Qumu Corporation
Q3 2016 Earnings Call Transcript

Published: 7 Nov 2016

[Operator:]

Good morning ladies and gentlemen and welcome to the Qumu Corporation, QUMU Third Quarter 2016 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to introduce your host for today's conference, Mr. Peter Goepfrich, CFO, Qumu Corporation. Mr. Goepfrich, you may begin.

[Peter Goepfrich:]

Thank you, Carey. Good morning and thank you for joining us for our third quarter 2016 earnings conference call. With me today is Vern Hanzlik, President and CEO of QUMU. I’ll begin the call with the Safe Harbor Statement before turning the call over to Vern. Our comments today may include forward-looking statements relating to our expectations, plans and prospects. These statements are based on information available to us at the time of this presentation and may by their nature involve risk and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Risk and uncertainties associated with our business are described in our most recent annual report on Form 10-K and any subsequently filed periodic reports on Form 10-Q. Any unreleased features or services referenced in this presentation are public statements, are not currently available and may not be delivered on time or at all. Customers who purchase our products or services should make sure their decisions are based on the features that are available today. We assume no obligation to and do not intend to update any forward-looking statements. I now turn the call over to Vern.

[Vern Hanzlik:]

Thank you, Peter. Good morning everyone. We generated quarterly revenues of $7.1 million compared to $9.6 million in the third quarter of 2015. In the first nine months of 2016, was $22.4 million compared to $24.3 million last year. We moved one-sum [ph] figure revenue transaction to the fourth quarter due to delays with customer sign-off and saw several perpetual license transactions move into Q4. Software license appliance revenue for the quarter was $1.2 million. The $2.1 million decrease from the third quarter of 2015 and a $3 million decrease year-to-date was primarily due to delays in one customer sign-off and several perpetual license opportunities. Subscription, maintenance, support revenue for the quarter was $5 million compared to $4.9 million in the third quarter of 2015, and $15.2 million compared to $13.6 million for nine months ending September 30, 2015 respectively. Professional services, other revenue for the quarter was $970,000, the $505,000 decrease from the third quarter of 2015 and $615,000 decrease year-to-date, was primarily due to lower license and appliance sales in the first three quarters of 2016 compared to the first three quarters of 2015. Additionally, we will continue to see flat professional services revenue year-over-year as more cloud and hybrid customers come on-board. So, we do anticipate an increase over the next couple of quarters due to the amount of on-premise transactions we see in our pipeline. We continue to focus on strengthening our financial performance and growing business with new and existing customers. Our top 10 existing customers accounted for 52% of our revenue in the third quarter. These enterprise customers represent some of our largest vertical markets, financial, technology, manufacturing and pharmaceutical. All new customers for the quarter were deployed in the cloud with potential to grow in the hybrid enterprise customers. Geographically the Americas and EMEA markets continued to show adoption in the third quarter for our enterprise video platform and customers continue to expand. The America market represented 81% of our revenue and the EMEA market was 18% revenue for the quarter. In APAC, we continue to make progress developed in our pipeline through our new partnership with VQ, and other partners continue to develop in the region. APAC represented 3% of our revenue for the year. And we expect APAC market to pick-up more momentum in 2017 with our VQ partnership. Additionally in Q3 2016, our global renewal rates, for maintenance support, term contract and SaaS contracts was greater than 92%. As I commented in the press release, based on our sales pipeline, we are positioned for a strong fourth quarter with both revenue and operating results. And as stated, the timing of our pipeline, the delay of customer sign-off, push revenue transactions into the fourth quarter both new and existing customers. But we continue to feel highly confident in those transactions. For additional financial commentary, I'll turn the call over to Peter.

[Peter Goepfrich:]

Thank you, Vern. I'll comment on a few items not already addressed by Vern or included in our earnings release yesterday. Total gross margin improved 10.5 percentage points to 59.8% and 10.9 percentage points to 56.9% for three and nine month ended September 30, 2016 compared with corresponding period last year. The improvement was driven by increased service gross margin related to cost savings initiatives implemented in the second half of 2015, and improved economies of scale on increased subscription, maintenance and support revenues. Partially offsetting the improvement in gross service margin was a decrease in software license and appliance gross margin in the three and nine months ended September 30, 2016 compared with corresponding periods last year. The decrease was due to the product mix for 2016 period which included a higher percentage of appliance revenue which generally has lower margin on software license revenue. Moving on to operating expense and adjusted EBITDA, non-GAAP measure. We have right-sided our expense structure over the last year on a similar revenue base, significantly improving operating results and adjusted EBITDA. Compared to the corresponding periods last year, total operating expenses decreased 44% and 34% for the three and nine months ended September 30, 2016. Adjusted EBITDA improved $4.8 million to a loss of $1.4 million for the three months ended September 30, 2016 and adjusted EBITDA improved $13.3 million to a loss of $7.4 million for the nine months ended September 30, 2016. Now for the balance sheet. Cash and investments were $4.6 million as of September 30, 2016 compared to $8.3 million as of June 30, 2016, reflecting the third quarter operating loss and impact on cash from changes in working capital. Last week we announced, we closed on $8 million credit agreement. The proceeds from that credit agreement strengthened our balance sheet as we execute our business plan that we’re able to raise capital of full dilutive impact of an equity offering was also very important to us. As it relates to guidance for the fourth quarter. Revenue is expected to be in the range of $10 million to $11 million. Gross margin percentage is expected to be in the mid-60s. Net loss is expected to be in range, $1 million to $500,000 or a loss of $0.11 to $0.06 per share with a weighted average shares outstanding of 9.25 million shares. Adjusted EBITDA is expected to be in the range of $300,000 to $800,000 compared to adjusted EBITDA loss of $3.7 million in the fourth quarter of 2015. While the company expects to be adjusted EBITDA positive in the fourth quarter of 2016 due to the timing and changes in working capital, the company expects it will not be cash flow breakeven in the fourth quarter of 2016 excluding the net proceeds of the $8 million term loan. Now, back to Vern.

[Vern Hanzlik:]

Thanks Peter. Let me review some key operational highlights and make some market comments and then we'll open the call up for questions. The business video market continues to evolve and grow, but Qumu's core opportunity hasn't changed delivering enterprise class, end-to-end video platform, built with a service based architecture and deployable on-premise as a hybrid or in the cloud. If you look at our current fourth quarter pipeline, in a sample of 100 current opportunities, the mix of different deployment models on-premise, cloud and hybrid is as follows. 70% are on-premise, 22% in the cloud and 8% are hybrid. With that said, we know this deployment mile will shift over the next two years to a more balance between cloud and hybrid. So, in our defined market, we see a continued appetite to invest in on-premise software for enterprise video solutions. The competitive landscape seems to believe that the market is moving faster in the cloud than the actual pace of investment for the largest enterprises Forbes 2000. We completely understand the shift to the cloud with departmental solutions and external deployments. In fact, we made our investments in this strategy over two years ago. And we see the benefits of those investments starting to play out. With that in mind, we delivered on our first wave of our next generation hybrid architecture and have deployed in new and existing customers. Additionally, we released our new Qumu cloud Pathfinder with Pathfinder Edges, which is our first all-software deployment that runs virtually. We will continue to provide flexibility for our customers to deploy our video platform. Just to review, we have defined our target market as the Forbes Global 2000 equivalent companies which, represents a huge market size of 8.7 million employees, 51% of the world’s GDP. The opportunity is clear to see the number of Qumu customers already in the Forbes Global 2000 list. Qumu represents approximately 4% of the top 1,000 companies, 10% of the top 500 companies and 19% of the top 100 companies on the Forbes list. In support of the strong trading of our customers, our account based marketing initiative continues to gain momentum as we increase our engagement with our 2000 targeted accounts and growth of our pipeline for 2017. We have populated our target contact database with an average of 14 contacts per account across five key titles. Our marketing focus is all-bound campaigns to this target population. Our engagement with the context and lease of our target accounts have increased by 288% from Q1 to Q2 based on our increased focus on this audience. In addition, we’re increasing our influence and nurturing of contacts in our pipeline, increased nurturing of the pipeline accounts is expected to accelerate our sales cycles in 2017. On the business development front, integrations with our partners with adjacent technologies and applications are in place and continue to open additional opportunities for us. We have strong integrations with Pexip, video, Skype-for-business, Citrix for video for VDI desktops, Jive and Yammer for video and social business and collaboration platforms, SharePoint and Microsoft 365, are platforms we continue to add value with integration with our video platform. We continue to see strong pipeline and new opportunities collectively from these integrations. As I mentioned earlier, we continue to grow in some of our largest existing customers in the third quarter, 52% of our revenue in the third quarter came from multiple existing customers, technology, pharmaceutical, manufacturing, professional service industries. The deployment footprint for business video creation, management and delivery of these for every one of these organization will continue to increase as we reach all employees, partners and customers with secure video. Organizations will continue to invest in video applications for the future with more live and on-demand applications as well as other video use-cases. We continue to manage the business with multiple strategies for customer success, our video platform direction and the operational side of our business. While we maintain well in the third quarter of both revenue and operations while communicating that some of our largest transactions laid into the fourth quarter, we know we are positioned well for our next quarter and moving our business forward in 2017. Video communication is and will be the largest communication that will impact business over the next five years. And Qumu is well positioned to take advantage of that opportunity. Also, we remain confident in our ability to continue to translate transition matching the pace of the market to shift to a more reoccurring revenue and lower reliance on perpetual license sales over time. During this transition we will focus on providing the best video platform to our enterprise customers both existing and new with our defined market. In summary, we continue to invest in the future with the mindful discipline of our product direction and a clear vision for our teams to carry the momentum into 2017, and be well positioned to reach our corporate milestones and objectives in the future. Now, we’d like to open the call up to questions.

[Operator:]

[Operator Instructions]. Our first question comes from Mark Argento of Lake Street Capital. Mr. Argento, your line is open.

[Mark Argento:]

Yes, good morning Vern, Peter. Just a couple of quick questions on, so you’ve done a decent job of retching down the expenses, particularly on the operating expense line. Sales and marketing is one area which like that you guys have taken a decent amount of cost out of. Now that you have some additional capital here with the term note, what should we expect in terms of the deployment of that capital back into the business?

[Vern Hanzlik:]

Mark, I think the key for us is that we’re evaluating, we brought on a new EDP sales and business development. We’re working on some strategies to lift the sales team on dividing up hunters and farmers and also on the business development side as we’re seeing the momentum kind of start to come together with that. And then also, look for opportunities invest in the R&D side if it makes sense. So we’re being cautiously optimistic as we kind of align the business where we’re at from a revenue perspective right now. We’re going to add in the areas that make sense as we move into 2017 as we’re evaluating where we’re at. So, I think that we’re - the key was to, as Peter mentioned to sure up the balance sheet, to kind of move as to where we’re moving the business into more of a positive perspective and then invest in the right areas. But sales and marketing is one area and then also obviously in the technology area which makes sense whether that’s integrations or vertical opportunities into the platform.

[Mark Argento:]

In your prepared remarks you talked about what’s like, and everybody is talking about the cloud and SaaS based models but in particular it sounds like, a lot of your core customers still want the on-premise solution. Do you think and then you’ve talked about how things, you’ve got some of these larger deals that gets pushed out. Is that, you got caught in between of traditional on-premise and package software enterprise, kind of old enterprise versus I mean, more of the cloud. Are you kind of stuck in the vortex there as guys are trying to figure out which direction to go here or do you really believe it’s just the timing issue around trying to get some of deals actually signed?

[Vern Hanzlik:]

On the on-premise one, for sure, it’s just timing. I think that there is, the departmental components as I mentioned on external communication department I think are the stuff that we made our investment in the Kulu Valley organization, we’ve integrated the platforms the Pathfinder and the sound stuff as I mentioned in my remarks. But I think that the key is that the larger organizations are definitively, want to run in their data centers. They’ve made big investments. And as I continue to kind of harp on with our focus of the Forbes 2000, the largest organizations and that we’re not mutually exclusive there. But that’s where we’re kind of focusing the opportunity get horizontal on those. And they’re measuring that, we hear that from the clients and we hear it from the market as the pace cloud tech computing is going to happen, but it’s where they are feeling comfortable, security and trust with this piece of content. So, but I think the larger transactions that have pushed out for us is basically timing. And that’s kind of why we feel confident with my remarks on that.

[Mark Argento:]

Great. Good luck guys.

[Vern Hanzlik:]

Thank you, Mark.

[Operator:]

And the next question comes from Jeff VanRhee with Craig-Hallum. Mr. VanRhee, your line is open.

[Jeff VanRhee:]

Thank you. A few questions, maybe Peter just first on the cash flow side, it looks like working capital was drained this quarter, it sounds like you expect more of the same next quarter. So really two questions, one

[Peter Goepfrich:]

I think in the future you’ll see that more aligned. I think right now with some of the pressure we’ve had on sales in the first and second quarter, really bleed into impact on the third quarter. With the strong quarter we anticipate in fourth quarter, a lot of that collection happens in Q1, so we won’t see, there is a little bit a lag on the working capital impact, the stronger revenue quarter we have it generally benefits the following quarter. So, that’s just, it’s more of a timing element. But as we show some more consistency on the revenue line, I’d see those come closer to matching to actually having a nice working capital benefit to cash flow. And so that’s short and long-term.

[Jeff VanRhee:]

So, for the out-year, certainly the EBITDA would seem to be the floor for cash from ops and with some working capital benefits could go higher. But you’d be surprised if it’s lower?

[Peter Goepfrich:]

Yes.

[Vern Hanzlik:]

Okay, great. And then, I guess Vern, on the sales side. Several quarters of push-outs, talk to me about the pipeline at this point and in particular what’s different now than the last several quarters, obviously these deals have pushed. Just what gives you the conviction that they don’t push again? And along those lines, just a little more about the selling environment, are these customers frozen across the board or they have other priorities that have found their way up the list while video has been stagnant or gone down the list? Just a bit more about the selling environment in those two respects.

[Vern Hanzlik:]

Yes, I’ll give you three, not defined the examples but just kind of what happened in the tranches on Jeff. One; is, RFP process competitive proof-of-concept, timing was X and it really became Y from a sign-off perspective. And so that you kind of get the nod that you’re going to win. And then working through the purchasing cycle and that’s delayed 90 days almost. Other one, it became sort of a, we went from X to Y as far as the opportunities actually went into, well we’re going to do it and then we’re not going to do it and it became a priority thing. And then it changed and then it accelerated. So, I think some of these, where we thought we’re going to kind of sign contracts and we did and it got delayed. From a pure selling perspective, it’s becoming more relevant depending on what the business case is, if it’s a large organization with the streaming and they need to build the back-bone which we’re best in class and/or if it’s a department on words, the cost stuff, like the new customers will be brought on again this quarter with cloud based departmental smaller transactions. But the larger ones, as we look at the pipeline, even if we go back to Q3 and Q4, I mean, the pipeline of the samples that I said, we’re just seeing more of the people going to start to invest and it might be budget cycles or just might be prioritization because we don’t have the defined color on that Jeff. But I think that’s where we have the conviction of the things that we see right now coming over because they are farther down the pipeline of being signed in addition to the variables that we’re dealing with before when we didn’t have clear direction from the client.

[Jeff VanRhee:]

From a pipeline coverage standpoint on that $10 million to $11 million guide, are you in excess late-stage deals with that you’ve waited probable to close a unit excess of that three times coverage on the quarter?

[Vern Hanzlik:]

Yes.

[Jeff VanRhee:]

Okay. All right. And then, the sales organization just at this point, can you just outline kind of, you gave a little bit of color on the marketing and the sort of the named account focus. Sales capacity wise where are the heads now and is that expected I guess to be stable over the next few quarters. Just how you’re thinking about sales in particular where are, you now from a headcount standpoint?

[Vern Hanzlik:]

We got about 13 people in sales. We’re going to be adding some in the business development area and then also we’re calling more of a hybrid which is a more, what I call farmers within our base that are more strategic. And so, we’re working through that right now. And now kind of putting that organization so, B&BD [ph] and adding to the - what we’re calling more of a farmer hybrid type working list because we have, we still have lots of new clients in the pipeline Jeff. But our base continues to want to expand. And that’s one of the reasons we’re pushing so hard on departments that don’t know about us, know about the capabilities, both of all the things that we want to do with the platform. So I don’t have the exact number of what we’re going to add right now. We’re still working through that as we kind of roll this out for 2017. But we’ll have more color here in the next 60 days on that.

[Jeff VanRhee:]

And I guess just last from me, then from a product standpoint, you’ve made a lot of efforts to bring together the acquired Kulu products and you’ve also I think introduced the hybrid architecture. Any concrete impact yet, can you hear me Vern?

[Vern Hanzlik:]

Yes, I can Jeff. I think that from other than the deployments that we have running with the combined architectures and we’re starting to see add-ons to cloud with our software edge type components where people want to do more delivery. And that we’ll see more add-ins to that this quarter as we move into 2017. That’s really the key component there of people actually taking the next level of staging their content closer to where more Edge computing which is very hot topic in the IT. How do you diffuse this on their networks and people are becoming more and more aware of that as the video population grows on these backbones.

[Jeff VanRhee:]

Okay, good. Thanks.

[Operator:]

And the next question comes from Neil Cataldi with Blueprint Capital Management. Mr. Cataldi, your line is open.

[Neil Cataldi:]

Thanks. Guys, can you help us understand in the quarter how many new customers there were versus sales to existing customers in expansion?

[Vern Hanzlik:]

Yes, there were seven new customers Neil. And then the balance of it was expanded, I recognize there was 52% we’re the top 10, I don’t have the exact number, we’re probably in the 20 range of the existing customers.

[Neil Cataldi:]

Okay. And any comment on the expansion environment what you’re seeing with this large base of big customers that you’re referencing. Are you seeing them need to expand faster than maybe you were a couple of quarters ago or what does that look like?

[Vern Hanzlik:]

Well, we’re talking to them - I think the user generated content is becoming a hot topic for people. The integration with other deployments I mentioned a lot of the integration that we’ve got with the social portals and SharePoint, 365 and the unified communication things continues to evolve with the ones that I mentioned Pexip, Digital and Skype-for-Business, those are environments that where people are wanting to initiate streaming from those interfaces. And those are starting to take on more affect in the accounts that we’re already in plus new ones. So, that area, so if you mark it down for operation, initiating video conferences with streaming of larger audiences, management of those pieces of content and then the integrations with the social and Citrix and the portals which SharePoint is probably our number one and 365 is evolving. And then also the other one and I’d add into that we’ve got a lot of appetite towards the mobile and how people are going to attack mobile with video within these enterprises. And securities, the biggest component within that of who can see it, when all those types of things. And the customization of those mobile apps which are foundationally we have all that but they wanted to expand on that.

[Neil Cataldi:]

Okay. I’m listening to the call and I’m hearing you guys talk and I’m hearing growth coming. The customer list is clearly very impressive I think recurring revenues now at almost $5 million per quarter. You just mentioned that pipeline coverage for the current quarter we’re in is three times the guidance of $10 million. There is clearly a disconnect I think between the market valuation and where this company should be valued. But a lot of the analysts are forecasting flat year-over-year growth in the first half of next year. So, is there some seasonality in the fourth quarter that’s taking place here or something that happens at year-end with your customers? Or maybe is this a resetting of what the new quarterly mark should be. Is there any way you can comment on that and help investors grasp where this is going from this quarter forward?

[Vern Hanzlik:]

Yes, I think that we commented on the balance of the - the lumpiness of our sales in Q2 and Q3. But I think that we saw some of those things on the perpetual side which is an area that people invest in the year-end and we see that our Q4 is our seasonally larger in transactions. One of the things that we’re balancing though and we’re seeing more of is the different types of transactions at different departments. And as we look at our pipelines focused on 2017 we’re evaluating, where that’s going to be from a seasonality perspective but there is definitely going to be a shift. I think Neil, in 2017 how we can create that predictability for our shareholders. And that’s the transition that we’re in and we’ll continue to evolve through that depending on where we’re going to line-up for growth for 2017. But we’re cautiously optimistic about how that’s going to happen in 2017. I mean, there definitely is a lot of activity in this market space as I mentioned. But I think where we’re looking at is kind of the conversion of these, because the thing is that it’s hard to push some of these larger transactions over line, as the pace, we want versus how the customers want them. And I think that I can’t - all I can predict is I can communicate what we’re seeing in our pipelines. And we’re seeing that balance, I went through sort of our sample size of where we’re seeing on-premise and cloud. We definitely see that shifting in 2017. But we don’t know what the pace is, because we continue to get demand from the on-premise. And those transactions are either very large or they’re kind of in the mid-tier for people depending on when they started.

[Neil Cataldi:]

Okay. Fair enough. Last question, now I think you have the credit agreement, does it change anything with your - with how you’re looking at the Briefcam investment and is that still on the table as a source of cash?

[Vern Hanzlik:]

It doesn’t change anything. I mean, we’re still looking at how we potentially would divest that investment with the right timing in that. I think this gives us the right, some timing to do it the right ways. So we’re still in that mode, absolutely.

[Neil Cataldi:]

Okay. All right, thanks guys.

[Operator:]

[Operator Instructions]. The next question comes from Ishaaq Farooq [ph] with WestPark Capital. Mr. Farooq, your line is open.

[Unidentified Analyst:]

Hi, good morning.

[Vern Hanzlik:]

Good morning. Vern, could you give me some color on your revenues especially on the licenses I see your revenues are down like 26% year-over-year?

[Unidentified Analyst:]

Yes, I think the key to that is that it’s changing in the mix. And I think that, I’d mentioned that we had deals in Q2 and Q3 that pushed out, we’re going to make up some of that line in Q4. But I think the mix of our revenue is changing. And I think that’s the key to the types of transactions we’re doing. We’re maintaining our base from a recurring revenue perspective and then we’re looking at a transition in our platform. So I think those are the main things. And I think there is a market based on some of the other things that we’re seeing in the market, it’s not as fast. So, we’re looking for different areas that we’re dealing with a lot of our partners and business development around the globe. And those things we’re starting to see to come to fruition. So, we see it picking up but I think that the key is that we’re, we saw transactions in our defined markets slide out in Q2 and Q3,

[Unidentified Analyst:]

Okay. And do you expect the revenues from your perpetual licenses to maintain the trajectory they are currently in or do you expect them to pick-up later on next year or going forward?

[Vern Hanzlik:]

On the perpetual license front, I’m not sure I understand the question.

[Unidentified Analyst:]

The software licenses.

[Vern Hanzlik:]

Yes, I think we’re evaluating the mix on a quarterly basis. I mean, like I said in my comments about the opportunities that we’re tracking right now for Q4, 70% of those are on-premise. We see that’s going to shift but we’re looking for evidence of that in our pipeline, in our defined markets. So whether it’s perpetual or it’s a hybrid deployment or it’s cloud, I mean it’s going to be differently how we take the revenue on a quarterly basis, just based on revenue recognition compliance. But I think that we’re continuing to track that mix and how companies want to consume this software. And I think that in the competitive landscape, some people are, its SaaS only. And you’re outside the firewall. And I think there is, a lot of organizations that want to build video infrastructure on private networks. And so that’s why we’re seeing more on-premise in our defined market. So, we’ll continue to communicate the mix and the pace of that we move the processing of video outside of the internal firewalls. But I don’t see it rapidly changing over the next couple of years. And that’s evident in a lot of different forms that I’ve seen and talked to at this scale. People are still investing in some data centers, and not moving all these applications to status quo.

[Unidentified Analyst:]

Okay. Quick question on your SG&A, your SG&A was down a lot year-over-year. Do you think it will remain in the same levels going forward, I think you did some headcount cutting this quarter?

[Vern Hanzlik:]

Well, I think that we’ve, from a size perspective, we’ve been there for a couple of quarters on, I think that we’ve looked at expenses that we’re doing there. We’ll probably do some investing in sales and marketing over the next six to nine months in certain areas. But as I mentioned on our account based marketing, it’s all digitally, it’s all automated. We’re sort of trying to get to the next generation of that, we’ll be using our platform integrated into different things to save cost but also get maximum penetration. And then put the right sales teams in place that make sense. But we’ll invest accordingly based on where we see the opportunities and business development is one of those in for sure. So those are the areas that we’re kind of, we’ve been investing and we’ve changed the level of investment. And then we’re looking for our pipelines to give us the evidence of when we should invest more or stay status quo.

[Unidentified Analyst:]

All right. Thank you very much.

[Operator:]

I am not showing any further questions at this time. I would now like to turn the call over to Mr. Vern Hanzlik, CEO for any further remarks.

[Vern Hanzlik:]

Well, thank you. And thank you for joining us today. And if you have any other questions for us, please contact us directly. And have a great day.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a great day.