AgroFresh Solutions, Inc.
Q4 2018 Earnings Call Transcript

Published: 12 Mar 2019

[Operator:]

Good afternoon and welcome to the AgroFresh Solutions Fourth Quarter and Full Year 2018 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note, today’s event is being recorded. At this time, I’d like to turn the conference call over to Jeff Sonnek, Investor Relations at ICR. Sir, please go ahead.

[Jeff Sonnek:]

Thank you. Good afternoon and welcome. Today’s presentation will be led by Jordi Ferre, Chief Executive Officer; and Graham Miao, Chief Financial Officer. The comments during today’s call and the accompanying presentation contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management’s current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of the risks and uncertainties are identified and discussed in the company’s filings with the SEC will also refer to certain non-GAAP financial measures. Please refer to the tables attached to the slides that accompany this presentation, as well as the press release, which can be found in the Investor Relations section of our website agrofresh.com, for a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures. I would now like to turn the call over to Jordi Ferre. Jordi?

[Jordi Ferre:]

Thank you, Jeff and good afternoon, everyone. Please turn to Slide 3. For full year 2018, we generated a 9% increase in total revenue versus the prior year and reached $67 million in adjusted EBITDA. 2018 was a transitional year for the company. There was focus on creating business diversification, as well as implementing initiatives that we believe will bear fruit in 2019, and deliver material improvement in our operating cost structure going forward. Diversifications initiatives into new crops and products represented over one-third of our 2018 revenue with revenue outside of apples growing 13% for the full year 2018. This growth was led by Tecnidex and its comprehensive portfolio of fungicides, coatings, and waxes, which enjoy accelerated sales in the second half of the year and grew 9% for the full-year versus 2017 on a pro forma basis. From a geographic mix perspective, revenue generated outside North America represented approximately 75% of the company’s total revenue. Europe is our largest region with over 40% of sales and is being driven by the addition of Tecnidex citrus business along with increased penetration in pear. We also continue to build a very diversified global customer base with our top 10 customers representing only approximately 15% of our revenue. Collectively these aspects of our diversification strategy help offset a weaker apple crop in the Pacific Northwest during the fourth quarter. As we look toward the future, we continue to focus on delivering a more cost-efficient operation that will support our growth initiatives, which are comprised of organic, acquisitions, and strategic partnerships. These growth initiatives will allow us to broaden our product offering and provide us with entries into new geographies. Both of which we expect to help in our efforts to create further diversification in our business. To deliver organic growth, we are proud of our regulatory capabilities as an enabler to new product launches and geographic expansion. The recent registration approvals for Harvista and LandSpring are examples of the opportunities we continue to create through our registration capabilities. Harvista received approval in Australia following our global registration strategy for the expansion of this key product. LandSpring just received approval for tomatoes in California, which now give us comprehensive coverage of the entire U.S. tomato market. The expansion into California opens a market where approximately 80% of U.S. tomatoes are grown today. Please turn to Slide 4. SmartFresh revenue saw an overall decline of 14% in the fourth quarter of 2018 versus the prior year period and was down 3% for the full-year 2018. SmartFresh revenue was essentially flat for the year, excluding the impact of foreign exchange and the ASC-606 accounting standard for deferred revenue. We saw improved dynamics in 2018 in the European apple market with the crop recovery versus last year in Germany and Belgium and penetration increases in Italy, France, and Portugal. We also have broader traction in crops outside of apples led by pears. The Pacific Northwest region of the U.S. was negatively affected during the fourth quarter of 2018 by a smaller and earlier apple harvest. Specifically, apple production by our estimates contracted approximately 15% in the Pacific Northwest for 2018. Additionally, many of our customers experienced a difficult cherry season due to the current trade dispute with China, which coupled with lower than normal yields in apple, put additional pressure on pricing and adversely impacted utilization of post-harvest solution. Thanks to a broad global geographic diversification the effects of a weak apple season in the Pacific Northwest were offset by growth in other markets, crops, and products. In fact, our Pacific Northwest SmartFresh business today represents less than 10% of the company’s total revenue. We believe that 2019 will be a better season in that region with new product solutions being introduced in a more aggressive approach to Harvista expansion. Please turn to Slide 5. Tecnidex contributed $18 million of revenue growth for full-year 2018 and served as a catalyst to change our culture from a one crop, one technology company to a more complete post-harvest business that includes a broader set of solution such as fungicides and coatings and provides access and knowhow into the citrus market. This additional expertise was particularly impactful since we estimate citrus to represent about 60% of the core global post-harvest market. As I previously mentioned, Tecnidex saw solid growth in the second half and we expect these to continue into 2019. Diversifying our core business to a broader crop on product base is central to our operating strategy and we saw continued progress on this front in 2018. Within our core SmartFresh portfolio, we continue to increase penetration of the pear market. For example, in Argentina, Chile, the Netherlands, and Belgium, pear revenue was up double-digit collectively adding approximately $3 million in revenue growth versus the full year 2017. For full year 2018, the proportion of revenues from crops other than apples increased to 30% with the primary drivers being citrus, pears, bananas, avocados, cherries, plums, and melons. This compared to just 19% in full-year 2017. Our regulatory strength is key to expanding the addressable market for our product offerings. The most notable approval since our last investor call are

[Graham Miao:]

Thank you, Jordi, and a good afternoon to everyone on the call. Please turn to Slide 11. Let me review the financial highlights for the fourth quarter and the full year of 2018. Beginning with net sales. I would like to remind everyone of the geographic seasonality of our sales throughout the year. Sales in the southern hemisphere are concentrated in the first half of the year and the sales in the northern hemisphere are concentrated in the second half of the year. As a result, our fourth quarter is profitably influenced by our SmartFresh franchise in the northern markets. Now, turning to the financials. Net sales for the fourth quarter of 2018 decreased 1.5% from $54.1 million to $53.3 million, compared to the fourth quarter of 2017. Despite a decline in North America, our business benefited from the global reach and ability to serve customers worldwide. Europe's core post-harvest SmartFresh business delivered strong 21% growth year-over-year. As a reminder, Europe represented 40% of our overall company revenue in 2018. Tecnidex, a business which we acquired controlling interest in December 2017 to complement our post-harvest portfolio generated 7% revenue growth to $7.8 million in the fourth quarter 2018 versus the same period last year. As Jordi mentioned in his remarks, our North America SmartFresh business was impacted by several factors in the fourth quarter, including a smaller apple crop site and a shorter season that affected both SmartFresh and Harvista, For the full year 2018, net sales increased to 9% to $178.8 million. The increase was driven by the addition of Tecnidex, which contributed growth of $18.1 million, along with SmartFresh growth in Europe, partially offset by declines in the Pacific Northwest of the United States. Due to our ongoing diversification strategy and the addition of Tecnidex, SmartFresh sales in the Pacific Northwest represented less than 10% of the company's overall revenue in 2018. For the full-year, Tecnidex below $20.8 million in revenue, representing a solid 9% growth year-over-year. This acquisition has performed well for us. And has expanded our post-harvest services to the citrus market. We have begun to take advantage of opportunities to leverage the Tecnidex products into areas such as the America's where AgroFresh already has strong customer relationship. Now, let me add additional color to the net sales driver. As a reminder, the 9% revenue growth for the full-year included Tecnidex. Total organic sales without Tecnidex were approximately $158 million, representing a 2.4% decline in the full-year 2018 versus 2017. Foreign exchange, driven by the euro and the impact of deferred revenue from ASC-606 had a combined effect of 1.5% reduction in sales. Excluding the impact of foreign exchange and ASC-606 accounting, our base business remained essentially flat. Please turn to Slide 12 were we will discuss margins. In the fourth quarter, our gross margin was 74.9% and was consistent with expectations as we execute our strategy of diversifying revenue mix with a broader assortment of product solution such as Tecnidex, Harvista, and RipeLock. For the full year 2018, gross profit increased 1% to $132.5 million, compared to the full year 2017. Gross margins for the full year 2018 decreased to 74.1% from 80.1% in the prior year. Also reflecting our diversification initiatives, strategic pricing in the quarter business, and the impact of ASC-606 deferred revenue. Turning to Slide 13. We continue to be focused on cost optimization to create greater efficiency for our business and better align our operating structure with our revenue base. We began to see the results of these initiatives in the fourth quarter of 2018 were operating expenses, including R&D and SG&A increased [ph] 9% to $19.2 million versus the prior year. Excluding Tecnidex, which added $3 million, operating expenses were down 15% to $17.6 million in the fourth quarter, compared to prior year. On a full year basis, operating expenses increased 5% to $79.6 million, driven by the addition of Tecnidex. Excluding Tecnidex, which contributed $6.4 million operating expense were reduced by 2.5% to $73.2 million for the full year, compared to 2017. Now, let me talk about specific expense items. Research and development expenses were $3.6 million in the fourth quarter of 2018, down slightly versus the prior year period. For the full year 2018, R&D expenses were stable, compared to the prior year at $13.9 million. This included $1.2 million of additional R&D expenses related to the citrus program at Tecnidex. R&D spending reflected our resource allocation strategy that supports initiatives that drive continued diversification beyond apples. Selling, general, and administrative expenses, including Tecnidex were $15.6 million on a reported basis for the fourth quarter, down 11% versus prior year. Excluding Tecnidex, SG&A expenses were $14.7 million, down 14%. For the full-year, selling, general, and administrative expenses, including Tecnidex were $65.8 million, up 6% versus 2017. Excluding Tecnidex, SG&A expenses were $60.6 million, down 1% for the year. Going forward, we expect our cost-optimization initiatives which began to yield results in the fourth quarter 2018 to generate full-year benefit in 2019. Please turn to Slide 14. Net loss was $1.9 million in the fourth quarter versus net income of $23.4 million in the year ago period. The decrease was mainly driven by a $24 million one-time mark-to-market gain in 2017 related to the Tax Receivables Agreement was down as a result of 2017 U.S. Tax Reform. For the full-year 2018, net loss was $30.2 million, compared to net income of $23.6 million in 2017. As a reminder, last year net income benefited from the aforementioned TRA mark-to-market gain, gains on foreign exchange of [$30 million and $40 million] of benefit as a result of deferred tax evaluation allowance reversal. The current year net loss was driven by the amortization of intangibles of approximately $46 million. Adjusted EBITDA was down $0.9 million to $24.4 million in the fourth quarter of 2018 versus the prior year period. For the full year 2018, adjusted EBITDA was essentially flat at $67 million. The full year number was driven by higher sales offset by the impact of lower gross margin and higher selling, general, and administrative expenses related to the Tecnidex acquisition. Turn to Slide 15. Cash provided by operations was $3 million for the full year 2018, compared to $35.4 million in the prior year period. The year-over-year change was driven by an increase in trade working capital of $17.9 million, timing of interest payments on our long-term debt, year-over- year interest payment were higher by $15.8 million because we made five payments in 2018, compared to three payments in 2017 along with higher interest rates. We also saw higher cash tax payments of $3.7 million related to unrealized foreign currency gains in France in 2018, which will be non-recurring. These were partially offset by $4 million cash received from the settlement of an interest rate swap. Capital expenditures were $4.2 million for the full year 2018, compared to $7.7 million in the year ago period. Our asset-light business model calls for limited capital expenditures, which generally range from 3% to 5% of sales annually. Beyond operating activities, we used $13.9 million to satisfy obligations down. $6.1 million for repayment of long-term debt. $2.2 million for a contractual payment to complete our 75% purchase of Tecnidex, and a $1.6 million, related to the Verigo acquisition in 2018. From a balance sheet perspective, cash as of December 31, 2018 was $34.9 million. Total debt was $412.9 million with no meaningful maturities until July 2021. Our revolver was undrawn as of December 31, 2018. Subsequent to quarter-end, on January 31, 2019 we signed an agreement to extend our existing revolving credit facility from July 31, 2019 to December 30, 2020 and amended certain financial covenants, which increased our ability to access the revolver. We believe that $12.5 million amended facility is right-sized for our current needs and it contains more advantages terms for us to utilize the facility. This new revolver will give us the financial flexibility to meet the company’s working capital needs and as an important first step in our efforts to optimize our capital structure. Now, I’ll turn the call back to Jordi for his closing remarks before opening the call to Q&A.

[Jordi Ferre:]

Thank you, Graham. Please turn to Slide 16. As I mentioned at the outset, 2018 was a transitional year for the company. We have refocused the enterprise on sustainable growth and I am confident that we now have the right leadership team place to meet our goals and more forward to delivering solid results in 2019. During the year, we intend to deliver organic net sales growth with a focus on building a more diversified business and expect the cost optimization initiatives that we’re putting place in 2018 to continue to yield benefit throughout 2019. Additionally, we are working towards improving the health of our balance sheet to ensure that we can support our long-term growth strategies that is necessary to meet our diversification initiative. And with that, operator please open the line for questions. Thank you.

[Operator:]

[Operator Instructions] Our first question comes from the line of Roger Duan from RF Lafferty. Please proceed with your question. Mr. Duan, your line is live.

[Roger Duan:]

Good afternoon. Can you guys hear me?

[Operator:]

Yes.

[Roger Duan:]

Okay. Hi, Jordi, hi, Graham. Hi. So, couple of questions. First of all, it looks like apple production in Europe is going to be up substantially this year according to USDA forecast. Can you guys confirm this? Are you guys seeing this as well and maybe give us a little bit more color on this?

[Jordi Ferre:]

Hi, Roger. Jordi here speaking. Yes. I think we mentioned that in the call that the European production, apple production was up. I think we mentioned specifically some countries in Central Europe. So that definitely is confirmed.

[Roger Duan:]

Yes. Yes. Because they did mention it was something like 40% increase year-over-year. So, I just want to confirm the magnitude of the increase. Okay. Second of all, can you guys update us on the progress of FreshCloud? I noticed that you guys attended Oppenheimer's Blockchain Summit, maybe talk a little bit more about the blockchain and how is it going to play in your FreshCloud offering?

[Jordi Ferre:]

Yes. So, the FreshCloud as we said before is a journey as we build the platform across the whole supply chain in kind of measuring all the information on real time and to be able to make – to help our customers make a good decision on predicting shelf life of products, et cetera and prioritizing pellets over others depending on the freshness of the food that is being shipped. Yes. we did attend the Blockchain conference. And I think that, eventually, at a certain point, once we have a solid platform, we could potentially turn these into a blockchain opportunity.

[Roger Duan:]

Alright. Okay, thanks. The final question, are you guys looking to acquire the rest of the Tecnidex seeing the growth provided by this segment?

[Jordi Ferre:]

We have a certain agreement with the previous owner and I don't think that's public. So, in due time, I guess things can happen, but at this point in time, at least we refer back to the agreement that we signed which is a private agreement.

[Roger Duan:]

Okay. No problem. Okay.

[Graham Miao:]

We own larger...

[Roger Duan:]

Go ahead, Graham.

[Graham Miao:]

It's Graham. So, we own 75%, so we consolidate their operations into our financial statements.

[Roger Duan:]

Okay. Yes. No problem. Okay. Understood. Thank you so much.

[Graham Miao:]

Thank you.

[Operator:]

[Operator Instructions] Our next question comes from line of Gerry Sweeney from ROTH Capital. Please proceed with your question.

[Gerry Sweeney:]

Hi, good afternoon, Jordi and Graham. Thanks for taking my call.

[Jordi Ferre:]

Hi, Gerry.

[Gerry Sweeney:]

Just a question on Tecnidex. Obviously, it's been a good acquisition for you on a few fronts, and I think you did touch up on it a little bit in the prepared comments. But can you go a little bit further into maybe some of the post-harvest citrus market opportunity you're seeing there. And then a follow up to that would be maybe some synergies to expect from Tecnidex now that it's fully integrated to AgroFresh? Thank you.

[Jordi Ferre:]

Right. So, in the growth opportunities that we see in citrus is obviously, there are two areas. One is, I think when we combined the name AgroFresh with a new offering in citrus, I think customers generally speaking because of our name, are very receptive to that. Second, the Tecnidex has also been playing for a while in certain countries that are going to be growth countries in the citrus business. I'm talking about the Middle East, in places like Egypt, Turkey. These are places that the company made early bet, Morocco, these are growing markets for citrus. The company had made an earlier bet, and with the addition of AgroFresh, we intend to speed up. We also have intentions to grow in areas like South Africa and in Latin America, where the company had just started as well to try to introduce their products. So, I think what we do in AgroFresh is two things, one is I think, combining the name, because I think AgroFresh has a strong name and a good reputation in the market. Combined with our resources as well in those markets, let's remember that Tecnidex was a privately-owned company that was trying to expand at their own pace. What we've done is basically we've put them on a much higher speed to actually achieve these growth opportunities.

[Gerry Sweeney:]

Got it. And then what about – maybe discussing some of the synergies, we expect on a go forward basis now that it's fully integrated. Anything on that front?

[Jordi Ferre:]

Well, there is some synergies that we're working on to capture that will be more related to improving our supply chain. That's going to be a very important thing. Tecnidex has a strong base in Spain, which is actually in the Valencia area, it's a good area to actually try to be integrated in our supply chain and how we move different products not only from them, but from us as well in terms of doing some manufacturing in that facility et cetera, which will be beneficial to us from a synergy standpoint. And obviously, we do see a lot of synergies in terms of the sales synergies. Right. And I think we saw that towards the end of the year especially, when we had a full impact, and we see that continuing as well, the acquisition was especially driven by synergies. So, I want to make sure that's understood.

[Gerry Sweeney:]

Got it. Okay. I appreciate it. Thank you.

[Jordi Ferre:]

Yes. Thank you.

[Operator:]

Our next question comes from line of James Jang from Maxim Group. Please proceed with your question.

[James Jang:]

Hi, good afternoon, guys.

[Jordi Ferre:]

Good afternoon. How are you?

[Graham Miao:]

Good afternoon, James.

[James Jang:]

Doing well. So, just a lot of questions have been answered, but as we move toward 2019, so what do you feel as the greatest revenue opportunity, do you see something happening in RipeLock where that could grow exponentially with the partnership to help the top line? What do you think is more of diversification and Tecnidex helping you get into other sectors that you really don't have strong presence in?

[Jordi Ferre:]

Of course, we always would hope that things would take an exponential path. I mean there is a possibility obviously all the stars line up in one year that we could actually get through that. However, I think that would – you would see in 2019 is the same trend that you see in 2018 in terms of our diversification strategies, we'll go deeper into the growth of the company. I think that some of the hiccups that we've seen like Harvista will be back on track this year. And so, I think that you will see even – with the results you've seen this year will be improved next year in terms of growth based on the diversification initiatives. In terms of having something that could be exponential, we're very prudent here. I think we take one step at a time and all the steps have to be solid towards that sustainable growth.

[James Jang:]

Okay. That's fair. And with RipeLock and everything else, have you had any further discussions with larger grocers in the U.S., meaning has there been more of pull factor in terms of your product?

[Jordi Ferre:]

I think I mentioned in my previous remarks that I disclosed that there were 10 – there is more than that, but 10 large grocery trials right now going on. I think I mentioned that. I disclosed it.

[James Jang:]

Yes.

[Jordi Ferre:]

So, yes, I think that shows that we're in full activity in doing trials. Trials sometimes can get a little bit long, because they take a while to prepare, a while to roll out and sometime also to evaluate results. And then there is the time logical for big companies to make decisions to do that. So, we could – so again we're on the right track here based on the pipeline and the number of trials that we have right now.

[James Jang:]

Okay great. And one last one, I know you don't have the exact numbers, but what do you think the market opportunity for the cherries in Chile could be, once they get mature?

[Jordi Ferre:]

You are referring yourself right now, cherries in Chile or because we talk about blueberries in Chile, you're talking about Harvista right now. Am I...

[James Jang:]

No, Tecnidex.

[Jordi Ferre:]

I'm sorry. I'm sorry.

[James Jang:]

You can expand it. The new...

[Jordi Ferre:]

Yes, yes. I'm sorry. I'm sorry. Yes, yes. So, I don't have the exact number, how much would that be. But I will tell you that the opportunity in the Harvista. Let me put it this way, in cherries, Harvista Chile has 35,000 acres of cherries, fungicide itself, I haven't really assessed the total potential. What I can tell you is that, it's not small, we're talking about an opportunity in the millions.

[James Jang:]

Okay. Alright. Got you. All right. That's all I had. Thanks, guys.

[Jordi Ferre:]

Thank you.

[Operator:]

Our next question comes from line of Daniel Jester from Citigroup Global Markets. Please proceed with your question.

[Daniel Jester:]

Yes. Hi, good morning – good afternoon, everyone. I wanted to ask you a bit on the – your current strategy for SmartFresh. I think it's my understanding that in 2019 you have more patents for the – in calculation, technology rolling off in parts of Europe, parts as Asia Pacific and also Canada. So, I was wondering if you can just comment about how you may adjust your business now that some more patents are rolling off?

[Jordi Ferre:]

Welcome back, Dan, it's good to have you here. So, on your question about patents, I mean, I've been saying that for a while, the main patent expires 2014 that was the used patent. And so, we've been public to say that we've been facing competition ever since. The patent you are actually addressing is the encapsulation patent and that is not even today our main application method. We have ProTabs, our main application method. But I will tell you this, and in my experience competition in this market happens when you have providers of service in the post-harvest market. And, so the fact that a patent expires, doesn't mean that we're going to have a multiplication of different competitors. It means that the competitors that we know and they are in a market and have certain reputation to the service can have access to that. Those that can be a more serious competitors have had access to that product now in a different application now for three years. So, although obviously nobody likes to have patents that expire, I don't think it's going to be that much of a dramatic correction as some of the people have been assessing.

[Graham Miao:]

And, also Dan, it's Graham. It's also important to point out, that you mentioned Canada and the East Coast, the United States and then as Jordi mentioned that we already using mostly ProTabs in those regions, instead of the powder encapsulation formula that you referred to.

[Daniel Jester:]

Got you. Thank you. That's very helpful clarification. On RipeLock in the slide deck you talked about adding 700 stores in the U.S., which by my math added a couple million dollars. So, I'm just wondering what the open opportunity is, if you have to add a very large number of stores every year just to get a few million dollars of revenue, is there a way to accelerate that? Is that – is this sort of revenue per store, low only, because you're in the trial phases? Can you just talk about how you see that ramping up over the next two years?

[Jordi Ferre:]

Yes. It's a very good question. Yes. The average store revenue will increase based on two factors. Number one, as you lend bigger stronger grocers that turn more products per store and the stores are larger obviously, you're going to have better sales per store. So again, as you improve your or you're getting larger grocers into your customer base. Second, yes, there is some incidence in terms of trials obviously. But generally speaking, trials, the only thing that they do actually, they should measure the same as in real life. So, I don't think that's the impact. The biggest impact really is adding more quality stores and quality grocers to your [indiscernible] customers.

[Daniel Jester:]

Got you. And then maybe one last one for Graham. Can you just talk a bit about philosophically how you think about the balance sheet? How rapidly do you feel like you need to delever it? Or are there other tools that you can use to give Jordi some more firepower to go acquire some more company? Thank you.

[Jordi Ferre:]

Thank you, as well.

[Graham Miao:]

Yes, sure. So, the balance sheet capital structure in general improvement has been on our radar screen. So, as you see that we are very proactive thinking about and also working with our advisors very actively evaluating the opportunities out there in the marketplace. So, the way we see over the next – over time certainly before the maturities, so we've got some time to put that – put into action. So first and foremost, as we announced in January, that is the – to fix the existing revolver. So, that's just a first step to make it more user friendly, but also extend the maturity by a year and a half. So that certainly will give the company opportunity, financial flexibility to look at the marketplace in terms of our overall capital structure and a debt refinancing opportunity later on. So, to – for overall deleveraging strategy for us with first and foremost that we are focusing on our business, internal organic growth as Jordi mentioned. We have several products that our baseline business is becoming more stable and we also have some growing brands that we're putting resources behind. So, in addition, as you mentioned we are very opportunistically looking at some suitable targets in the marketplace, ready to leverage our strong market position globally to tapping those – tapping to those opportunities. So, overall, we are active and it's on our radar screen.

[Operator:]

And ladies and gentlemen, at this time I'm showing no further questions. I'd like to end the question-and-answer session and turn the conference call back over to management for any closing remarks.

[Jordi Ferre:]

Thank you very much to everybody that attended the call. Thank you for your keen interest and I want everybody to know and rest assure that this management team and this company, employee base is working very hard to deliver the results that everybody is expecting. So, thank you very much and we'll speak again in the next quarter.

[Operator:]

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.