Quad/Graphics, Inc.
Q2 2018 Earnings Call Transcript

Published: 1 Aug 2018

[Operator:]

Good morning, ladies and gentlemen. Thank you for standing by. And welcome to the Quad/Graphics' Second Quarter 2018 Conference Call. During today's call, all participants will be in listen-only mode. [Operator Instructions] A slide presentation accompanies today's webcast. Participants are invited to follow along, advancing the slides themselves. To access the webcast, follow the instructions posted on last night's earnings release. Alternatively, you can access the slide presentation on the Investors' section of Quad/Graphics' website under the Events & Recent Presentations link in the left-hand navigation bar. Following today's presentation, the conference call will be opened for questions. [Operator Instructions] Please also note, today's event is being recorded. And at this time, I'd like to turn the conference call over to Kyle Egan, Quad/Graphics' Director of Investor Relations and Assistant Treasurer. Kyle, please go ahead.

[Kyle Egan:]

Thank you, operator, and good morning, everyone. With me today are Joel Quadracci, our Chairman, President and Chief Executive Officer; and Dave Honan, our Executive Vice President and Chief Financial Officer. Joel will lead off today's call with a detailed discussion of our company's transformation to a marketing solutions provider. Dave will follow with a more detailed review of our second quarter 2018 financial results followed by Q&A. I would like to remind everyone that this call is being webcast and forward-looking statements are subject to Safe Harbor provisions as outlined in our quarterly news release and in today's slide presentation on slide 2. Our financial results are prepared in accordance with Generally Accepted Accounting Principles. However, this presentation also contains non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, free cash flow and debt leverage ratio. We have included in the slide presentation reconciliations of these non-GAAP financial measures to GAAP financial measures. A replay of the call will be available on the Investors' section of our website shortly after we conclude. The slide presentation will remain posted on Quad/Graphics' website for future reference. I will now hand the call to Joel.

[Joel Quadracci:]

Thank you, Kyle, and good morning, everyone. I am pleased to report that our second quarter 2018 results were in line with our expectations. As a revenue performance reflects, we continue to make progress on our company's transformation, which we are leveraging our strong print foundation, as part of a robust integrated marketing platform, featuring a cohesive stack of services. On slide 4, we have included a visual representation of our integrated marketing platform. What makes our platform unique is that clients can use just one partner to plan, produce, deploy, manage and measure their marketing content across print, broadcast and digital channels. Through our integrated marketing platform, we reduced the complexities of working with multiple agencies and improve clients' process efficiencies and overall marketing spend effectiveness. Our process begins with planning our clients' marketing strategies. First, we take the time to understand the marketing objectives so that we can build the compelling integrated media plan together. Our marketing strategy services include, customer insights, analytics and media planning to help our clients better understand and connect with their customers. Our expertise in planning and media buying on behalf of our clients has grown to approximately $0.75 billion and includes print, TV, radio and digital channels. With a solid plan in place, we then help our clients produce the necessary creative assets such as photography, video, copy writing and design. Our creative operations include workflow optimization solutions and production management services and allow us to produce assets smarter and faster for our clients. At the end of the day, our job is to make their job easier and our integrated marketing platform allows that to happen. Once produced, we deploy those creative assets to the most appropriative media channels. We are focused on helping our clients reach their customers at the right, using the right channels to maximize engagement and ROI. To accomplish this, we measure performance throughout the entire process and make the necessary iterations along the way to drive the best results. Lastly, we offer marketing management services that further alleviate clients' operational burden and reduce complexity by giving them the ability to potentially outsource all aspects of media procurement and production to Quad, depending on their wants and needs. Recent wins validate that our Quad 3.0 strategy is working and delivering added value as represented in the following three client examples. One of our large national retail clients recently partnered with Quad for digital services including paid search, social, display placements, spend optimization and analytics reporting. These services are in addition to the traditional services we already provide, which include creative, production, media planning, printing and print distribution. Through Quad's integrated marketing platform, the national retailer reduces the complexity of using multiple agency partners, while improving process efficiencies and marketing spend effectiveness. Another national retail brand recently partnered with us to help centralize their marketing services. We have configured an online portal that will allow the retailers 400 plus stores to browse and order consistently branded in-store signage, displays other materials, as well as manage procurement and production. With our help, the retailer is vastly simplifying its marketing operations. And finally, Jackie's International recently expanded its partnership with Quad to improve photography services for its online retail, social and catalogue channels, as well as copy writing services. Quad's relationship with Jackie's goes back many years, but until recently was primarily limited to print and prep forming. We introduced a photo lightning solution that reduced the amount of retouching required, resulting in quicker, more efficient and less costly photography production, while maintaining their high quality standards. We continue to be very pleased with our investment in Ivie & Associates and Rise Interactive. Both partners have strengthened our offering in the value we deliver to our clients. As leaders, Ivie and Rise regularly earn recognition for the work they do on behalf of their clients. For example, Ivie recently earned 12 Telly Awards, the premier awards for excellence in video and television across all screens. Among its entries receiving recognition were television campaigns for [Indiscernible] and Methodist Health Systems. In June, Rise made search marketing history with the first ever perfect score for its entry in the 2008 Search Engine Land Awards. The awards recognize top performers in the SEO and SEM communities. Rise won Best Retail Search Marketing Initiative and was named Search Engine Marketing Agency of the Year in the Large Agency category. These awards confirm Rise's ability to drive business outcomes through innovative search strategies. Rise was also recently ranked on Crain's Chicago Business Fast 5o list. This is the third consecutive year Rise has appeared on the fastest growing companies list. In fact, Rise is only one of nine companies to make three or more consecutive appearances on the list. We congratulate both Ivie and Rise on all their accomplishments. As we move forward, we are confident in our transformation strategy and the value it delivers to our clients and shareholders. To that end, we remained focused on our consistent strategy, strategic priorities to continue to accelerate our Quad 3.0 transformation, drive further EBIDTA enhancement through revenue generation and cost containment, generate sustainable strong free cash flow, strengthen the balance sheet and demonstrate our ongoing commitment to providing long-term shareholder returns through our consistent dividend and share repurchases such as the $37 million stock buyback we conducted in the quarter. Before I hand the call over to Dave, I want to thank our employees who are making our transformation possible. We're fortunate to have a strong and engaged workforce that is committed to creating a better way every day for our clients and shareholders and our collective future. Thank you to all. And with that, I will now turn the call over to Dave.

[Dave Honan:]

Thanks, Joel. Good morning, everyone. We're pleased to report that our financial results for the first half of 2018 were in line with our expectations and we remained on track for delivering our 2018 financial guidance. As a reminder, the financial results from the Ivie and Rise investments are included in our financial results from the date of their respective acquisitions in the first quarter of 2018. Slide 5 provides a snapshot of our 2018 second quarter and year-to-date financial results as compared to 2017. Net sales for the three months ended June 30 increased 5.4% to $1 billion, reflecting the impact of the Ivie and Rise investments as part of the company's continuing transformation to a marketing solutions provider. Organic sales declined 2.2% after excluding a 6.2% positive impact from those acquisitions and a 1.6% positive impact from increased pass-through paper sales. These were partially offset by 0.2% negative impact from foreign exchange. Net sales for the six months ended June 30 increased 1.1% to $2 billion, while our organic sales declined 3.7% after excluding a 4.1% positive impact from the Ivie and Rise acquisitions and a 0.7% positive impact from increased pass-through paper sales. The quarter and year-to-date organic sales declines were due to ongoing print industry volume and pricing pressures and are in line with our 2018 annual sales guidance assumptions, which include continued downward price pressures of 1% to 1.5% and organic print volume decline of 1% to 4%. While we still expect organic decline in total print revenue for the year, we're pleased to see a 290 basis points or nearly 60% sequential improvement in the organic decline rate between our first quarter and second quarter of 2018. Adjusted EBITDA for the three months ended June 30 decreased $4 million to end the quarter at $90 million as compared to $94 million in 2017. And our adjusted EBITDA margin declined to 8.8% compared to 9.7% in 2017. Adjusted EBITDA for the six months ended June 30 decreased $13 million to end the six months at $200 million of EBITDA as compared to $213 million in 2017 and our adjusted EBITDA margin declined to 10.1% versus 10.8% in 2017. Our team continues to focus on proactively matching our cost structures to the realities of the top-line pressures we face in the printing industry, while still allowing for the company to invest in our transformation into a marketing solutions provider. Free cash flow was $9 million in the second quarter and on a year-to-date basis was negative $13 million and was in line with our expectations. This compares to $69 million in 2017. The year-over-year decrease was primarily due to expected timing differences from cash generated from working capital, which will be more weighted towards the end of our year and included an intentional increase in paper inventories during the second quarter in anticipation of increased paper costs and supply constraints during our seasonal peak in the third quarter. As a reminder, we realized our strongest volumes in the back half of the year due to seasonality. And as a result, our free cash flow will be primarily generated in the second half of the year. Slide 6 provides a summary of our debt capital structure as of June 30. Debt increased by $83 million since year-end to end the second quarter at $1.1 billion due to $71 million of net cash paid for the Ivie and Rise investments and $37 million of share repurchases that Joel mentioned we completed in the second quarter. We finished the second quarter of 2018 with a debt leverage ratio of 2.34 times, well within our long-term targeted range of 2 times to 2.5 times. Our debt capital structure is 60% fixed and 40% floating with an advantageous blended interest rate of 5.2%. We have no significant maturities until January of 2021. And available liquidity under our $725 million revolver was $585 million as of June 30. We believe we have sufficient liquidity for our current business needs, investing in our business, pursuing future growth opportunities and returning value to our shareholders. Slide 7 shows our continued commitment to our dividends, which is one of the ways in which we return value to our shareholders. Our next quarterly dividend of $0.30 per share will be payable on September 7th of 2018 to shareholders of record as of August 20th of 2018. We've consistently paid a quarterly dividend and our annual dividend of $1.20 per share is yielding approximately 5% that represents only 28% of our free cash flow at the midpoint of our guidance range. Another way which we return value to our shareholders is through share repurchases. As shown on slide 8, we repurchased 1.9 million shares for $37 million at an average price of $19.59 per share during the second quarter under our $100 million share repurchase program. This represents approximately 4% of our outstanding shares. As stated on our previous call, the share repurchase goal was to offset dilution impact from 1 million shares granted during the first quarter of 2018 for a $22 million special retirement plan contributions to our employees as part of the benefit of tax reform, and to help offset the cumulative impact of equity compensation grants made over time. Through the end of the second quarter, $43 million remained to repurchase shares under our $100 million share repurchase program. As a result of the significant use of this program, our Board of Directors authorized the cancellation of the remainder of the program and authorized a new $100 million share repurchase program as an opportunity to provide sufficient capacity for us to repurchase shares into the future. As we move into our seasonally busiest time in the year, we will remain focused on driving EBITDA enhancement and strong free cash flow generation by adding new business and continuing to focus on sustainable cost reductions and productivity improvements. We will continue to strengthen an already healthy balance sheet through ongoing debt reduction and invest in our business to accelerate our transformation to a marketing solutions provider. And with that, I'd like to turn the call back to our operator, who will facilitate taking your questions. Jaime?

[Operator:]

Ladies and gentlemen, at this time we'll begin the question-and-answer session. [Operator Instructions] Our first question today comes from Jaime Clement from Buckingham Research. Please go ahead with your question.

[James Clement:]

Gentlemen, good morning.

[Joel Quadracci:]

Hey, Jamie.

[Dave Honan:]

Good morning, Jamie.

[James Clement:]

Joel, Dave, I don't have the numbers in front me. Is minus 2.2% organic, is that the best revenue quarter year-over-year you had since you've been a public company?

[Joel Quadracci:]

Yes, it is. And I think that we are pleased to see that of course.

[James Clement:]

Yeah. So, some of the metrics Dave gave around anticipated volume and price, I think you said minus 1% to minus 4% on volume, minus 1% to 1.5% on price. Typically, I think you all speak in terms of minus 3% to 4% on volume, 1% to 2% on price. Is the better trend - is this more a function of the account wins that you've kind of talked about over last year or so, the expanded relationships that you've had with some pre-existing customers or are we at a point now where customers actually might be spending a little bit more?

[Dave Honan:]

Yeah. Jamie, the guidance that we gave, I reiterated again here on pricing and print volumes is consistent with how we ended the year. We thought given some of the momentum we saw with existing accounts that instead of kind of a 3% to 4% volume decline range in print that we actually brought that to a 1% to 4% because we saw there could be some upside in the print volumes, which we didn't see in the second quarter, we are pleased with that. Second quarter does represent a long-term trend for us and we're going to continue to work at this. But it's evidenced that the strategy that Joel has been talking about in transformation is working. And I think I'll hand it to Joel, but your answer shortly to what you were saying before is it segment wins, is it continuing to sell more to existing customers is yes, it's all of the above. Joel?

[Joel Quadracci:]

Yeah. And I think what you're seeing too is there has been a lot of disruption in the past couple of years in places like retail, in marketing in general. And I see - you will see a lot of people going through a lot of gyrations to figure it out. And I think they're starting to figure things out and realize that it truly is a multi-channel world and that multi-channel doesn't just mean Facebook to Google, it also means all the traditional channels as well. And we're seeing that especially in the receptiveness of our 3.0 conversations which spanned both sides of the fence. And so, to Dave's point, as we kind of have this continued transformation, I'm very pleased with the momentum that we're getting in terms of added services and products. And remember, I referred to our whole product offering as a stack because it's not just the ability to help people with digital, online et cetera, but any of those conversations when we're talking about a full multi-channel approach lead to revenue all the way down the stack from media buying and digital all the way to printing and retail inserts. And so, I think the other thing that we're seeing is we continue to be pleased with the portfolio of types of clients we have. Typically, if you look through like retail inserts continuing to be double digit percent down as an industry, but we're single digit. So, significantly better in the quarter than the industry I think due to the portfolio, but also due to some recent significant segment wins. And then on the catalog side, the industries show in the quarter are a little bit down, but we're significantly better, up almost 3% and that's due to I think portfolio, but also more industry recent wins. Direct Mail, I think continues to be a good story out there which will continue to grow as an industry. Publications, I think continues to lag with the challenge of ad pages being mid-teens negative and we're actually low-teens negative. And I think that has to do a little bit ours is a little bit more affected, so might have been better, but there is some frequency changes in some of the titles we have where people instead of doing 12 times a year might decide to do 10 times a year to manage that decline. And of course, books is a great story for the industry, continues to grow and I think has a good future. So, I think you kind of you look at all those things not just the fact that people are kind of trying to stabilize through all the craziness of the environment and realize that you have to market in all channels to also us being very diligent on how we bring value added to our clients so that they want to bring more print to us and want to stay with us.

[James Clement:]

So, Joel, just last question and I'll get back in the queue. So, post Ivie acquisition, how has your go-to-market evolved in terms of taking traditional print customers and making a more 3.0 customers? Then also, I'm curious like as you look at Ivie's customer base, how do you go-to-market and take 3.0 customers for lack of better phrase and turn them into plan customers?

[Joel Quadracci:]

Yeah. Well, first of all, Ivie's customers were all print customers. And…

[James Clement:]

Right.

[Joel Quadracci:]

And I'll remind that…

[James Clement:]

…with your customers also?

[Joel Quadracci:]

Yeah, yeah. I'll remind you that we've done business with them for a long time as the printer. But we had already been doing a lot of what Ivie did in terms of being in-house at people's businesses. They just go much broader within their businesses, which is why we're interested in them because we are going broader and it was just a natural fit. And it is not just Ivie, it's Rise as well, you have to - in your question you have to consider that too. I mean literally within one of the examples of the big retailers here where we took on the digital spend that was literally a Ivie customer that we had been printing for that then right away we closed enlisted Rise, Ivie enlisted Rise because there was a digital RFP possibility and out of the blocks we had a major win between those two. And the fact that that happening was so natural for both teams, all three teams understand that, just made it clear that this so natural in the direction we're going and the receptivity of the customer. I don't know that Ivie would have won that because they were probably more procuring digital from other vendors who may not be as integrated and suddenly now we've got all three of us at the table and making a major win. So, it's happening quickly. And again, this is fairly logical. I try and simplify this thing. In that, remember our marketing customers, they all market it, but they are using so many different silos to buy where they market to. To the point where there is not a lot of good measurement in the overall pool then. So, when they spend a dollar in marketing, they may be way overspending in search and underspending in retail insert or vice versa. There is times we tell people to do less print because the data sense that. But overall, having these additional services and talents - and by the way, Jamie, it's not just the two acquisitions. I already said that we're spending an additional $10 million in talent both internally and externally this year, which probably impacts our margin a little bit, but that's about building ahead. All that stuff is moving very quickly and ramping very quickly because this is very logical.

[James Clement:]

Yeah, okay. Thank you very much for your time. I'll get back in the queue.

[Joel Quadracci:]

No problem. Thank you, Jamie.

[Operator:]

Our next question comes from Dan Jacome from Sidoti & Company. Please go ahead with your question.

[Dan Jacome:]

Hey, good morning.

[Dave Honan:]

Good morning, Dan.

[Dan Jacome:]

Just a quick question. Can you talk a little bit more about you said you wanted new retail brands contract, maybe just some high level of thoughts what the conversations were before or around the RFP and then the eventual win for you guys? And it sounds like you said you're doing back-end marketing analytics for them, but are you also doing some traditional printing and things of that nature?

[Joel Quadracci:]

I think you're crossing over between what we're just talking about what the retailer who bought digital and then segment wins that we have. So, it's not like a singular client, but in the category, we continue to either pick up more count or more share of the spend that a culture might have and bringing in new customers. So, it's a little bit - I'd say that the retailers have been under pressure. So, in the retail segment, it's really - our offering has resonated the most. Again, because they're under pressure and they're using all channels and they're still trying to drive traffic, you still have to drive traffic. I mean you can look at there is a major Internet company out there that seems to dominate a lot of things. We have publicly launched the catalog, so they could sell more toys. So, I just think that you're seeing all these dynamics kind of come into play. And with the fact that our offering is about cutting cost by making them more efficient and how they create content. And more importantly, cutting the timeframe it takes to create that content combined with how do they deploy the content where they get a much better ROI to it because they're not overspending to the degree that they were in certain segments and underspending in others.

[Dan Jacome:]

Okay. That helps. And then just one more. So, it sounds like services component now, if my math is right an encouraging 18% of revenue. And I don't know if you can comment on this but do you guys internally or your board discussions have some sort of target for where that penetration ratio can go because I mean 18% is definitely encouraging. I think it was like 14% just a couple of years ago. So, I'm just trying to get some idea of where that trajectory might head because it could definitely help your multiple and other benefits?

[Joel Quadracci:]

Yeah, you will obviously see it continue to grow. And that's both organically and as we invest in new services and capabilities. That's absolutely true. But I think you also have to remember that that tends to also create, make the other products grow or at least decline less, because as we have those conversations, like we said, we're spending $0.25 billion on media buying for our customers on 3.0, which includes print, but also includes radio TV, digital. And so, I think that you will continue to see that we'll grow the segment as a percent, but the decline will be managed because it's creating revenue all the way down the stack as well. And when you get to the print wins, those numbers are so much greater, the invoice size than the sort of the services wins, which kind of will balance it out. So, I think you have to continue to think about it holistically, but I think directionally you're correct, it will continue to grow as a percent of the total offering.

[Dan Jacome:]

Great. I had not thought about that. Perfect. All right. Thank you.

[Joel Quadracci:]

You're welcome. Operator, next question?

[Operator:]

Our next question is a follow-up from Jamie Clement from Buckingham Research. Please go ahead with your follow-up.

[Joel Quadracci:]

Welcome back, Jamie.

[James Clement:]

Joel, thank you. I'm glad you brought it up. So, I was going to ask you that the report earlier this summer that Amazon started deploy catalog perhaps around the holiday season. I don't know if it's gone out yet, but I think the reports said it was more going to be around the holiday season to maybe kind of fill the gaps, fill Toys "R" Us' gap. What percentage roughly of your catalog business is originating from e-tailers that don't have brick and mortar and I assume that number is growing?

[Joel Quadracci:]

I would say just about a 100%, because every marketer we have, every retailer is to a degree an e-tailer. But I think what's encouraging is you see Internet pure plays, and I've talked about this in the past where we've converted in excess of 50 plus e-tailers to using print where they didn't use it before. But if you look at a cataloger who is - by the way most catalogers are retailers to some degree, also they're e-tailers, retailers are e-tailers. So, it's not something you can easily breakout, because again it's all mix. But I think the encouraging thing is that people continue to advance the multi-channel approach to include all channels. So, while the company you mentioned is launching one, we're in talks with other retailers who bring a digital people to become their CMO who suddenly are saying maybe we should do a retail insert or a catalog. So I think that's that whole sort of the noise is starting to get washed out and people are realizing that the marketing of the future is all channels together in one cohesive stack that's integrated so that you can measure it accurately and then decide what to do next, because it's an ongoing circle if you look at our slide that it doesn't stop, you don't just plan a whole event and then measure and say wow that was great. You use the measurement to plan the next one and on and on and on. Does that make sense?

[James Clement:]

Yeah, it absolutely does. Dave, if I could ask just one follow-up to you. How should we - if we look at your inventory line item, how much of these should we be thinking about versus December 31 or should I be thinking about it versus March 31 in terms of how much of that increase in inventory is paper, is it like all of it?

[Dave Honan:]

No. The impact that we had, as you know with paper prices have been increasing based on tariff that have been placed on paper. So, there is a natural increase in inventory levels because of pricing, but also, we purposely brought ahead and just…

[James Clement:]

Yeah, that's what I was going to ask you back there. The latter portion, like approximately how much of that and I don't know if I should be looking at June over December or June over March.

[Dave Honan:]

You look at June to June actually between $15 million of our increase is related to buying ahead on inventory and the increased price impact of paper.

[Joel Quadracci:]

Yeah. And Jamie, I think - go ahead.

[James Clement:]

No, I think, Dave, your answer was a lot clearer than my question. So, thank you.

[Joel Quadracci:]

Well, Jamie, I'd also add to it though. A bunch of that is about the news print tax that the Commerce Department put dumping taxes on some of the Canadian mills and it's something I had personally aggressively been working on for months now. In fact, I hosted [Indiscernible] out in our plant too early on, really talking about the damage this is doing to the newspapers in the Northeast. And he wanted to come see our plant, because it's in his neighborhood and really talk to the issue. And then since then he met with Wilbur Ross. And then a week ago I got a call from Paul Ryan who we've been working with, who has been very effective as well. Paul then informed me that Wilbur Ross want me to come to Washington to talk directly about it. So, I went there just this Monday and had I think the productive conversation. We'll know where that goes tomorrow, because today is the legal date by which the Commerce Department needs to do their final recommendation to the International Trade Group that then then rules on it. And so, they will come out with it tomorrow. And then the ITC has to then make their final decision on the fairness of the tariff around I think August 28. But we've also worked the ITC, we've got quite a few Senators and Congressmen and industry players who have testified there, we've testified to build the picture that if Commerce decides to keep going with this tariff, we've got a lot of work we did on the side who has to rule on it. And so, if they decide to pull it back, pull it back to a degree that will be the number that the ITC will have to rule on in August. So, I'd say that the conversation felt very productive. There is a lot of logical reasons why this is different than all the other tariff stuff they are dealing with because if you look at news print demand in the United States, there is 3 million tons worth of demand and only 1 million tons worth of production capability and those million tons are only in certain regions. So, it's a pretty logical story. So, again, but I think that's - it's a long-winded way of answering your inventory question that it made sense for everyone to kind of load up ahead of the tariff going in because it's a 20% plus increase with that.

[James Clement:]

Yeah. And Joel, after you - now that you brought it up, I did - I notice some new stories on that and I think there may be a bit of inaccuracy in some of those new stories, I wanted to make sure I'm right. Some of the new stories said that theoretically $90 million of cost could be, increased cost could be absorbed by Quad/Graphics. That really should say $90 million theoretically would be absorbed by Quad's customer. And obviously the risk that they need to pull back, right?

[Joel Quadracci:]

Yeah. Paper is a very important distinction. Papers is a pass-through that we do for our customers. And that $90 million is significant because first of all the newspapers get hurt through circulation, the retail inserts get hurt through circulation going down, because that's the carrier and also the cost. So, I think we've laid out a very good road map for Commerce to have a favorable outcome here, but time will tell, in fact, 24 hours from now will tell and Washington is a little bit different place these days with predictability, but I feel very good about the conversation we had.

[James Clement:]

Okay, great. Thanks again for your time.

[Joel Quadracci:]

You're welcome. Operator, any more questions?

[Operator:]

At this time, I am showing no additional questions.

[Joel Quadracci:]

Okay. Well, thank you all for joining us. We are very pleased with our trajectory. We are very pleased with the view out of our front window in terms of the long-term transformation that Quad's been going through and we'll talk to you next quarter. Thank you.

[Operator:]

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