RADA Electronic Industries Ltd.
Q2 2020 Earnings Call Transcript

Published:

  • Operator:
    [Call started abruptly] listen-only mode. Following managements' formal presentation, instructions will be given for the question-and-answer session. As a reminder this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact RADA's Investor Relations team at GK Investor & Public Relations at 1-646-688-3559 or view it in the News section of the company's website, www.rada.com. I would now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Mr. Helft, would you like to begin?
  • Ehud Helft:
    Thank you, operator. I would like to welcome all of you to this conference call to discuss RADA's second quarter 2020 results. I would like to thank RADA management for hosting this call. With us on the call today are Mr. Dov Sella, Chief Executive Officer; and Mr. Avi Israel, Chief Financial Officer. Dov will summarize the key highlights of the quarter followed by Avi who will provide a summary of the financials. We will then open the call for questions and answer session. Before we start, I'd like to point out that the Safe Harbor published in today's press release also pertains to the content of this conference call. And with that, I would now like to introduce RADA's CEO, Mr. Dov Sella. Dov, go ahead please.
  • Dov Sella:
    Thank you, Ehud. Good day to all of our call participants. Let's start with the result summary. As you can assume, we are very pleased with our financial results for this second quarter. We demonstrated a continuous strong growth both year-over-year and quarter-over-quarter. Growth rates are 75% year-over-year, and 16% compared to the previous quarter. We expect the growth to continue for the reminder of this year and also into 2021. Our gross margins remain stable at about 36%. Our operating expenses are stabilizing and it means, that there is now strong operating leverage in our business. And going forward, we can substantially bring much of the growth down into the bottom line. Our results show that so far, the Corona pandemic is having no material financial impact on RADA, a strong results speak for themselves. We have previously discussed the steps that we have taken to protect our workforce and this has not change. We have successfully make all the adaptation needed and have overcome all the work channels that the pandemic has presented on us. And being part of the critical infrastructure industrial base in the U.S. and in Israel, we continue to work at full capacity. We have also taken steps to protect our ability to deliver our products to customers, there are commitments and plans. We have significantly increased our inventory to ensure we have in-stock the components we need for manufacturing and to support our strong growth. We increased our revenue guidance for 2020 from the previous $65 million to the current expectation of over $70 million. The update is based on our current backlog and the orders that we have received in the first half of the year. It represents a growth of over 58% year-over-year. And as mentioned in the past calls, we continue to expect sequential quarterly revenue growth throughout this year and into 2021. We have a strong balance sheet of $30 million in net cash, which is sufficient for our growth and working capital need. It allows us to maintain significant inventories and to continue to invest in our growth and overcome potential challenges, we may face due to the changing economic situation. And obviously, it allows us to continue to invest in our R&D and capitalize on opportunities and we identify it. Let's talk a bit about our markets. Our RADA's are enablers in life-saving active protection solutions for military technical forces and critical infrastructure, which are new and growing segments within the defense systems market. In our relevant market segments, the interest and need for the solutions in which our radars are key part in is not just in the U.S., it is global. Being pioneers and leaders in these segments, we are now at the beginning of an anticipated sustain growth period to our opinion. Our strong growth in sales demonstrates the transition of our end market from the initial stages to the serial production phase. We estimated our addressable market at about $5 billion in the coming decade. Market is spread even between the U.S. and rest of the relevant world. Today, we are still scratching the surface of this potential to our opinion. Competition today is rather limited. We know, it will come as it is an attractive market and we have build a very nice lead. Programs are moving from fulfillment of the urgent needs to multiyear acquisition programs, as we just mentioned, we have expect that this will enable us to start building backlog into -- in the second half of this year and along 2021, which will establish a long term path in 2021 and hopefully beyond. About our business development situation. Like everybody else, we are still not traveling out of the country to meet face-to-face with existing and potential customers and partners. We meet virtually by video and phone. Because all are in the same boat, and this type of remote business development is currently the industry standout or the new normal or whatever we want to call it. It is less than optimal though. Integration, testing, demonstration activities continuing our major geographies, which are the U.S. and Israel. And local presence makes the difference and show its benefit. Generally, our sales cycle tend to be long term, about a year, its not more. Hence, we believe that the potential delays in some of our markets due to closure and travel restrictions will recover within a few months. Obviously, if closures and travel avoidance will persist for more than nine months to our estimation, it may delay new orders from this restricted geographies along 2021. In terms of a macro economics and defense spending, while macroeconomic look seems bit at least for 2020. Defense spending is a government expense, which is generally less expose to the macro economy. So far we have not seen any cancellation of existing orders and in fact, we have continue to get new orders in a good pace luckily enough. And in the U.S. immediate defense spending is even increased to support the economy. We believe that the defense spending especially in the niches that we are focused on will be resilient to most extend. On the macro level, we assume the huge economic stimulation package in the U.S., Israel and elsewhere will flow in prior to the defense spending and this has positive impact on employment and economy activity in general. Our radars are embedded in life-saving active defense solutions as we just mentioned. We believe that the programs we are involved with, which are in the heart of the U.S. modernization priorities and emerging needs will not be those who will suffer from potential future decrease in defense budget if that will happen. We believe that in case general elections in the U.S. may lead to change of government, our new markets will continue to grow and listening to the United States Secretary of the Defense while ago, he mentioned that if there will be budget challenges it will be an opportunity to re-prioritize the modernization priorities over legacy programs of record. Now while we do sense an atmosphere of budget pressure all around that may effect short-term decisions by our end users. We are still optimistic that our business will continue to growth despite organic challenges that the pandemic, elections and all other macro conditions may post. Few words about our current program. I'd like to update you on some of this major programs in which we are involved. The first one is the APF [ph] for fighting vehicles. We are part of Elbit's Iron Fist solution. Israel Eitan AFV development is on schedule. Production will commence in 2022. And the scope is over 1000 radars along the few years. The U.S. Army Bradley, a fighting vehicle, the testing is ongoing. A bit delay because of the pandemic, because end users cannot be participant in all the tests that are going on. A serial production is expected to commence in 2022 formally. A scope of the first brigade is over 600 radars. We are still optimistic that if the pandemic restrictions will be removed and the tests will be favorable, there are some chances that this schedule of production will come earlier. In addition to these two major programs, there are several additional programs in incubation, requiring potentially thousands of radars with delivery to start in 2023 and onwards. Generally speaking, the active production market is not yet affecting our top lines. What is affecting our top lines are the ground based air defense, the short ranger air defense programs, and specifically also the counter UAV and the C-RAM portions or sub segments of this market segment. The US Army, I'm sure, these under testing, with some a recoverable minor [ph] delays it just mentioned yesterday in the opening media. Production orders for the first battalion are expected in quarter number four of this year. USMG [ph] program is en route to become a program for record, while momentum is kept by entering deliveries. And we have delivered over 200 radars to the Marine Corps by now. We evident strong momentum in point defense, following the identified threats of rockets, cruise missiles and drone attacks is evidenced in the near east. Beyond what has been delivered to-date, we anticipate significant upside from follow on orders to the initial orders we have satisfied so far, and they are in production. A pipeline continues to broaden with promising prospects, potential orders are especially strong in the U.S., while other international markets are increasingly growing. To summarize, we are outperforming even our highest expectations. Revenues year-over-year grew 75% to $17.5 million in this quarter. Fastest since our acceleration beginning 2019, quarter-over-quarter I mean, and we showed 60% of growth this quarter. Based on a strong order flow and current backlog, we have increased our revenue guidance for this year to over $70 million, given our stable gross margin and stabilizing the operating expenses, the growth can substantially flow down to the bottom line. EBITDA of $1.75 million, about 10% of revenues and up 100% compared to the previous quarter, shows that we are now starting to enjoy the fruits of our investments and growth. From our markets perspective, defense is a critical industry, as we mentioned, less exposed to an economic turn down, a downturn, I mean. Furthermore, we see defense budgets generally growing especially the programs we cater to. The need for life saving products is urgent. And for the military forces, and we don't see it any decrease. And we are in the early stages of enjoying the fruits of our investments over the past few years. We are very well-positioned for significant growth to our opinion. Our current leading and mature radar technology addresses the demanding needs of this growing market for the near term. And through the advanced developments of our next generation of tactical radars, our R&D is focused on maintaining our leadership in this developing and growing markets for future use. And while reporting our best ever quarterly results, we believe that our next quarters will be even better. I'd like now to hand over the discussion to Avi Israel, our CFO. Avi, please go ahead.
  • Avi Israel:
    Thank you, Dov. Good day, everybody. You can find our results on the press release we should earlier today. And I'll provide a short summary of the second quarter results. Second quarter revenues were at a record $17.5 million, up 75% year-over-year. Our gross margin in the quarter was at a stable 36% of revenues and has not changed over the past two few quarters. This is the level we're currently expect and are happy with. As you know, we made significant investments last year, especially in R&D and sales and marketing, as well as our infrastructure in the United States. So our operating expenses grew. However, looking ahead, we don't expect significant changes to the operating expenses going forward. Operating Income was $634,000 in the quarter, compared to operating loss of $843,000 in the second quarter of 2019. Adjusted EBITDA of $1.7 million, which is 10% of the quarter revenues compared with a negative one of $268,000 in Q2 of last year. Net income attribute to two other shareholders in the quarter was $707,000, or $0.02 per share, compared to a net loss of $564,000 or $0.01 per share in the second quarter of 2019. I'd like to summarize and point out some highlights from our balance sheet as well. As of June 30, 2020, we had $29.9 million in cash, net of the small financial debt related to the PPP plan in the U.S. At quarter end, our shareholders equity stood at $66.5 million, financing 68% of our balance sheet. Our inventory level increased to $26.5 million from $17.2 million at the end of 2019. This inventory level was strategically increased to support future expected growth and to ensure full availability of components given the current environment and the need to mitigate against any negative influence of COVID-19 pandemic on our supply chain. In summary, as Dov mentioned and as the financial results demonstrates, we're very pleased with our progress and look forward to continued growth. That is my summary. We should now open the call for questions. Operator, please.
  • Operator:
    Thank you. Ladies and gentlemen, at this time we will begin the question and answer session. [Operator Instructions] The first question is from Brian Kinstlinger of Alliance Global Partners. Please go ahead
  • Brian Kinstlinger:
    Good morning, guys. Thanks for taking my questions. In the past, about 50% of your revenue was coming from the U.S. You mentioned that in 2Q, the primary driver, it sounds like was the U.S. even though, I think all markets are growing. So has the mix changed? Is more than 50% coming from the U.S. and do you expect U.S. continue to grow faster than the rest of your business?
  • Dov Sella:
    We do expect that the U.S. as we anticipated early on -- well, first of all, its basically half of our potential market. In addition, it emerged first. And the rest of the markets are in a trend to follow. So we do expect that it will be over 50% in the near term, especially next year.
  • Brian Kinstlinger:
    Great. And then, on the inventory, given a pandemic is still quite uncertain, and demand continues to ramp for RADA, do you expect to continue to add inventory to the remainder of 2020? Or do you expect to work through that inventory and inventory will be coming down over the next six months or so?
  • Avi Israel:
    The pandemic didn't change dramatically our strategy, while experiencing a new and emerging markets, meaning, emergent needs. In order to address them, we long ago decided to build to stock. And lot of our revenues are coming from book and bill sales. The pandemic put an other emphasis that, okay, let's try to be as resilient as possible in this emerging market. What will change the inventory levels is mainly the transition to the serial production phase where you have long term production plans. You can get advance payments and so on and so forth. So you are going to be more relaxed in the cash needs and working capital. However, since it is -- as I said, phasing market, there will be areas that will behave in an urgent need. So, it will be a mixture, less pressure -- less pressuring --hopefully the mixture will be towards the serial production and the whole idea is to become cash flow positive soon enough.
  • Brian Kinstlinger:
    Right. And then, while demand is ramping, have you seen any changes in the competitive landscape? Many competitors improve their capabilities with many tactical radars.
  • Dov Sella:
    We didn't see any change. Its ongoing situation or environment. We see the competition mainly Elta, SRC, and they may be one, two more introducing their developments, testing their equipment. Cross our fingers, we are still in the lead.
  • Brian Kinstlinger:
    With that said, in the lack of true competitors, although they're may be making their way to where you are and strengthening demand. Is there an opportunity for price increases? Or do you think you're priced appropriately given where the market is?
  • Dov Sella:
    I would not call them untrue competitors. They are fierce competitors. They are world-class radar companies. And I don't think we should remove our foot from this pedal of being very competitive in performance over price.
  • Brian Kinstlinger:
    Thank you.
  • Dov Sella:
    Thank you.
  • Operator:
    The next question is from Ken Herbert of Canaccord. Please go ahead.
  • Ken Herbert:
    Good afternoon, Dov and Avi.
  • Dov Sella:
    Hi.
  • Ken Herbert:
    The commentary here in the United States regarding sort of SHORAD and testing on the program seems to be -- maybe getting a little better from where we were a few months ago. Can you comment on -- you called out specifically the opportunity for production order in the fourth quarter. Can you can you comment further on your assumptions for SHORAD this year and into next year? And how should we think about the volume on that particular program potentially ramping and transitioning here?
  • Dov Sella:
    Yes. The plan is, as I said earlier in my review, we expect orders of the first battalion, which is 32 vehicles to be received this year. 32 vehicles with over 120 radar. By mid next year, we do believe that the second and third battalions will be on order. So we believe that next year and the order that we will get this year will be delivered next year. We do believe that next year we will be able to deliver two battalions, half of the initial program. And the rest will be in 2022.
  • Ken Herbert:
    Okay. That's great. And are you seeing -- how would you characterize or handicap the risk around timing here? Or maybe what are the next major milestones we need to see soon in advance of these first orders?
  • Dov Sella:
    We are not from here, because this is a classified program and we are not being told exactly what's going on. But it is being advertised in the media as you just read yesterday. And in it was mentioned that they are assuming that they will close only the hiccups as they call them. And the milestone should be, let's say, a note by us or even by our customers DRS, that the production order was placed with them. Hopefully, by the end of September, in the fiscal year. And this will be a bit delayed towards us.
  • Ken Herbert:
    Okay. Okay, that's very helpful. Thank you. And you -- obviously active protection is not very meaningful yet from a revenue standpoint. Can you talk about how that could impact 2021 and 2022 as we continue to see specifically on the Bradley, things gradually move forward?
  • Dov Sella:
    In 2022, we will start deliveries of the Israeli Eitan program. And hopefully, the Bradley. So, a few 10s of millions of dollars may happen in 2022. And again, the massive will be in 2023 and onwards.
  • Ken Herbert:
    Okay. That's helpful. And I -- just one follow up. As you look at the -- you highlighted the competitive landscape. Is it fair to assume that R&D spending within your broader comments around OpEx, R&D spending holds relatively flat at these levels? Or do you envision having to increase R&D spending here in the next few quarters or into 2021?
  • Avi Israel:
    I believe that here in Israel, where the majority of the R&D is executed. We are almost stabilizing, I mean, we had our ambitious plans, but it took us some time to build up and train the people to build up the talent that the engineering force and train them. And now we are almost there. And we are working the full scale. I mean, we are developing three radars in parallel. And all three of them will start testing next year. In the U.S., we still expect some recruitments of engineering force to happen. But on the total picture, we are almost stabilizing.
  • Ken Herbert:
    Okay. And just finally, on the U.S. operations, are you fairly --you just talked about the R&D or the engineering side fairly well staffed up there and operating, where are you on the ramp of that facility and when do you get to sort of the full capacity?
  • Dov Sella:
    Capacity wise, the production capabilities there. It is up and running. And we have enough technicians to support the production at this level. Capacity is ramping up. And if we need we can top up to three shifts and produce up to $100 million worth of radars. We are not there yet. We do believe that by the end of this year, we will deliver 250 radars to the U.S. market from our a U.S. plant and we have already delivered a few dozens of radars from there.
  • Ken Herbert:
    Excellent. Thank you very much. Very nice quarter.
  • Dov Sella:
    Thank you very much.
  • Operator:
    The next question is from Will Manuel of Edison Group. Please go ahead.
  • Will Manuel:
    Yes. Hi. Congratulations on a great quarter. Just would like maybe a little bit more color on the rest of the world opportunities. If you could sort of maybe drill down a bit into sort of countries and timelines?
  • Dov Sella:
    It's too early to tell about timelines, because the rest of the world is in urgent need phase. I mean initial orders very promising though, but there still some of the geographies are affected by the coronavirus and the things are a bit delayed, so I cannot tell you exactly when. But the potential is there and I cannot comment about the specific countries. I'm sorry.
  • Will Manuel:
    Okay. In terms of sort of product development, sort of next generation products of yours. Can you give us some sort of light there on that?
  • Dov Sella:
    Yes. We are developing our next generation of active protection radars of counter UAV and short-ranger air defense radars and also our next generation of C-RAM radar, all types of our radars are being the now, all the lessons that we have learned are being introduced into the next generation, which will start to be tested as I mentioned, less than a year from now.
  • Will Manuel:
    And how -- with those products, what sort of change in -- would there be any sort of change in your in gross margins? Is there more of sort of software element? Does that change anything in the medium term?
  • Dov Sella:
    Could you please repeat that, sorry.
  • Will Manuel:
    Is there any sort of change in the sort of gross margins from those next generation products?
  • Dov Sella:
    No. We keep as I mentioned earlier. We keep the same go-to-market strategy of customers, products, price points, and so on. We -- our desire is to stay highly competitive.
  • Will Manuel:
    Okay. All right. Thank you very much. Thank you.
  • Dov Sella:
    Thank you.
  • Operator:
    The next question is from Jeff Bernstein of Cowen. Please go ahead.
  • Jeff Bernstein:
    Hi, gentlemen. Congratulations on a good quarter. Couple of questions for you. The incremental EBITDA margin just quarter-to-quarter here, looks like it was about 35%. So you're getting a lot of fall through to the bottom line. Just interested if there was any sort of one timers there? And how we should think about EBITDA margins going forward? I know, for prime contractors, there gets to be a level that you don't want to flaunt in front of the government. But can you guys make 15% operating margin or what sort of a level beyond which you're not going to go?
  • Avi Israel:
    So first of all, answering your first question, there was no one time event in the quarter or previous quarter and so on. Everything is business as usual, nothing special. You estimated correctly, that by growing the top line and maintaining the gross profit, the numbers will fall all the way down to the operating income as well as to the EBITDA. The gap between the operating expenses and adjusted EBITDA is currently something like $1 million per quarter. So you can do the mathematics yourself assuming that we maintain our growth, assuming that we maintain our gross profit, the gap between operating profit and the EBITDA per quarter is around $1 million, nothing special.
  • Dov Sella:
    Just to add few words to that, Jeff. We believe that the production facilities around radars, especially in the U.S., naturally, also in Israel are relatively new. And with some more experienced in the automation, we can improve our efficiency, but it is not to the level of 50%. It's a one tools, that's the most. And let's not forget that we are in a competitive environment. It's not that we can raise the prices. We are not there.
  • Jeff Bernstein:
    Okay. And I'm just wondering, being an optimist, you talked about the headwinds from, from not being able to go see customers, et cetera for business development. But it would seem like at this point in time, that would be a relative advantage for you over competitors?
  • Dov Sella:
    I think we are lucky in the fact that our primary market is the U.S. and in the U.S. we have already established our local presence in production. So in the U.S. we kind of are immune. And the rest of the emerging markets are suffering from the delays. But everybody is suffering from delays. So I think we are here in par with our competition.
  • Jeff Bernstein:
    Okay. And then, you mentioned, the Marine Corps program, was that GBAD, that's going to become a program of record?
  • Avi Israel:
    Yes.
  • Jeff Bernstein:
    Got you. Thank you.
  • Operator:
    The next question is from [Indiscernible]. Please go ahead.
  • Unidentified Analyst:
    Good afternoon, gentlemen. [Indiscernible] after such a good report, we say [Indiscernible]. And now to my first question. It is regarding your R&D. In the test you said that, your R&D department is working on development of four new radars. Out of the four Radars, you introduce two new radars. When do you plan to introduce the other two? And also in the recent interview conducted by Jefferies, you mentioned that RADA is developing bigger radars. Is this a change of direction because up to now, you can concentrated on small radios. And my second question is regarding the Indian market.
  • Dov Sella:
    To your questions, let me answer one by one.
  • Unidentified Analyst:
    Okay.
  • Dov Sella:
    Okay. First of all, we are developing three new radars now. We have developed four. One is already introduced. And the rest of the three -- there are three we'll introduced as I mentioned, less than a year from now. Bigger radars are relative. We have a small, smaller and smallest. And we are going to do something a bit bigger than our small, but it is all tactical. The concept is radars that are installed on vehicles, working with the maneuver force and so on. So, the new radar we are talking about compared to the bigger radar that we have now with round shaped with a diameter of 80 centimeters, we are talking about a radar of 120 by 90 centimeters. So, this is bigger. The antenna is bigger. Ranges are doubles, but it is still compact and maneuverable. So, let's put it in proportion. What is your next question please?
  • Unidentified Analyst:
    My second question is regarding the Indian market. In view of the latest tension between India and China, how do you foresee radar involvement in the Indian market?
  • Dov Sella:
    We have stated quite a few times that India is one of our strategic target market. We have already initial sales of radars there. Indian market is behaving slowly by nature, by definition, let's say even. You need a very long term thinking and air in your lungs, as we say. We have dedicated specific Vice President of Business Development to address the Indian market. We have the patience, and we know that one time it will pay back, but stay tuned.
  • Unidentified Analyst:
    Okay. Thank you and good luck.
  • Dov Sella:
    Thank you.
  • Operator:
    Thank you. [Operator Instructions] The next question is from Austin Moeller of Canaccord. Please go ahead.
  • Austin Moeller:
    Hi, Dov and Avi.
  • Dov Sella:
    Hey, good. How are you?
  • Austin Moeller:
    I'm doing great. I just had one question. Can you guys provide any additional commentary around the C-RAM opportunity that you're working on at the moment or not yet?
  • Dov Sella:
    Not yet, not yet. We are working on C-RAM. In the U.S. it's being the under a initial testing. We cannot talk too much about it. Mainly our C-RAM sales are non U.S. sales. Naturally, in Israel, around Gaza, and not only in a Africa for UN forces, not directly and so on. But it is too early to say.
  • Austin Moeller:
    And the C-RAM opportunity that's currently in Israel. Is that's not related to Iron Dome that specifically the red color stuff? Or is that also other stuffs?
  • Dov Sella:
    Our C-RAM, C-RAM is a wide myriad of solutions. It can be also addressing artillery from being shot at you from 30 and over kilometres away. This is not -- these are not the ranges with our radar, our compact and tactical radars are reaching. We are talking about the tactical ranges of about 10 kilometers and less, mortars, the short range rockets, that kind of stuff. And also, cruise missiles to a certain extent. With cruise missiles you need the longer ranges. So we are developing a bit of a bigger radar as we mentioned, doubling the ranges. But again, we stay at the tactical level. It's not Iron Dome. Iron Dome is addressing the long range -- the longer range. It is called medium, okay. But tens of kilometres of rockets maybe even more than that 100 rockets and missiles that are being a fire at stationary basis and villages and houses. We are not there. We are in the tactical Layer.
  • Austin Moeller:
    Okay. Got it. Thanks for the additional color.
  • Dov Sella:
    Thank you, Austin.
  • Operator:
    The next question is from Ron [Indiscernible]. Please go ahead.
  • Unidentified Analyst:
    Hi. First of all, congratulations for the results. And my question is given the fact that as of 17th of July, we disclose that you have orders in almost $50 million in revenue. Most of it will be recognized this year. And given the fact that the fourth quarter is usually a strong one in the industry from budget needs to be dispensed. Don't just think that new guidance is too conservative?
  • Dov Sella:
    There are uncertainties, and we do believe that it is realistic and not too conservative. And, if we are lucky, we will give a new guidance. If not, it will be realistic. But it is -- the market is not all the orders are deliver this year.. Not all of them. So, it's not plain and simple mathematics. We do stand behind our new guidance and we believe this is firm and realistic.
  • Unidentified Analyst:
    Thank you and congratulations again.
  • Dov Sella:
    Thank you.
  • Operator:
    There are no further questions at this time. Mr. Sella, would you like to make your concluding statement?
  • Dov Sella:
    Yes. Thank you, operator. On behalf of the management, I would like to tank you all for your continued interest in our business. We will be presenting at the Canaccord conference today and on Thursday. If you would like to speak with us, please be in touch with our IR team or with the Canaccord relevant representatives. We still have open slots for tomorrow in the Thursday. Otherwise, we look forward to speaking with you and updating you again in our first quarter results release in approximately three months from now. We wish you all to stay well and have a good day. Thank you very much.
  • Operator:
    Thank you. This concludes the RADA Electronic Industries' second quarter 2020 results conference call. Thank you for your participation.