Vishay Intertechnology, Inc.

Good morning, and thank you for standing by. Welcome to VCA and Search Technology first quarter 2024 earnings conference call. At this time, all participants are on the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host. Peter Hennessy, Head of Investor Relations. Please go ahead.

Thank you, Livia. Good morning and welcome to Vishay Intertechnology's first quarter 2024 earnings call. I am joined today by Joel Smekal, our President and Chief Executive Officer, and by Dave McConnell, our Chief Financial Officer. This morning we reported results for our first quarter. A copy of our earnings release is available in the investor relations section of our website at ir.vichet.com. This call is being broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available via replay on our website. During the call, we will be referring to a slide presentation, which we also posted at ir.fiche.com. You should be aware that in today's conference call, we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. For a discussion of factors that could cause results to differ, please see today's press release and Fichet's Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. We are including information in our press release and on this conference call on various gap and non-gap measures. We have included a full gap to non-gap reconciliation in our press release, as well as in the presentation posted on ir.fiche.com, which we believe you will find useful when comparing our gap and non-gap results. We use non-gap measures because we believe they provide useful information about the operating performance of our businesses and should be considered by investors in conjunction with gap measures. Now, I turn the call over to President and Chief Executive Officer Joel Smekoff.

Thank you, Peter. Good morning, everyone. Thank you for joining our first quarter 2024 earnings call. I'll start my remarks on slide three with a review of the demand trends for the first quarter by end market, channel, and region. Then Dave will take us through the highlights of our financial results. and guidance for the second quarter of 2024 after that i'll wrap up with a review of our initiatives and goals for 2024 and then we'll be happy to answer any of your questions for the first quarter we are reporting revenue of 746.3 million dollars slightly above the midpoint of our guidance range 715 million to 775 million dollars the inventory digestion that began to impact our demand last quarter, extended into the first quarter, and our revenue fell 5% sequentially. A greater proportion of this oversupply inventory is for semiconductor products compared to passives. However, as I mentioned last February, we expect some end markets to improve sooner, notably aerospace and defense. And that is in fact what happened with growth both year over year and quarter over quarter. Let's now look in more detail at the revenue by market segment on the left side of slide three. Automotive, which is still the largest contributor of total revenue, declined slightly by 0.7% and also due to the beginning of a new annual contracts with OEMs and Tier 1s that went into effect on January 1. Demand from EV programs weakened in most regions, while orders for hybrids and internal combustion engines are steady to increasing. Regardless of our customers' powertrain mix, Bechet is well-positioned to supply their needs. Compared to the first quarter of last year, our automotive revenue was up 1%. Design activity and design wins in automotive continued to increase and remained focused on ADAS and e-mobility, including battery management systems, traction inverters, and onboard chargers. While current and near-term demand for EV has somewhat moderated, automotive OEMs and Tier 1s are engaging with us more closely for design and technology capability discussions for their next-generation EV projects. We have an 8% increase year over year in new design engagements with OEMs plus multiple silicon carbide design discussions with potential new OEMs. Revenue from industrial customers, our second largest revenue contributor, declined 6.2% from the fourth quarter and 23.9% versus last year's first quarter, also due to continued inventory digestion, primarily in semiconductors. Demand remained weak in Asia, influenced by the ongoing economic uncertainties in China. Europe and the Americas remain sluggish. Customers continue to digest inventory. Although revenue was soft in the quarter, we saw improvement in infrastructure projects and renewable projects where Bechet has high passive component count and some sole source positions. It should be noted in the first quarter We received a sizable order from a European industrial customer for the grid. The order in the first quarter for one of our large capacitors was $77 million. This is a multi-year program with this customer. The commitment at this point is $145 million. The project will support their demands 2024 through 2027. and they do offer some upside. Design activity for industrial customers continues to be strong, growing 22% over the first quarter last year, with smart grid infrastructure redesign and industrial automation remaining as the major focus for our customers in all regions across, along with the renewable energy generation and energy storage. In aerospace and defense, our revenue and increased 13.6% versus the fourth quarter and 34.2% versus last year. Continued strong demand in commercial aviation and from weapons system contractors in the Americas and Europe where munitions are being replenished and production of new weapons systems and communication systems is ramping up. Bichet's presence on the United States Department of Defense qualified parts list puts us in an excellent position for continued growth in this market as OEM and EMS companies require those products for their military qualified builds. With a book to build greater than one at quarter end and customers placing expedited delivery requests, we expect demand in this market segment to strengthen throughout 2024. Revenue for medical customers decreased 4.3% compared to the fourth quarter. and 18.3% compared to last year as demand returns to more normalized levels. Design activity remains strong in the areas of remote monitoring equipment and implantable devices. Revenue from our other market segments, computing, telecom, and consumer declined both sequentially and year over year by 21.9% and 40.5% respectively. reflecting ongoing semiconductor inventory digestion and some pricing pressure. While telecom and consumer remain soft, computing improved in Asia on demand for AI servers and notebooks as the next computer upgrade cycle begins. Design activity in computing is up 21% year over year, driven by demand for AI servers targeting the high-speed data transmission. accelerator cards, power management systems, and also for standard data center servers. Turning to our channel sales, OEM revenue declined 6% compared to the fourth quarter and was 7.8% lower than last year's first quarter. First quarter demand, like the fourth quarter, saw some automotive and industrial OEMs further digesting inventory. and new pricing came into effect on annual contract customers. Customers are indicating that they have inventory to consume for some products, and short lead times reduce their need to place long-term orders. EMS revenue increased 2.1% sequentially and declined 16.5% year over year, as those EMS customers serving aerospace and defense and automotive markets saw increases. while for some customers the need to replenish inventory is low, given manageable lead times in all regions. Distribution revenue for the first quarter fell 4.9% from the fourth quarter and was 18.8% below last year, as customers in all regions continue to digest semiconductor inventory. Distribution inventory worldwide was flat quarter over quarter at 26 weeks. POS worldwide was also flat. However, this flat POS worldwide masked the 3.9% increase in the Americas, reflecting strong sell-through of passives to aerospace and defense customers. Based on input from our customers, we still expect the inventory correction to extend through the second quarter, with a recovery in the second half of the year led by passives. The bill for the passive lines is moving into the positive territory, most prominently those serving aerospace defense, and markets. Bookings are also improving in some industrial and markets and computing. Semiconductor book bill continues to lag passives, and the recovery is likely to extend into the third quarter. Finally, during the quarter, we continue to advance our initiative to deepen engagement with our distributors now and that our capacity expansions will allow us to reliably supply their needs in all market cycles. Our business unit leaders have traveled to the distributors. Some were initial meetings. Others were follow-up meetings to strengthen and improve Vishay's position on the distributor's shelves by adding SKUs. All meetings are enlightening and come with many action items. Before turning the call to Dave, I want to express my deep appreciation to all employees of Vishay. for their continued excitement and enthusiasm to embrace the changes taking place at our company, and for their commitment to turning our future potential into a reality, and for collectively creating the Boucher 3.0. And now I'll turn the call over to Dave for a review of our financials. Thank you, Joel.

Good morning, everyone. Let's start our review of the first quarter results with the highlights on slide four. First quarter revenues were $746.3 million, including $3 million attributed to our recently computed Newport acquisition and within the range of our guidance. Revenues decreased 5% compared to the fourth quarter, reflecting a 3% decrease in volume and a 2.5% reduction in ASPs. Most of the volume in ASP reduction occurred in our semiconductor business segments, reflecting ongoing soft demand in industrial end markets and continued pricing pressure in distribution and EMS channels. By reportable business segment, the $59 decrease in revenues was mainly attributable to MOSFETs and diodes, each of which decreased sequentially by approximately 9%, followed by opto and resistors, which declined 9% and 5% respectively. These declines were slightly offset by increases in the revenues of inductors and capacitors. Compared to the first quarter last year, revenues were down 14.3%, reflecting a volume decrease of 11.8% and a 3.6% reduction in ASPs. At quarter end, book to bill for VICHE was 0.82, comprised of 0.73 for semis and 0.91 for passes. Backlog for total VICHE was 5.0 months compared to 5.3 months at the end of the prior quarter. Looking at the backlog quarter over quarter comparison by product category, backlog for semis was 5.0 months compared to 5.3 months, and backlog for passives was 5.1 months compared to 5.4 months. Moving on to the next slide, presenting the income statement highlights, gross profit, which includes the impact of the Newport acquisition, was $170.4 million. Gross margin was 22.8% and included the negative impact of 74 basis points related to Newport. The depreciation expense included in the gross profit for the quarter was $43.8 million. Compared to the fourth quarter, gross margin decreased primarily due to the previously mentioned impact of lower volumes and ASPs, particularly for MOSFETs, as well as the negative margin impact of Newport. SGA expenses were $127.7 million compared to $122.8 million for the fourth quarter. Operating income decreased $35.2 million versus the fourth quarter on lower gross profit. Compared to prior year first quarter, operating income decreased $115.9 million driven by lower sales volumes and to a lesser extent higher SGA expenses. Operating margin was 5.7% compared to 9.9% for the fourth quarter and 18.2% first quarter of 2023. EBITDA for the quarter was 91.2 million for an EBITDA margin of 12.2%. Our normalized effective tax rate for the quarter was 29%. EPS was 22 cents per share. This compares to EPS of 37 cents per share for the fourth quarter and 79 cents per share for the first quarter of 2023. Proceeding to slide six, for ease of reference, the presentation includes a table illustrating the revenue, gross margin, and book-to-bill ratios for each of our reportable business segments. Turning to slide seven, We present our cash conversion cycle metrics. DSO was 51 days, one day higher than the fourth quarter, while the DPO remained flat at 31 days. Inventory was $665.8 million at the end of the quarter, including about $11 million of inventory related to Newport. Inventory days outstanding were 104 days compared to 101 days for the fourth quarter. resulting in a cash conversion cycle for the first quarter of 124 days. On slide eight, you can see that the cash flow from operations amounted to 80.2 million for the first quarter. As a reminder, the fourth quarter was unusually low, finding the payment of withholding taxes on cash repatriation transactions. Compared to the first quarter of 2023, cash flow from operations is lower largely due to the reduction in earnings. Total CapEx was 53.1 million for the quarter, with 41.5 million of that total invested in capacity expansion projects. On a trailing 12-month basis, capital intensity was 10.3% compared to 9.5% for the same period last year. Free cash flow for the quarter was 27.9 million, compared to a significant use of free cash in the fourth quarter related to high levels of capex and taxes paid for cash repatriation. Stockholder returns for the first quarter amounted to $26.3 million, consisting of $13.8 million from our quarterly dividend and $12.5 million of share repurchases. The number of shares repurchased during the quarter with 0.6 million shares at an average price of $22.17 per share. For 2024, we still expect to return at least $100 million to shareholders. Cash and short-term investments decreased to $833 million at the end of the quarter, after we utilized $168.6 million of cash on hand to fund the Newport acquisition. At the end of the quarter, we have approximately $82 million of cash on hand in the U.S. Turning to slide nine for our guidance. For the second quarter of 2024, revenues are expected to be $750 million plus or minus $20 million. Gross margin is expected to be in the range of 21.7% plus or minus 50 basis points. The Newport acquisition has an approximately 160 basis point drag on the gross margin. SG&A expenses are expected to be $130 million plus or minus 2 million for the quarter and 527 million plus or minus 5 million for the full year. Included in our year SG&A guidance is the addition of approximately 8.7 million related to Newport, which is offset by adjustments to our planned 2024 spending, including lower headcount, freezes on hiring and salary increases, as well as non-discretionary travel. For 2024, we expect a normalized effective tax rate of approximately 29 to 31%. Okay, I'll turn the call back over to Joel.

Thank you, Dave. At the Investor Day we held on April 2nd, we talked about our need to scale our capacity to be a reliable supplier to more and more customers and also to attract new customers. From our travels and communication with customers, they clearly want more from Vishay. As we deepen our engagements with customers, our capacity expansions are one component for us to scale and support their growth. Second is our commitment to innovate and to supply products which support their technology direction in the megatrends of e-mobility and sustainability. To meet the commitments we are making to our customers to accelerate revenue growth and drive greater returns and to more broadly serve our addressable market, and expand our product portfolio, we are executing a five-year strategic plan, pulling the eight levers displayed on slide 10. Expanding capacity is one cornerstone of our growth plan. During the first earnings conference call in February 2023, I shared that we are planning to invest 1.2 billion of CapEx over three years. 70% of which is earmarked for internal capacity expansion with the Newport fab acquisition for March, 2024, we added $200 million to our three-year CapEx plan. Then as Jeff Webster, our COO, excuse me, then as Jeff Webster, our COO detailed at the investor day, Our five-year strategic growth plan includes investing a total of $2.6 billion between 2023 and 2028. In 2024, we plan to invest $435 million in CapEx, of which around 7% will be spent on expansion projects, which are expected to come online in 2025. The investments we made in capacity expansion in 2022 and 2023 have landed. and are in qualification. I'd like to now share with you our progress on five of our expansion projects. The first is around internal capacity expansion. La Laguna, Mexico, we commercially qualified inductors and began to ship products in Q1 24. Automotive qualification is underway and to be completed the second half of 2024. We have customers coming in and scheduling audits. You may remember a doubling of our capacity for the inductor portfolio, the power inductors. We expect capacity increase in 2024 to be 15%. Juarez, Mexico, we commercially qualified the resistors, the current sense resistors, and shipped product in the first quarter. We're shipping some automotive qualified products now. and there will continue to be a schedule of customer audits coming through. Doubling our capacity is also happening with this expansion. We expect the annualized capacity to increase in 2024 by 15%. Taipei, Taiwan, we're commercially qualifying our diodes and expect to begin shipments in Q3-24, while we also continue to advance automotive qualifications there. We expect annualized capacity to increase in 2024 5.5%. However, there will be larger capacity expansions on select key products in the range of 32%. Turin, Italy, due to a delay in the environmental approval by the government, we now expect to ship commercially qualified diodes and complete the automotive qualification early in 2025. Finally, the fifth is Newport. The FAB, we took control of the FAB March 6th. We are now doing five technology transfers, three for MOSFETs, one for opto and one for resistors. 80% of the tools were ordered in December and the rest of the tools needed will be ordered this month in May. The product transfers will be qualifying beginning in the fourth quarter. and extending into the first half of 2025. If we shift to external capacity expansion, key foundries, Korea. In 2024, we are planning to complete six technology transfers of MOSFETs and ICs. Two technologies are automotive products, while four are commercial transfers. We expect to have engineering samples available on these six technologies in Q3 24 and Q4 24. We expect to complete manufacturing qualification Q4 24 and Q1 25 and begin shipping volume in Q2 of 25. Our goal is to increase annualized capacity for MOSFETs by 11% in 2025 compared to 2024 with an 18% capacity increase for the split gate products charge balance products that we have underserved the market. As a reminder, this key foundry fab is an intermediate step of increasing our capacity as we complete the 12-inch fab addition, which is in Itzehoe, Germany, scheduled for 2026 and early 2027. Also around external capacity, during the first quarter, we added three subcontractors for passives and one for semiconductors. In addition to expanding capacity for some of our commodity products, we're also adding new products to our portfolio supplied by these subcontractors. For 2024, we set goals for use of external capacity on our path to achieving our 2028 targets. We expect to generate 3% revenue from outsourced passives in 2024 as we continue to qualify suppliers. We expect 41.5% semiconductor production from outsourced wafer fabs in 2024. We expect 27.4% semiconductor production from outside assembly in 2024. If we shift now to innovation and talk about silicon carbide, the 1,200 volt planner technology, we are on track. We provided samples in the first half of last year to customers. And now we'll have the silicon carbide package types for three different resistance and current capabilities available in the next couple of weeks. They'll show up on our website and be released. The development of the 1,200 volt trench technology the 1700 volt planter and the 650 volt planter technology is taking a bit longer than we would like as our foundry partner is currently heavy loaded with silicon carbide demand. This stresses the importance and why we're looking forward to moving the developments of these technologies to Newport in 2025 and 2026. If we talk about Newport, the site itself, activities are beginning this quarter due to the given priorities first of qualifying and transferring the silicon technology so we can begin activities. The tools we've talked about were ordered with a delivery time of late Q4-24 and early Q1-25, the tools to begin the silicon carbide qualification, the process development. So when you look at all of these initiatives, the internal capacity, the external capacity, the subcontractor, the innovation with silicon carbide and expanding Newport, these are all underway in 2024. And we are intending to position these to help us support the scaling of the customer. This is the strategy with 3.0. So in closing, we're excited about the progress we are making with Bichet 3.0, the factory expansion, customer engagement, part number increases, innovation initiatives. They're all moving in the right direction. We're taking advantage of this sideways market to invest in catch-up capacity and polishing our reputation as a reliable supplier so we are fully prepared for an upturn in demand boosted by the trends in e-mobility and sustainability. That completes our prepared remarks. Now we'd be happy to answer any of your questions. Olivia, let's take the first question.

Thank you. Ladies and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1-1 again. Please stand by while we compile the Q&A roster. Now, first question coming from the lineup. Matt Sheeran with Stiefel. Your line is open.

Yes, thank you. Good morning, everyone. First question, just regarding the gross margin guidance and how we should think about that as we get through the year and you start to see some sequential growth as the cycle recovers, you're typically, you know, at roughly 45% incremental margin contribution on volume growth, but you do have the headwinds of Newport and then also I'm thinking incremental capacity and more depreciation. So how should we think about gross margins as we get through the next few quarters?

I match Dave. So I think we expect the second half to be better than the first half, driven primarily from our demand for the increased demand from aerospace, defense, and automotive. We expect ASPs to be fairly stable the rest of the year since the OEM contracts are already in place in quarter one. The issue is with everybody else is we have limited visibility on volume at the moment.

Okay, but so X, the volume in terms of incremental other impacts like Newport, anything else there? Or is it really just now it's just a matter of volumes coming back?

Yep, just volume.

Okay. And then on the ASPs, it looked like ASP erosion was more significant this quarter. Could you be more specific about the MOSFETs and semis versus passives and what the expectation sounds like? You're saying things are stable, but it looked like we're seeing more pricing pressure.

Pricing pressure, yes. The inventory that's out in the channel, whether it's the distributor, the EMS, or the OEM, people are trying to move that inventory. Capacity utilization at ourselves and our peers is in the mid 50%, 60% from what we've seen. So there is a push to move inventory. There is some price pressure with ship and debits to move the inventory through. We do see that. The ASPs in the first quarter were around the contract, the annual agreements that we have with many of our strategic accounts. That also impacted the first quarter, but most of it was the price pressure on the semiconductors, on MOSFETs and diodes.

Okay, then why are you getting a sense that it's stable here? Is that based on the contracts that you're seeing from customers?

The contracts, they're annual agreements, so those are in place. Don't expect anything to be adjusted further based on those large accounts that have annual agreements. The ship and debit activity could continue a bit, more so for semiconductors, much less for passives. The inventory in the channels for passives is not excessive, so the passives is quite stable. There will be some spot measures on semis, but we don't see it excessive.

Okay. All right. That's it for me. Thank you. Thanks, Matt.

Thank you. And our next question coming from the line of with Bank of America. Hi.

Thank you for taking my questions. Joel, inventory at distribution was at 26 weeks. What do you think is the new normal for inventory weeks at distribution? I know you were trying to increase some of your product lines at distribution. And the second part of that question is, how many more quarters of inventory correction do you expect? I think you said that you expect some improvement in the second half, but is that more a 4Q expectation? I mean, do you think it's only another quarter of inventory correction, or could it be extending into 3Q as well?

Okay. 26 weeks is about where we see it. You may remember in the past calls, we were growing the inventory intentionally. We were adding SKUs and we continued to do that. We kind of said we'd be around the 26 weeks as a high, and that's where we sit. The distributors have adjusted their order rates. So the backlog is more of a just-in-time type of supply versus stocking. We are still adding SKUs. So I would say at this point, the 26 weeks is where we should be. As the POS increases, there is some concern that quickly the inventory is going to be depleted. The quarters of inventory correcting passives, I think we feel quite good. It's going to go through Q2, and then the second half of the year passes will be trending to be more normalized. However, we expect POS to increase. On the semis, I think that'll go in beyond Q2. It'll go into Q3. And then we feel that Q4 can be that quarter where the semi-inventory is digested and we're more in par with the at the OEM. And this inventory digestion is done.

OK, thanks for that. Thanks for the details there. Let me ask Dave a couple of questions. Dave, nice to speak with you on the call. You mentioned an industrial win, 77 million. How should we think about the timeframe for revenues coming in for that project?

Actually, I can comment on that. These are orders that we've now received in Q1. There's heavy materials here. The volume of business that we expect in 2024 is around 18 million euro to 20 million euro as their program begins. The peak years will be 2025 and 2026. Quite excited about this project. This is an industrial smart grid design that we've been working on for a number of years, and now it's getting into production. So it's a good sign. We've all been waiting for industrial to start to move. And here's a very large industrial leader that has given us the purchase orders, and we're starting to plan to support them.

okay thanks for that uh in terms of cash conversion cycle how should we think about that and free cash flow both for the june quarter and and the subsequent quarters how do you see that trending so i wouldn't expect any material changes to our cash conversion cycle the inventory is fairly flat quarter on quarter already and newport's added already to the quarter one to the quarter one number

In terms of the free cash generation, I think at our investor day, we presented a chart that had indicated a slightly negative number this year, and I think that's still our guidance.

Okay, got it. Okay, maybe my last question, Joel, is one of the strategic growth levers you're showing on slide 10 is increasing the technical headcount. Can you talk about, like, are you done with that, or is there more headcount that you would like And if so, which specific areas or geographies do you think that you would need to increase that, and how would that impact SG&A? Thank you so much.

Okay. Thank you, Ripley. The engineering technical headcount will continue. Through our customer engagements, the customers are asking for closer technical assistance from Vichay. It could be the OEMs, it could be Tier 1s, and it could also be EMS. We mentioned in one of the last calls, we've been given early access to JBL's design engineers, Flex as well. We're working with their technology teams. This is new for us. There's other EMS customers which we've met, and they're offering for us to come in and help their design teams move projects forward. So we're going back, looking at the maps by Americas in Europe and Asia, and we're starting to put the next steps in place further engineering talent in the field. This will be coming the second half of the year. There will be some increase in the SG&A expense, but I think the value of the engagement with the customer and driving their projects forward is going to pay off for us. These opportunities which previously did not have, and I think the customer highlights this quite clearly, Vichay, because you're investing to scale. You're investing to scale now. We see it beneficially. for our investors to get closer together. You can be there when the volume production increases, and you can support it.

Thank you. Appreciate all the details.

Thank you, Rupal.

Thank you. And our next question coming from the line up, Josh McAlter with TD Co when the line is open.

Hi, guys. Thanks for taking my question, and let me echo the welcome to Dave to the Earnings Call Fund. To start, could you maybe provide some guidance on how long or the shape of the Newport gross margin headwinds? And is there sort of a revenue level that we need to get to to have that start to abate? Or is it sort of fixed from here because of the foundry arrangement, at least over the next couple of years? Thank you.

I can start off with it and then Dave can echo. We have now a FAB, which is partially full. And when I say it's partially full, The previous owner is exiting. Their volume that they committed to us will be declining quarter on quarter. The volume in the second quarter is in place and we're building towards that. We start to see their volumes diminishing in Q3 and Q4. This is going to impact the margins as we see lower production volumes and in parallel we're expediting our technology transfers, which we mentioned will start to be qualified in Q4. And then production will begin in the first half of 2025. So we're trying to offset an exit of the previous owner, diminishing business there with then Vache stepping in. So we're going to see second half impact. Dave, you want to comment at all?

Yeah, sure, Joshua. So for the second quarter, we're guiding the 160 basis points impact on the margin for Newport. That's on $15 million approximately of sales. Q3 and Q4, that sales number is gonna drop again to roughly 5 million. So it's negligible revenue. So the total impact on the margin, we think Q3 and Q4 is closer to 170 basis points, Josh.

Thank you. And I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Joel Smigiel for any closing.

Thank you, Olivia. Again, thank you, everyone, for joining us this morning and for a review of our first quarter performance. We look forward to talking to you in early August, and we will then report our second quarter results. Thank you again. Have a good day.

Ladies and gentlemen, that's the conference for today. Thank you for your participation. You may now disconnect.