, Matt. Before we open the call for Q&A, I would like to announce our participation in the Steeple 2022 Midwest One-on-One Growth Conference on November 10th in Chicago. We'll now open the call for questions. To accommodate as many people as possible before the market opens, I ask that you limit your time to one question with one follow-up if needed.
spk01: Ladies and gentlemen, at this time, we will begin that question and answer session. To ask a question, you may press star and then 1. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. If at any time your question has been addressed and you would like to withdraw your questions, you may press star and 2. Once again, that is star and then 1 to join the question queue. Our first question today comes from Matt Ramsey from Cowan. Please go ahead with your question.
spk00: Thank you very much. Good morning, guys. I guess for my first question, Matt, if you just kind of go through the guidance as John laid it out, and industrial and commercials up a hair in Q4, that means you're down home and life, down, I don't know, mid to high teens, something like that, sequentially. I just wanted you to maybe provide some color and walk us through what sort of order patterns you're seeing. I think in the commentary you guys mentioned maybe some programs that were It sounds like some customer inventory might have built up in some cases. I'm just trying to get a feel for that home and life segment and what you guys are seeing in real time. Thanks.
spk05: Sure, Matt. No problem. So, yeah, big picture, if you look at Q4, we're seeing, you know, that consumer life, particularly consumer, kind of starting in China, seeing the softness, then in Europe, then in the U.S. And in that space, there are still demand and supply gaps. But if you look at the industrial and commercial, you definitely see more strength in that space. There's definitely pockets where we've seen softness there as well, but nowhere near the same as what we're seeing on the consumer side. In the industrial and commercial space, the demand and supply gaps remain pretty substantial. You know, an easy way to think about it is if we had, you know, the ability to close that gap, we'd be looking at good growth going from Q3 to Q4. The other thing that's worth kind of mentioning to add a little color is, you know, because of the diversity of business that we have across technologies, markets, applications, geos, we're seeing a little bit of everything, honestly. We're seeing, you know, some customers were still in the mouth, strong growth and, you know, strong growth cycles. seeing other people kind of just right and others that are over inventory and not getting as much supply from us. So it's a pretty diverse set of circumstances that we're seeing out there. That being said, we still expect, you know, our market space to outgrow the overall market. And given the share gains we've seen over the last couple of years, we expect ourselves to be able to outperform whatever this market ends up being.
spk00: I appreciate all the color there, Matt. It's definitely a dynamic environment. I guess for my follow-up question, I wanted to ask sort of a bigger picture topic. During the last, I don't know, 24 months or so when supply for your company and most of your competitors have been insanely tight, we've noticed many of your microcontroller competitors are really over-indexing their allocations toward automotive and industrial and maybe much less so towards IoT customers. And you mentioned the share gains that your company has taken as a result. I guess going forward from here over the next couple years, would you expect that sort of land and expand share gain story to continue for you and those customers that you guys service to be loyal? Or on the flip side, as the tightness eases for your competitors, are they diving back into IoT and that becoming a focus? Just how is that dynamic playing out with customers as maybe supply opens up for some of your competition? Thanks.
spk05: That's understood. And, yeah, quick answer is, you know, we definitely saw that dynamic where, you know, as things became extremely tight, you know, a lot of competitors returned to what was their core, which was fantastic for us because our core was this space. And so we definitely know that we've gained share as a result of that. I think a few things. We haven't seen that dynamic shift yet. So things definitely have not opened up in a way that we've seen you know, competition coming back for those sockets yet. I think it's too early for that. I do think it will happen. As supply improves, people will be out there looking for sockets. Two things I'd say. One is customers remember this stuff. I think, you know, memories are pretty deep, and this supply chain crisis has either strengthened relationships or weakened relationships. And I'm proud to say that I think a lot of our relationships have improved in this cycle. So I think that will serve us well as we go into the next few years. The other thing that's really critical to understand, we are in an incredibly strong period of our product cycle. I mentioned our Series 2 platform. You know, as I said in my prepared comment, we have literally almost doubled the size of our revenue in the last couple of years on the first few products coming out of that platform. And there's, you know, we just announced four more, and we have a lot more coming in development. So that strength of platform where we're at in the cycle positions us really well going into whatever this is in the sense that we've improved our customer relationships, and we have that strong product pipeline. So those are competition, but I think we're pretty well positioned going into that.
spk00: Thanks, Matt. Appreciate the context.
spk01: Our next question comes from Gary Mobley from Wells Fargo Securities. Please go ahead with your question.
spk04: Hey, everyone. Thanks for taking my question. I wanted to ask, you know, ask about what Matt mentioned earlier in his prior questioning, perhaps in a little more direct fashion. Given the trends that you're seeing in your bookings on a week-to-week basis or month-to-month basis, do you feel like your fourth quarter revenue guidance is reflective of the trend, or is this just a node on the way down? And against that, do you think you can grow your top line in calendar year 23?
spk05: John, you know, that's a good question. It's a hard one to answer. Based on everything we see, we see outstanding design win momentum in the company. We're at 90% of our annual goal for design win achievement through the first three quarters of the year. That's a tremendously positive statement. We are not immune from macroeconomic effects. No company really is at the end of the day. So we'll see. We'll see what the Fed comes out with next week and where the capitulation cycle may begin to kick in, et cetera. But we're as well positioned as we could be, as Matt just articulated very well, to grow the business. And putting aside macro conditions, we see fundamental drivers in the business that indicate to us, yes, we expect the business to grow in fiscal 23. and we are not changing our long-term figure for growth of 20%.
spk04: I hope that answers, but happy to follow up if that didn't quite help. No, it's quite helpful, John. I appreciate the comments. So if I'm not mistaken, you have some China-based FAB partners. I'm curious to know, you know, against the backdrop of tightening U.S. export restrictions targeting China, have you begun the process of trying to reshuffle your FAB partner, excuse me, FAB partner footprint to try to mitigate the risk associated with these restrictions.
spk05: Yeah, this is Pat. So big picture of the company, we have a relatively low percent of our overall business in China, I think around 13, 14%, and even, you know, smaller percentage of our supply coming out of China from a boundary perspective. And we do not have, you know, any of our, think of it as our next generation or series two or growth products, sole source anywhere in China. So we believe that we're relatively well positioned, you know, to be clear and fair, there's a lot of uncertainty, you know, geopolitically that's growing there, but, you know, we are not sole source on any of our future growth or next generation products there. That's helpful. Thank you, Matt.
spk01: And our next question comes from Blaine Curtis from Barclays. Please go ahead with your question.
spk02: Hey, guys. Thanks for taking my question. I just want to go back to Matt's first question on the guidance, because you did mention some certain programs, and then I think your answer was more kind of about geography. So I'm just trying to understand, is it quite a sharp decline in December? Is that kind of like a one-time thing? I mean, I know you're still saying demand above supply and supply is the issue, but you did also mention some programs, if you could just elaborate on that.
spk05: Yeah, sure. So to be clear, this is more broad and consumer. So it's a complex situation where we're definitely seeing consumer softness, right? We're not seeing order cancellations. We're seeing order push-outs. And at the same time, we still have more demand than supply. So matching those up is becoming increasingly difficult given that volatility that we're seeing out there. This is less in Q4 about one or two customer programs or ramps or anything like that. And this is more of a market statement about what we're seeing in consumer across really, like I said earlier, strongest and most acute in China, but then some consumer softness in Europe as well. So think of it as we're seeing broad softening in the consumer space, you know, still some demand supply gaps, but this isn't about one or two ramps or a few customers or products or anything like that. It's also important to reference, you know, relative to the last, you know, year, it's definitely weaker than what we've seen, but if you step back and look at this, you know, previous supply chain crisis, you know, our backlog and outlook would be stronger than ever going into a quarter or going into a year. So the context matters in this case, I think.
spk02: And I just wanted to ask on pricing, you kind of took the position of raising once and not having to go back to customers, but it has been the primary driver of growth this year. So just your thoughts as things soften and capacity becomes available elsewhere, your ability to hold pricing that you've had this year into next?
spk05: Sure. Yeah, we're not seeing any indications of supplier pricing softening yet. In fact, you know, we're still seeing some increases and expectations increase, especially as, you know, there's still some pretty sharp demand supply gaps, particularly in the nodes that we trade into the company that the industry consider more mature process nodes. So that's important to realize that, you know, not all nodes are the same in the semiconductor space. So that's the first thing. The second is we do believe that we are well positioned to navigate not getting stuck in the middle, for lack of better terms of the company. You know, especially given the way we manage customer relationships and the strength of that product cycle I mentioned earlier. So, you know, we mentioned consistently over the course of the last year or so, our goal in this was not to change our model, raise our model, but to, you know, pass those prices along and not get stuck in the middle. And I think we're still in a very good position to continue to do that. Yeah, and just, John, if I could just add a couple quick points. You know, the ASP dynamics are also driven by product mix, where at times we're selling, you know, higher value-added products, but just in here on the count of higher prices. And just a final point is that units, the Q3, Q4, are all double digits here on here, just as a data point.
spk02: Thank you, though.
spk01: Our next question comes from Raji Gill from Needham & Company. Please go ahead with your question.
spk03: Yeah, thank you for taking my questions. Yeah, just to follow up again on the home and life. So it's a fairly steep deceleration in terms of year-over-year growth. The growth is decelerating to about 11% year-over-year, and on a sequential basis for Q4, it's down about 17%. And so when we were thinking about going into the first half of 2023, If there's kind of continued softness in the consumer market, if this is mainly driven due to order pushouts and then trying to match the demand supply, you know, is there a concern that those order pushouts are going to lead to kind of order cancellations and we have more of a pronounced, even more pronounced kind of decline in the home and life? I'm just trying to get a sense of the steep decline on a quarter-over-quarter basis. You're attributing it to order pushouts and matching demand and supply, but not necessarily straight out order cancellations. I'm trying to reconcile those two ideas.
spk05: Yeah, sure. I think this is Matt. I'll comment on that, and I think it would be good to hear from John as well. You know, things are dynamic right now and changing, right? So what we're giving you is the best picture that we have sitting here right now. You know, when we look, you know, customer by customer and go through this, as I said earlier, there's quite a mix of what we're seeing, right? Some customers are still going strong. Some are just right. And some have more inventory than they should. And they're also seeing, you know, demand soften, so they're trying to work through that. So, you know, as we go forward, you know, we definitely know that Q4 will be working through inventory that customers have, which is good. And I think that's what we want to see going into next year. I think what you'll see in next year is a pretty wide range of things that we mentioned earlier, right? We're going to see some customers that still need to run off some inventory and are seeing also demand softness overall. But we also see some customers presenting a lot of strength in consumer, and we also know we have those share gains in those sockets and applications. The confluence of those still gives us good confidence going into 2023 that we're going to be able to do better than whatever that space ends up being, all instances. And John, still for that. Yeah, I would just add that in terms of cancellations, we really have not seen that. There's been a handful, but really it's more push out to, you know, I understand your point, Raji, but so far we have not seen meaningful cancellations in
spk03: I appreciate that insight. And just for my follow-up on the gross margins, the gross margins, even though they've been trending down off kind of a high base, are still quite healthy relative to your long-term target, 60% for Q4 guide. If we're entering into a period where there could be volatility around the home and life business, I'm just curious, how are we thinking about gross margins as we trend into next year? And why have the margins been relatively healthy, you know, given kind of the, you know, the mismatch that you saw with price and cost? Is it a mixed shift towards industrial commercial that's helped? Just curious on kind of the dynamics of margin in Q4, and then how should we be thinking about the margin trends next year at a high level? Thanks a lot, guys. Sure. Yeah, sure, John.
spk05: So, you know, we've performed well in this area this year, As we look at the guide for Q4, we're near the model indication of high 50s gross margin given the current situation. And no real change to the overall messaging on gross margins. We continue to allow for some potential compression there over time due to the factors we talked about previously on growth in standards-based technologies, growth in certain volume customers, et cetera. you know, we're going to try to continue to outperform. To the extent we do that, that's a win. So really no major change in our messaging this morning.
spk01: And our next question comes from Tori Swanberg from Stiefel Nicholas. Please go ahead with your question.
spk06: Yes, good morning. This is actually Jeremy calling for Tori. Maybe if I could ask firstly on – Is there a way to get a sense of maybe where your lead times are at, both in terms of what you may be quoting to your customers and also what you may be getting from your suppliers? And has that shifted in the last quarter or so?
spk05: Sure, Ashley. This is John. You know, we've seen lead times come in a bit. They were running in the 26 to 52 weeks, depending on the product. It's more averaging now about 26 weeks, so it has come in some. That continues to be well in excess of where we have traditionally operated. You know, in the past, we ran with roughly seven to eight weeks of lead time. I think those days are over. Going forward, we'll, you know, systemically have longer lead times, more likely in the roughly about a quarter worth of lead time. So, we're still roughly about 2x our expected long-term lead time, but it has come in a bit.
spk06: Great. Thank you. And certainly, To the design wins, I think you mentioned, you know, you're at 90% of your initial target and, you know, just about three quarters of the way through the year. Can you give us a little bit more color in terms of, you know, is there a way to quantify that opportunity? Maybe, you know, potential pipeline or lifetime revenue, or also maybe in comparison to the design wins you achieved last year, you know, how does that compare?
spk05: Sure. Yeah, just a few points that will help maybe frame it and give some context. So, you know, we've seen, honestly, just a remarkable progress on our design wins. You know, we share that, you know, our opportunity funnel has grown to over $16 billion lifetime revenue, which is, I think, you know, 50% more than it was the same time last year, which is amazing progress. But it doesn't matter if you have the opportunity unless you don't, you know, get to win business. So the team's been hyper-focused on winning business in this supply constraint cycle. And, you know, it's not just that desire. We have that product cycle that's incredibly strong, I mentioned, right? So you have, you know, the strength of the product cycle, which gives our sales team, you know, the awesome and best combination you could hope for. They have strong products to go win business with, They have the, you know, ability and relationships that, you know, are improving in this cycle. It's the best combination you can hope for. And maybe, you know, another way to think about it and to kind of quantify it for you, we set our targets to, you know, always win as much as you can, but at a minimum you've got to win at least as much to drive our model, which is the, you know, 20% compound annual growth or your revenue growth. So it's always, you know, the floor on that is always that because we always want to grow that much or faster. So, you know, right now we're trending well above that, which is a few things. We know that positions us really well for the future, and we know we're gaining share in these designments. So, you know, We fully recognize the uncertainty that's out there right now in the semiconductor space and the overall economy, but we do believe that whatever this ends up being, because of those share gains and that strong product cycle, we're going to gain share and outperform, just like we have when things were strong. When things are uncertain, we think we're going to outperform there as well. That's the best way I think I can bring forth the design momentum, and hopefully that answers your question.
spk06: That's very helpful. Thank you.
spk01: And with that, ladies and gentlemen, we'll conclude today's question and answer session. I'd like to turn the floor back over to Giovanni Pacelli for any closing remarks.
spk05: Yeah, thank you, Jamie, and thank you all for joining this morning.
spk01: This concludes today's call. And with that, ladies and gentlemen, we'll conclude today's conference call. We thank you for joining today's presentation. You may now disconnect your lines.
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