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spk02: Ladies and gentlemen, thank you for standing by. Welcome to the OptinTech Holdings Limited Second Quarter 2024 Earnings Conference Call. At this time, all participants are in the listen-only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, August 30, 2024. I would now like to hand the conference over to your first speaker today, Mr. Aaron Lee, the Head of Investor Relations. Thank you. Please go ahead.
spk01: Thank you, Desmond. Hello, everyone, and thank you for joining us for the call today. UpFintech Coding Limited's second quarter 2024 earnings release was distributed earlier today, and it's available on our IR website at ir.ithigerup.com, as well as Globe Newswire Services. On the call today from UpFintech are Mr. Wu Tianhua, Chairman and Chief Executive Officer, Mr. Zhang Zeng, Chief Financial Officer, Mr. Huang Lei, CEO of US Tiger Securities, and Mr. Kenny Zhao, our financial controller. Mr. Wu will give an overview of our business operations and discuss corporate highlights. Mr. Zeng will then discuss our financial results. They will both be available to answer your questions during the Q&A session that follows the remarks. Now let me cover the safe harbor. The statements we are about to make contain forward-looking statements. This is the meaning of the U.S. Private Securities Education Reform Act of 1995. A number of factors could cause actual results to differ materially from those containing any forward-looking statements. For more information about factors that could cause actual results to materially differ from those in the forward-looking statements, please refer to our Form 6-K furnished today, August 30, 2024, and our annual report on Form 29 filed on April 22nd, 2024. We undertake no obligation to update any forward-looking statement, except as required under applicable law. It is my pleasure to now introduce our Chairman and Chief Executive Officer, Mr. Wu. Mr. Wu will make remarks in Chinese, which will be followed by English translation. Mr. Wu, please go ahead with your remarks.
spk00: Hello, everyone. Thank you for joining the Tiger Brokers Second Quarter 2024 Earnings Conference Call. The gross income reached $34.1 million. The net profit rose to $22.7 million. The net profit rose to $54.9 million. This is the second-highest quarter of the company's history. The net profit of the second quarter reached $87.4 million. The net profit rose to 10.8%. The net profit rose to 32.4%. The net profit rose to 32.4%. The net profit rose to 32.4%. The net profit rose to 32.4%. The net profit rose to 32.4%. The net profit rose to 32.4%. The net profit rose to 32.4%. The net profit rose to 32.4%. respectively $2.6 million and $5.2 million. Mainly because the company has always used Hong Kong stock as a suppressor to carry out financing and funding business, the company based on the principle of cautiousness should raise the amount of $1,320 million in the second quarter, so it has a greater impact on the profit end of this quarter. Since 2023, the company has stopped the stock price suppression and funding business in Hong Kong stock market In the second quarter, the US stock market continued to perform well, and overall market activity further improved compared to the first quarter.
spk01: This led to a sequential increase in client trading volume across stocks, options, and futures, with commission income reaching $34.1 million, up 22.7% quarter-per-quarter and 54.9% year-over-year, the second-highest quarterly commission revenue in our operating history. Our total revenue for the second quarter was $87.4 million, an all-time high and reflected a quarter-for-quarter increase of 10.8% and year-over-year increase of 32.4%. In bottom line, our GAAP and non-GAAP net income attributable to Ops Fintech was 2.6 million US dollars and 5.2 million US dollars respectively. The bottom line was negatively impacted by a lost provision of 13.2 million US dollars relating to a case of Hong Kong stock pledging and withdrawal. Since 2023, our company has already stopped similar Hong Kong equity stock pledging and withdrawal in response to market condition and risk. And there is no such risk exposure among existing users anymore. Excluding the impact of the loss provision, our free tax profit for the quarter would be 19.4 million US dollars, reflecting a 13.9% increase quarter-over-quarter and an 8.3% increase year-over-year.
spk00: In the second quarter, we had 48,900 new users, with 69% increase in the total and 68% increase in the total. Singapore and Southeast Asia are the major contributing markets. In the first half of this year, we had 77,700 new users. We are confident in achieving the goal of having tens of thousands of new users every year. At the end of the second quarter, the total number of new users reached 982,300. Compared to the same period last year, it increased by 17%. In terms of total customer service, this year's second quarter of customer assets have still remained strong. The second quarter achieved 17 billion US dollars in cash, which mainly contributed to the Singapore and Hong Kong markets. The 36 billion US dollars in customer assets and supply value gain made this quarter's total customer assets reach 38.2 billion US dollars, creating a new record and raising by 16%. We are very happy to see that the company's corporate assets have been rising in return for seven consecutive seasons, creating a historical high for three consecutive seasons. It is also worth noting that the second quarter's corporate assets from the Hong Kong market have doubled in return compared to the first quarter. This shows that the company's market in Singapore and Hong Kong, with its excellent product experience and increased awareness of the local market, has gained more high-quality users. At the same time, it also shows that
spk01: In the second quarter, we added 48,900 newly funded accounts, representing a 69% sequential increase and a 68% increase year-over-year. Singapore and Southeast Asian regions were the primary contributors. In the first half of this year, we added a total of 77,700 newly funded accounts, and we are confident of delivering our annual guidance for acquiring at least 150,000 newly-signed accounts in 2024. In terms of client assets, China's net assets inflow remained strong in the second quarter, amounting to US$1.7 billion, primarily from the Singapore and Hong Kong markets, fueled by a US$3.6 billion mark-to-market gain. that total client assets by the end of the second quarter increased by 16% quarter-per-quarter and 121% year-over-year to US$38.2 billion, an all-time high. We are glad to see seven consecutive quarterly growths in total client assets with new highs in the past three quarters. Notably, client assets from the Hong Kong market doubled quarter-per-quarter. Highlight our competency in attracting high-quality users in markets like Singapore and Hong Kong through superior product experience and local knowledge. Also underscores the significant growth potential in the markets we currently focus on.
spk00: The second phase is to continuously improve the product's richness, and to introduce a variety of localization features. First of all, we have introduced Hong Kong stock equity and Hong Kong stock isolation in August. That also marked the entire labor platform. We have supplemented the main categories of Hong Kong-Urban trade, improving the competitiveness of companies in Hong Kong's local market and the attractiveness of trading customers. In addition, we will also launch the next function of the Hong Kong-Urban Securities Group. In addition, in terms of virtual assets, after the upgrade of the key to be completed in January this year and the opening of the virtual asset trading service to professional investors, we have currently approved to expand this service to retail users. In the second quarter, we continue to enhance our product offerings by introducing a range of localized features. In August, we launched two key functionalities, Hong Kong stock options
spk01: and short selling for Hong Kong stocks. Now we offer all major trading products for Hong Kong market, boosting our competitiveness and appeal to local users. Looking ahead, we also plan to introduce the combo option strategy feature for Hong Kong stock options. Additionally, since our Hong Kong subsidiary officially uplifted its Type 1 license to include virtual asset dealing service for professional investors in January of this year, we received a proof in June to expand this license to retail investors in Hong Kong. We offer zero commission and no platform fee for both professional investors and Hong Kong retail clients to trade spot cryptocurrency on Tiger platform and supporting real-time settlement of virtual asset transaction US dollar. This provides users with a truly secure, convenient, and cost-effective global trading experience.
spk00: We are also happy to see In the first quarter, we launched the first local trading card and contract trading function in Singapore. We received a wide range of reviews from local storage users and attracted a large number of new entry-level users and credit card users. The activity and user connection have been greatly improved. In addition to launching new products, we are also continuously optimizing the existing user experience. For example, After trading online for 24 hours, we are currently expanding to support up to 9,500 U.S. stocks and ETFs. To provide more convenience for traders who have a difference in buying and selling U.S. stocks, U.S. stocks'期权组合下单功能 in July has been upgraded to support four-leg combination order, combined calculation guarantee, further improve the flexibility of the trading strategy and the utilization of guarantee.
spk01: We are also pleased to report that after introducing TigerBot's debit card and contract trading feature in Singapore market in the first quarter, we have received widespread positive feedback from existing users, which led to a significant increase in the number of newly funded accounts and cardholders, with notable improvement in both user activity and stickiness. In addition to launching new products, we continue to refine the user experience of our existing features. For instance, Our overnight trading for U.S. stock has now expanded to support up to 9,500 stocks and ETFs, offering greater convenience for clients to trade U.S. stocks and ETFs during local market hours and capture more market opportunities. Moreover, combo options strategy feature for U.S. stock was upgraded in July to support four-leg options trade and execution based on net margin requirements, further enhancing trading strategy flexibility and margin efficiency.
spk00: Lao Wu International's 2B business has maintained a good development trend. In the second quarter of the investment business plan, we sold 12 Hong Kong and U.S. IPO projects, including the wife of Huang Jin and Dita Travel, etc. Among them, as a exclusive partner of Tongzhi Technology and Y Group's U.S. IPO, and successfully launched. In terms of ESOP business, the second quarter of this year added 22 ESOP customers. The total number of customers has reached 579, with a 21% increase.
spk01: Our 2B business continues to perform well. In investment banking, we enrolled 12 U.S. and Hong Kong IPOs in the second quarter, including LaPu Gold and DDA, and we serve as the exclusive lead bank for Tangren Technologies and YY Group U.S. IPO. In our ESOP business, we added 22 new clients in the second quarter, bringing the total number of ESOP clients served to 579 by the end of the second quarter of 2024, increased by 21% year-over-year. Now, I would like to invite our CFO, John, to go over our financials.
spk03: Thanks, Tianhua and Aaron. Let me go through our financial performance for the second quarter. All numbers are in U.S. dollar. Market was more active in the second quarter versus the first quarter. Trading commission reached 34.1 million. increased 23% quarter-over-quarter and 55% year-over-year. Total revenue reached all-time high to $87.4 million, increased 11% quarter-over-quarter and 32% year-over-year. Cash equities take rate was 6.7 bps this quarter, slightly increased from 6.3 bps last quarter. Raising commission revenue, about 65% comes from cash equities. 30% from options, and the rest from futures and other products. Now on to cost. Interest expense was $13.6 million, increased by 30% from the same quarter of last year, in light of the high interest rate environment. Execution and the clearing expense were $2.8 million, increased 38% from the same period of last year. primarily due to an increase in our trading volume. And we keep improving our clearing efficiency. Cash equity clearing expense as a percentage of cash equity commission is about 2.1% this quarter, which remains around the lowest in the industry. Employee compensation and benefit expense were 28.6 million, an increase of 20% year over year due to headcount increase to strengthen overseer growth and the R&D. Occupancy depreciation and amortization expense decreased 17% to 2.1 million. Communication and market data expense were 8.8 million, an increase of 14% year-over-year due to an increase in Euro-based and IT-related services. Marketing expense were 6.4 million this quarter, increased 36% year-over-year as we saw market backdrop was more supportive for user acquisition and branding in the second quarter. General and administrative expense were 20.2 million, an increase of 345% year over year due to 13.2 billion one time loss provision we incurred this quarter. Total operating costs were 69 million, an increase of 52% from the same quarter of last year. As a result, our gap-led income and non-gap-led income for the second quarter were $2.6 million and $5.2 million, respectively. If excluding the impact from the loss provision, our pre-tax profit for the same quarter would be $18.4 million, increase 14% quarter-over-quarter, and 8% year-over-year. Now I have concluded our presentation. Operator, please open the night for Q&A. Thank you.
spk02: As a reminder, if you'd like to ask question, please press star 11 and wait for a name to be announced. To cancel your request, please press star 11 again. One moment for the first question. Our first question comes from the line of Yufan from CICC. Please go ahead.
spk06: Okay. Thank you for giving me the opportunity to ask this question. I'm Fan You, a researcher at Zhongjing. I have two questions I would like to ask. One is, we have seen that since August of the third quarter, the U.S. stock market has been fluctuating. The third quarter has been fluctuating for the past two months. I would like to ask the management to think about whether the third quarter has been fluctuating I will quickly translate my question. This is Yoyo Sun from CICC. I have two questions here. The first one is that we see the U.S. stock market has been quite volatile in others, and Q3 has already been underway for two months. Can you show some draw rates over the past two months, such as the number of new users, the trend of client assets, and also the impact on the financial performance? And second, if we enter a rate-cutting cycle, how might TIDR adjust your business? And what kind of impact, say, like a 25 basis point rate cut would have on the company's interest income?
spk00: 好,谢谢。我来回答第一个问题,Joey回答第二个。 在客户资产方面,三季度的前两个月依然保持客户资产进入的趋势。 The new number of new employees has also continued the rapid growth trend of the second quarter. In terms of finance, we see that in July, the company's overall income has set a new high of one month in history. August is not over yet. There is no accurate data for August yet, but the trading volume in August is still very good. September will be affected by the U.S. election and the decision of interest every year. But in general, I'll translate for the first question.
spk01: In terms of current assets, the trend of net asset inflow was still strong in the first two months of the third quarter, and the number of newly funded users also continued the rapid growth as we saw in the second quarter. If we look at numbers, in July we saw the highest single month revenue in our operating history. Well, August is not yet completed. Trading volume in August so far is also very active. September is a bit uncertain due to factors like U.S. election and Fed interest rate decision. But overall, we are quite satisfied with how Q3 has been shaping up so far.
spk03: Okay, let me answer your second question. That is to say, the decline in interest rates will have a negative impact on the company's interest income. But we also think that the market will be more active. It will bring more trading volume and cash income. Therefore, we will use the actual decline in interest rates and the reaction of the market to adjust and deploy accordingly. Ensure that we find a balance between cash business, interest related business and wealth management business. If it is a decline of 25 points, So, Arica by the Federal Reserve may negatively impact our interest income, but we also believe it could boost market activities, leading to a more active trading volume and commission income. Therefore, we will adjust our strategy based on the actual pace of the RECA and the market reactions, ensure we will find a balance among our commission interest-related business and wealth management. So if the RECA is 25 BPS next month, our calculation based on our second quarter business scale and the interest income, such as the weekly impact on total revenue for a quarter would be about 1%.
spk05: Okay, thank you.
spk01: Operator, please move on to the next question. Thank you.
spk02: One moment for the next question. Our next question comes from Cindy Wang from China Renaissance. Please ask your question.
spk04: Okay, thank you for giving me the opportunity to ask this question. I have two questions here. The first one is, we see that the loss of wages in this quarter is mainly due to the loss of profits. So can you tell us about the reasons behind the reduction in revenue for customers, and how to deal with it, and the possibility of recovery? And what are the risks of this kind of reduction in the future? And the second question, because we see that the number of new users in the second quarter is still relatively strong, so can you give us a breakdown of the region? And I would also like to ask if we have any new customer strategies in the second quarter? Thanks management for giving me the chance to ask questions. So I have two questions. First one is we see the profitability in this quarter many impacted by loss provisions. Could you tell us the reason why for the allowance for receivables from customers and any following treatment with clients and the possibility of right back? What is the risk of such those provisions might happen again in the future? Second question is, the second quarter new funded account grows very nicely, and can you give us the regional breakdown, and any new customer acquisition strategy adopted in this quarter? Thank you.
spk00: So, this quarter, we have made a comprehensive proposal. First of all, we highly appreciate the company's ability to fight for the possibility of recovery. At present, we have communicated with the users who owe money and signed the agreement to pay back the debt. We have also signed the agreement to pay back the debt with the debtor's internal shareholders and the person who lost the money. But due to the careful consideration, In the second quarter, we still made a one-off full-fledged offer. In the future, when we receive the refund, we will enter the profits of the current quarter. Second, before this happened, since last year, based on the market situation, we have stopped the stock price pressure of Hong Kong stocks and started a business. This business is still in the contract period, so we are able to continue to execute. After this happened, we deeply reviewed This impairment was linked to a Hong Kong stock pledging transaction business. To be cautious, the full amount was written off in the second quarter.
spk01: First of all, we're taking this very seriously and doing everything possible to recover the loss. We already signed a repayment agreement with the client and have the controlling shareholder as guarantor. However, to be cautious, the full amount was written off in the second quarter. If we do receive repayment in the future, we will reverse this loss provision when the payment is made. Secondly, since last year, before this incident happened, We have already stopped our Hong Kong stock pledge with withdrawal business due to the market condition and risk. This particular transaction continued because it was still under contract. And finally, after the event, we had a thorough review of our risk procedures and existing stock pledging transactions. Now there are no outstanding stock pledging and cash withdrawal transactions using Hong Kong stock as collateral anymore.
spk00: Regarding the break-down of users, in the second quarter, about 65% of new users came from Singapore and Southeast Asia, and about 15% came from Hong Kong. The increase from the Auxin market and the U.S. market is about 10%. We are also very happy to see that in the second quarter, users have achieved good results in terms of increase. It is also the highest in the last ten quarters, mainly from two aspects. First of all, the U.S. and Hong Kong stock markets of the second quarter have performed quite well. Because in the second quarter, we have also increased the investment in some market aspects, including brands and hair products. The market cost-to-bid ratio has also risen by about 45%. The number of new imports and imports in each market has also increased by a different ratio. The second is also due to some localized products that have been launched in Singapore in the first quarter. For example, like the boss credit card of Tiger, as well as the contract trading function. In the second quarter, it also exceeded our expected user recognition. By the end of August, Laohu Boutika already has 10,000 or so card users. Most of them are added local customers to the second quarter. In the last three months, the contract trading function has also contributed significantly to Singapore's cash and cash income. Therefore, we can see that the second quarter Singapore market, whether it is the number of new users,
spk01: So in the second quarter, about 65% of our new funding clients came from Singapore and Southeast Asia, around 15% from Hong Kong market, and about 10% each from Australia, New Zealand region, and the U.S. We are quite pleased with this result, which are the best we've seen in the last 10 quarters in terms of the number of quarterly new funding accounts. We believe there are a couple of reasons for this growth. First of all, the US and Hong Kong stock market did well in the second quarter, so we increased our market spending, like on branding and advertisements, by about 45% quarter-over-quarter, which helps boost new user numbers across different markets. And secondly, we also saw a big boost from new products we launched in Singapore in the fourth quarter, like the TigerBoost debit card and contract trading features. The popularity of these functions among local clientele exceeded our expectations. By the end of August, we already have around 10,000 TigerBoost card holders, mostly new-funded users from the second quarter. Plus, in the past three months, contract trading feature alone also made meaningful contribution on DARS and commission income. So we are seeing significant growth in not only just user numbers, but also trading volume and commission income in Singapore quarter per quarter and year over year. Thank you.
spk02: Thank you for the questions. One moment for the next question. Our next question comes from Judy Zhang from Citi. Please go ahead.
spk06: Thank you for giving me the opportunity to ask a question. I am Zhang Zhoujia, a lawyer at Huaxi Bank. I have two questions. The first question is to let the management team introduce how the expansion of the Hong Kong market is going, including the traditional currency business and the virtual currency business of the company, which has already supported retail and private transactions. Let me translate my two questions. So the first question is regarding the development in Hong Kong markets. How is the progress in the Hong Kong market development, including the traditional brokerage business and the companies, the virtual currency asset business that now supports retail and the PI trading? And what are the plans for deploying this business, such as pricing, customer acquisition strategy, and what is the expected results from the management? And second question is, how is the company's wealth management business progressing and what is the current scale and any updates on the product offerings? Thanks.
spk03: Hello, Julie. Let me answer your first question, which is about the progress in Hong Kong. Overall, we are quite satisfied with the progress. First of all, the traditional voucher business is that the average income of the new users in the second quarter of Hong Kong is more than US$150,000. In the second quarter, Hong Kong is the highest region of Group R&P. At the same time, R&P has doubled in the fourth quarter compared to last year. Therefore, we think that the quality of customers in Hong Kong is very good. It also makes us very determined to push the market deeper. At the same time, the second quarter market has warmed up, and we have increased our channel cooperation and advertising in Hong Kong based on the market environment. In this quarter, the number of new entry-level users in Hong Kong exceeded 7,000, which is more than twice that of last quarter. Customer assets in the second quarter have also entered a strong market position. In addition, the mark-to-market gain brought by the market situation in Hong Kong and the reduction in customer assets in Hong Kong have doubled. In terms of virtual currency, as we mentioned before, we think that virtual currency will become a major asset class. For us, we think that as a blockchain, we should offer all the products to our users, and they will have the best user experience in a very convenient way on a platform. Therefore, we are continuously investing and developing in crypto. In terms of gold and silver, After the update of PI, we actually did a special crypto campaign for PI users in May. By the end of June, our PI user count had doubled. and we think the results are pretty good. In the future, we will continue to do this kind of ticketing in the right time to get customers through Crypto and provide more Crypto trading experience and products to users. We have just received the upgrade of the retail users, so we have recently invested in, for example, online advertising in the bus station. In Hong Kong, the price of credit for Hong Kong users should be the most competitive in the market. We are a private fund and a private platform. We also hope to attract more users to trade on the old platform through the best cost. Let me briefly translate it. So, in regards to the traditional brokerage business, we are quite pleased with our progress in Hong Kong. So in the second quarter, average net asset inflow from our newly acquired clients was over 15,000 US dollar. The Hong Kong market also saw the highest output for the group, with output doubling compared to the first quarter of last year. Market was more active in the second quarter, so we capitalized off this backdrop by increasing local partnership and advertising. As a result, over 7,000 new funded users onboarding in the second quarter, which is about 2.5 times the number from the previous quarter. And in terms of client asset, we saw a robust lead-asset inflow in the second quarter, and with the Hang Seng Index experiencing four consecutive weeks of gains, our asset under custody from the Hong Kong market by the end of the second quarter doubled sequentially. In terms of virtual asset business, our Type I license was uplifted back in June, Sorry, back in January to provide crypto trading for professional investors. In June, we got additional approval to offer Spark crypto trading for retail investors. We launched a crypto campaign for professional investors back in May. The campaign was very successful. By the end of June, we already doubled our PI users on our platform. So far, we offer the most competitive pricing in Hong Kong in terms of Spark crypto trading. Our pricing is zero commission plus zero platform fee to trade SPARC free crypto on our platform. Thanks.
spk02: At this time, there are no further questions from the line. Allow me to hand the call back to management for closing.
spk01: Operator, there is one more question that hasn't been answered.
spk02: I beg your pardon. Please continue.
spk00: Regarding the development of financial management, In the second quarter, our financial management business deducted more than 20% of the net profit and increased the net profit by about 150%. The market share has also improved. In the second quarter, among our new users, the market share of the previous generation products has increased by more than 30%. The automation function of the previous generation products has also been optimized in the second quarter. Before May 28th, when the share price was raised to T plus 1, our tiger money bag has already achieved the function of T plus 0 in the full price chart, supporting US dollars, Hong Kong dollars, and new dollars. Customers' reserve funds can be converted into purchases on that day, and participate in market transactions after the raise. At the same time, the bottom of the tiger money bag's asset performance continues to improve. According to the average annual revenue during the second quarter, The U.S. dollar currency fund is more than 5.2%, the Hong Kong dollar currency fund is more than 4.2%, and the Hong Kong dollar currency fund is more than 3.6%. This is because investors provide cash management investment returns that exceed the market average level. Looking back at the past few years, the company's financial management business has been greatly improved both in terms of investment and in terms of AOM. In the second quarter, our wealth management business saw strong growth.
spk01: with client access and user numbers increased by over 20% quarter-to-quarter and around 150% year-over-year. Platform penetration also improved. Now, among the new-found clients in the second quarter, more than 30 of them started using our TigerVault product. They also made some upgrades to the TigerVault in the second quarter. Before the U.S. stock market switched to a T-plus-1 settlement on May 28th, TigerVault had already implemented C++ functionality across all licenses, supporting US dollar, Hong Kong dollar, and Singapore dollar. This allowed customers to instantly convert their balance into buying power and participate in faster market trading. The underlying asset of TigerVault also continued to perform well, with average seven-day annualized yields during the second quarter exceeding 5.2% for US dollar market fund and 4.2% for Hong Kong dollar market fund and 3.6% for Singapore dollar market fund providing investor which returns above the market average for cash management. So looking back over the past two years of the interest rate high cycle, our wealth management business has seen significant growth in both product categories and AUM. In the second quarter, we have moved our wealth management business to the home interface of our app, making it easier for users to access a variety of asset management products. This includes money market funds, stable income products, top performing funds, ETFs, UST bonds, FCNs, and more, for users with different risk appetites diversified from pure equity investment. Thank you. Desmond, is there any other questions?
spk02: At this time, there are no more questions. Please continue.
spk01: I would like to thank everyone for joining our call today. I'm now closing the call on behalf of the management team here at Tiger. We do appreciate you participating in today's call. If you have any further questions, please reach out to our investor agent team. This concludes the call, and thank you very much for your time. Bye-bye.
spk02: Ladies and gentlemen, that concludes our conference for today. Thank you for your participation. You may now disconnect your lines.
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