Sequans Communications S.A.
Q2 2018 Earnings Call Transcript

Published: 31 Jul 2018

[Operator:]

Welcome to the Sequans Second Quarter 2018 Results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a Question and Answer session. Instructions will be given at that time. As a reminder, this conference is being recorded. Before I turn the conference over to our host, Mr. Georges Karam, I would like to remind you of the following important information in behalf of Sequans. This call contains projections and other forward-looking statements regarding future events, our future financial performance and potential financing sources. All statements other than present and historical facts and conditions discussed in this call, including any statements regarding our future results of operations and financial positions, business strategy and plans, expectations for IoT and broadband sales, sources, and availability of funding, and our objectives for future operations and potential strategic partnerships, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are only predictions and reflect our current beliefs and expectations with respect to future events and are based on assumptions and subject to risk and uncertainties and subject to change at any time. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Actual events or results may differ materially from those contained in the projections or forward-looking statements. More information on factors that could affect our business and financial results are included in our public filings made with the Securities and Exchange Commission. Please go ahead, sir.

[Georges Karam:]

Good morning, ladies and gentlemen. This is Georges Karam speaking. I am with Deborah Choate, our Chief Financial Officer. Welcome to our second quarter 2018 results conference call. Before we get into the details of the second quarter, I'd like to take a moment to summarize our strong business and technology position to provide some context in which to consider the details of the quarter. Looking first at our primary growth engine, the IoT business, we’re very pleased to say that momentum is continuing to build and we are reinforcing our position as the technology leader. All operators around the world continue to move full speed deploying LTE-M, NB-IoT and, often, both of them. We are engaging with dozens of these operators in various regions

[Deborah Choate:]

Thank you, Georges, and hello everyone. I'd like to add some details about our second quarter results and discuss the outlook, including our guidance for Q3 of 2018. Our revenue was $12.7 million for the second quarter of 2018, up 12.7% sequentially from the first quarter, primarily due to 30% sequential growth in product revenue, and a decrease of 4.2% compared to the same quarter a year ago. The change versus the second quarter of 2017 reflected significantly higher IoT product revenue that was masked by lower broadband product revenue and lower other revenue compared with a year ago. But, as expected, the broadband business improved sequentially from Q1, and we expect gradual further improvement going forward. In Q2, we had three 10% customers; two are distributors serving a number of OEM and ODM customers, and one is an ODM directly. Gross margin in second quarter was 39.4%, compared to 41.7% in the first quarter of 2018, and compared to 42.1% in the second quarter of 2017. The lower gross margin was primarily due to a shift in product mix toward a higher proportion of modules as our CAT 1 business continued to ramp, as well as lower license revenue. Operating expenses were $11.9 million in Q2, down slightly from $12 million in Q1, reflecting the benefit of a higher French research credit reducing R&D expense offset by higher legal and bad debt expenses. The increase from the second quarter of 2017 is primarily a result of the increase in headcount and the impact of the strength in the Euro versus the dollar. We continue expect non-IFRS operating expenses in 2018 to average about $11.5 million per quarter. Our second quarter operating loss was $7 million, compared to an operating loss of $7.3 million in the first quarter of 2018, and a $4.1 million loss in the second quarter of 2017. Our net loss in Q2 was $8.1 million, or $0.09 per diluted share/ADS, compared to a net loss of $8.7 million, or $0.10 per diluted share/ADS in the first quarter. The net loss in the second quarter of last year was $6.0 million or $0.08 per diluted share/ADS. Our weighted average share count increased to 94.5 million shares in Q2, compared to 75.9 million a year ago and 91.5 million at the end of Q1, reflecting the full effect of the equity offering in January 2018. On a non-IFRS basis, our net loss for Q2 was $6.8 million, or $0.07 per diluted share/ADS, compared to a non-IFRS net loss of $7.5 million, or $0.08 in the first quarter, and net loss of $4.9 million or $0.06 in the second quarter of 2017. Our non-IFRS net loss excludes non-cash items related to stock-based compensation expense, and the non-cash impact of convertible debt amendments and the effective interest adjustments related to the convertible debt and other financings. Cash used in operations in Q2 was $8 million, compared to $6 million in the first quarter, reflecting increased working capital requirements. Our cash and short-term deposits at June 30, 2018, totaled $7 million, compared to $15 million at the end of Q1. Our Q3 balance sheet will reflect $1.5 million in grant payments, already received in July, and we expect to collect a further $3.2 million in September for last year's French research credit. As Georges noted, we are in advanced stages of negotiating terms of one of our strategic opportunities which includes a funding element and, assuming it closes this quarter as expected, the additional funding will appear on our balance sheet in Q3 or soon thereafter. We also have secured commitments of $5 million in additional convertible debt and are working to close another financing facility for up to $20 million. We are continuing to explore additional strategic partnerships, some of which could include a funding element as well. Given the progress we have made on strategic funding, and the expected Cat M revenue ramp during the next several quarters, we believe we will have sufficient funding to reach cash flow breakeven and maintain acceptable balance sheet optics. Accounts receivable at June 30, 2018, were $21.4 million and included $3.4 million in currently unbilled service revenue resulting from recognition of our NRE contracts on the percentage of completion basis. We have a large contract that's back-end loaded in terms of billings and other contracts nearing the end of deliverables that are awaiting final billing. Excluding the impact of unbilled service revenue, DSOs were 112 days, up from 101 days calculated on the same basis at the end of Q1 and continue to reflect the impact of billings being concentrated in the last part of the quarter. Inventories were up slightly at $7.7 million. And short-term debt from financing receivables increased by $2.9 million to end at $8.2 million at the end of June 2018. Looking forward, we expect revenues for the third quarter of 2018 to be in the range of $13.5 million to $16 million, as IoT revenues continue to ramp. The wider guidance range reflects some caution about project timetables as new LTE-M devices are brought to the market. We expect non-IFRS gross margin in Q3 to be above 40%, and non-IFRS net loss per diluted share to range between $0.06 and $0.08, based on approximately 94.5 million weighted average diluted shares/ADSs. Our guidance for Q3 non-IFRS net loss per share excludes non-cash stock-based compensation, effective interest adjustments related to the convertible debt and other financings, and any other relevant non-cash or non-recurring expenses. As Georges indicated, we continue to expect strong growth in IoT in the second half of 2018 and beyond. The broadband business is expected to improve gradually, and our assumption is that revenue from the vertical markets, which includes public safety, avionics, and various strategic partnerships, will be at least similar in 2018 to 2017. So, our growth in 2018 will be driven by a full-year of shipments for CAT 1 combined with the ramp in LTE-M1/NB1 during the second half of the year, and we continue to expect IoT to account for more than 50% of total revenue in 2018. Before I turn the call back to Georges, I’d just like to just remind you that at the conclusion of this call, we will post a written version of our formal remarks in the Investor Relations section of our website on the “Webcasts and Presentations” page. That's the same location where you will find the audio replay. Georges?

[Georges Karam:]

Thanks Deborah. So just to conclude and pass it over to the questions to stress again that the overall momentum in our IoT business is very, very strong, we're talking about huge market opportunity and a unique leadership position for Sequans. As the broadband business now challenges are behind us, we will be growing sequentially each quarter driven mainly by the IoT business now. The slope of our revenue around in the short-term could be difficult to predict as this depends on the launch date of our customer products but there is no doubt that the LTM and NB IoT market ramp is imminent and we are extremely well-positioned to capture the strong portion of it. So my team and I are very confident in the future of our company. Thank you for listening and I will pass the floor now to the questions. Operator?

[Operator:]

Thank you. [Operator Instructions]. Our first question comes from the line of Mike Walkley from Canaccord Genuity. Please go ahead.

[Mike Walkley:]

Great, thank you. With the IoT business ramping in the first half, how should we think maybe about the second half of 2018 versus the first half of 2018, I know there is some timing pushes you have talked about but do you think the Cat M business could exceed $10 million in 2018 or do you still think it can maybe reach even the $15 million you talked about earlier in the year? Thank you.

[Georges Karam:]

Hi, Mike. I mean, definitely, today, we still believe that this will exceed the $10 million. As I said you know from the beginning we had a little bit less than $1 million in Q1 and repeating on a flat basis in Q2, we will have some acceleration in Q3 and we will get more acceleration in Q4. So it's really a question Mike about those launch days we have many products between September/October timeframe some shipments could be in the quarter, some could be next quarter but on a global basis we remain confident that will be for sure about $10 million Cat M business this year.

[Mike Walkley:]

Okay, that's helpful. And with your strategic bet on CAT 1 seems to be ramping well, can you talk about maybe the longevity of this business opportunity and how maybe you see that business 2019 and beyond versus the good ramp we're seeing in 2018?

[Georges Karam:]

Absolutely, I mean this is good point. I mean I see definitely that the CAT 1 will stay, I should never say this but maybe forever because there is no reason to think about there is really a segment of the IoT application where you cannot address it today with NB IoT or LTM and you need CAT 1 all this related to the order music or streaming music or video application and to some extent even voice calls because even if LTM is designed to support voice, this will take at least the operator maybe one two more years to be ready and the quality level to confer to the CAT 1 because CAT 1 will give you the quality level exactly as you have on your phone from voice call point of view. So for all those good reasons, I will say the CAT 1 will stay there for long, long time. Now the impact in the short-term, in the short-term we could see some application instead of going CAT 1, they go LTM but in the same time we’re seeing more and more applications going to CAT 1. So for us the way look to it -- we look to a growth trajectory between 2018 and 2019 we are -- we have very good visibility for example on our module partner where we have nice growth year-to-year in other words our visibility for 2019 is very good and we believe it's decent growth and our module guys that we have in hand, we know that they are expanding to new careers as you see for example if you take now Sprint they are deploying CAT 1, Cat M will be later on. So all the application where you see Sprint is they’re turning CDMA, they will be moving CAT 1. Also we have the other reason that many application that they start to do CAT 1 but they speaking like metering application and so on. They will stay for three, four years before they switch over to LTM. So again to summarize all this, we see CAT 1 growth year-to-year and we expect 2019 to grow again versus this year maybe in order to be conservative, I see 20% or 25% growth year-over-year on the CAT 1 between 2019 and 2018. And beyond 2019, I mean we will see how this would develop but for sure it will be there a decent business that will continue in Sequans on CAT 1 application.

[Mike Walkley:]

Thank you. Last question for me, I will pass the line. Just on the broadband business, can you give us any just color on how Q2 improved over Q1 in terms of maybe percent growth, and how you see that slope of recovery into the second half of the year and maybe in 2019 maybe if you could give us some parameters how you see the business in 2019 versus these 2018 levels? Thank you.

[Georges Karam:]

Yes, I mean we have -- we have one major as you know in our broadband we have the Verizon and we have the emerging market. On the Verizon things settled today, I mean Verizon the U.S. market first of all the business went back to normal and on top of this as I mentioned we have an application with that MVNO adding extra business as well in the U.S., we have two new design wins reinforcing this revenue stream with MVNO using Verizon network as well in this case. So this business is fine and the business in hand I tend to say, the emerging remains a little bit of challenge because as we said in the past all this is now CAT 4, our CAT 6 is very weak there and we need to come with our new platform to recover more market share in the emerging markets. But the good news above this is that we have a lot and lot of traction with the new application outside Verizon emerging in the U.S. but also outside the U.S. and Europe and we have some of them are almost secured view that will contribute to revenue growth next year in the broadband. So for this year, we will see modest growth, we get good recovery so far and we will continue more or less same level quarter-to-quarter but we expect next year will mainly when we introduce this new platform of CAT 6 to accelerate and obviously once we get the new business beyond Verizon and the emerging business that we have in hand turning to revenue which will be next year as well.

[Operator:]

Thank you. And our next question comes from the line of Quinn Bolton from Needham & Company. Please go ahead.

[Quinn Bolton:]

Hi Georges and Deborah, just wanted to follow-up on couple of things, just the can you just quantify for us if possible that sort of revenue at risk due to the timing shifts in the Cat M business it looks like it might be on the order of maybe $1 million, $2 million in each of Q3, Q4 just wanted to see if that was kind of the right ballpark?

[Georges Karam:]

The answer is yes, more or less this is the right ballpark, again you know there is no risk at all for our CAT 1 business, it's really because it's business shipping in hand and we have very, very good visibility and obviously the broadband as I said in the vertical now they are doing well there. The Cat M is building up, we have revenue, we have again I mentioned that we are shipping but more than shipping the fact that we have six, seven projects going this year, some of them as I said are under edge in Q3 launch, some more in Q4. It should be one product there you could have $0.5 million moving from one quarter to another on one deal, so we are talking about the $1 million order of magnitude also between quarters.

[Quinn Bolton:]

Great. And then --

[Georges Karam:]

And again you know Quinn let me just say I want to really stress this, I said this previously but we saw similar things in the CAT 1 ward even if the CAT 1 ramp was not that fast, here we are not talking about the pipe is not less, we’re adding more in the pipe, we’re adding more design win and we have more and more design turning to product launch but just only the initial phase of it, we still have them in hand and their potential is the same. But just only if you look on a calendar quarter, you will see plus minus impact but if you look, if you project this business over four quarters or whatever there is no impact at all for us from this point of view.

[Quinn Bolton:]

In interest of Cat M projects that are scheduled to launch in September/October timeframe, mostly smart city, smarthome tracking applications, can you give us a sense of the range applications for those Cat M projects?

[Georges Karam:]

We have a lot and in the end what I call it tracking but you know tracking can go between consumer device or professional or telematic and automotives. We have a lot of this and in past we have many of them like this. We have some of them are carriers SKU that we’re launching by carriers as I mentioned there, we have three products going with carriers this year and we have as I said mainly the module partners, couple of them, they are in advanced stage, some of them they are shipping, they have secured even some big deals that we will be launching in Q4 and it could be even going to smarthomes, some of them are in the smarthome area as well.

[Quinn Bolton:]

Great. And then just following up on the broadband business, you mentioned on several calls you can’t reduce CAT 6 platform and you’ve sort of given us a sense it’s going to ship sometime next year, I was wondering if that might be able to pin you down to a more specific time for that launch, is it first half, is it second half any thoughts you could provide?

[Georges Karam:]

Will be something the product first half and again the picture there and even if you know I have to go back on a broadband, our broadband was not very diversified and focusing on two markets, Verizon and Emerging hence any impact there we saw the damage there but still with those two markets, we manage to be very close to $10 million a quarter. So I still believe in this -- in the potential we can capture from the Emerging and with this platform we can come back and get the market share on the CAT 6 platform because we’ve very optimized solution there. And beyond this, obviously as I mentioned expanding to other carriers which will give us a more diversified business on the broadband.

[Quinn Bolton:]

Great. And then just for Deborah, the $20 million credit facility, I assume that’s going to be a straight debt credit facility?

[Deborah Choate:]

We had a couple of options; one is yes, they're both straight debt with different kind of returns.

[Quinn Bolton:]

Great. And will you pursue that $20 million facility regardless of the outcome of the strategic collaborations or is there a scenario where you signed the strategic collaboration in Q3 a second in Q4 that may obviate the need for the $20 million facility?

[Deborah Choate:]

I think we’ll see where the strategic comes in and then we can adjust downwards or eliminate the debt option if it’s no longer required.

[Quinn Bolton:]

Understood.

[Deborah Choate:]

We have a certain amount of flexibility on the debt side.

[Operator:]

Thank you. And our next question comes from the line of Scott Searle from Roth Capital. Please go ahead.

[Scott Searle:]

Hey, good morning. Thanks for taking my questions. Hey just to quickly follow-up on Quinn’s question related to cash in the balance sheet, looking at the strategic options that you have out there Georges could you give us some idea about what that funding could potentially look like are you thinking license fee NRE or is this somehow have an equity component to it, it sounds like you’ve got a couple of different options with this in the credit facility that should get you to cash flow breakeven but just kind of wondering what discussion is at this point in terms of how the cash will come in from a strategic?

[Georges Karam:]

Hi Scott, I mean again on the cash situation, let me stress again what we said which is still I support my -- what I said on the previous call and I can repeat it again we don't need cash to go through the year for the company, even no debt facility, obviously OpEx doesn’t look good, that's why we are adding if you want the debt facility that gives us some option if you want even in terms of growth next year will accelerate fast and we need some working capital so it's better to use this instead of going back to market and make a dilution. And then, in addition to this, as we said we have strategic option that we’re pursuing them first of all for the strategic interest and strategic interest and strategic interest is really developing the business for the company and the relationship. So definitely either any, we are pursuing two of them and both of them the main advantage of this is really business strategic in other words even if there is no funding component I will be pursuing them. Now it happens that in the two days we’re discussing there is some funding component and especially it includes all which we said before, it could be scaling from licensing to some kind of investment as well but for the time being just for the confidential nature of this discussion, I prefer not to comment more.

[Scott Searle:]

Okay, fair enough. And just to follow-up quickly on M1 not unusual to see the early ramp up of a market like this some delays, but just from a carrier standpoint, the networks are ready, the technology is available, you’ve been certified, are there other pricing issues that they're having from a service standpoint or getting their marketing plans online what is -- what's kind of the hold up from your perspective when you’re looking at M1 really starting to hit this major inflexion?

[Georges Karam:]

No, I mean very frankly again M1 this year is really in the U.S. and the two carriers in the U.S. M1 down already, even if it was too smart. When you say really the deployment lot of the scale and we need to go through testing and so on, we get some hits here and there and some modification that needs to happen whether on the network or on the software globally from device. And so we went through this and it’s more behind us all this, but this delayed a little bit the process in general. Now what we're facing is not at all any pricing issues, I mean it’s really project kicked-off, launched decided and we go to market, there is no debate on this. The only issue was just on the execution almost left to the execution to take the product fully certified in a sense, get approved and you can move to it mass fraction and volume and send it to the street. And this is a little bit, you could have weak heels of sometimes modification of this, sometimes issues when you do trial in the field and you find yourself that you need to add some software feature here and there that delay the stuff. Sometimes it’s the server application, so there are many issues from the system end-to-end that takes some time and again we’re not talking about quarters of delay, we’re talking about weeks but those weeks on a quarter -- on a calendar of the quarter put us a little bit on more cautious approach the order of the shipment, as I'm speaking today for example I have order in hand I’m not 100% sure if this will ship in September or this will ship in October because customer will be pushing to not to take them if he doesn’t need to build the product ahead of time. So all this put us in a cautious approach but we remain very, very excited and bullish on the market, on the launch, on the potential going to get, just only question of getting $1 million more or less within a quarter that obviously when because you're assuming on a quarter you see big, if you look to the potential what we’re targeting for 2019 you see it like it’s nothing relative.

[Scott Searle:]

Got it. Very helpful and then lastly if I could looking to NB1 or the Monarch N product, I’m not sure if I missed it earlier have you talked about timeline of when you expect to commercially have the part available, it’s interesting to hear your comments as well in terms of how China is shifting a little bit, it’s been going on, behind closed doors for a little bit more so of entertaining the idea of Cat M1 but could you talk a little bit maybe about the China strategy, your NB1 expectations for 2019, and the dual mode between M1 and NB1, how big of an opportunity is that going to be even in NB1 only markets or NB1 focused markets or applications where M1 could be used as an OTA for broadband applications to update the device et cetera. Thank you.

[Georges Karam:]

Well, I mean let’s just start with the China franchise, the carriers in China, they launch NB IoT and to some extent the government cannot push or stimulate the business little bit to have some millions of units already deployed. But in the same time they realize that they need Cat M because NB IoT is very low speed, low latency, no mobility, many application that needs more than NB and this is why you need LTM. On the other side which is quite interesting you see in the U.S. where to some extent maybe Verizon was pushing a little bit announced their NB, but recently AT&T where they have an LTM network ready and they say well I mean I have a free spectrum which is the guard broadband of 200 kilohertz if I put them an NB system there, I can have very, very cheap IoT that I can offer for people that are not looking for too much speed like kind of take us an example of smoke detector or kind of sensor, so why not using this as well. And when you look really to the market, you look to Japan, frankly speaking almost 90% of the carrier now they are clear that they need the two and as I said in the past if I’m a carrier, I will be doing the two because it doesn’t cost me anything, it's just only software. So software upgrade on my network, I enable two servers that they can have a comprehensive data plan offer from narrow band IoT up to higher speed and I can really market my business in a smart way. So this is what we’re seeing and as such really 100% in line of what Sequans what we did in Sequans by starting with LTM and adding the NB software which is as I said today it's today we have trial, we have design wins, we have advanced level of certification with carriers where we have our NB1 solution. So from our angle, we have the two, I can ship the same Monarch platform, I can ship with LTM only, I can ship with NB only. And in the future, I will have my Monarch and which is a cost reduced version of Monarch to support NB-only for people that are very, very sensitive to pricing. In the meantime, it is what I mentioned carrier realize even when you have NB networks the speed of NB doesn’t allow you to do photo, do software upgrade over there in an efficient way. So that is why more and more carriers because they have the two networks LTM and NB even when you have an NB device they can turn this device to LTM mode to download the software and go back to NB and this creates a lot of interesting application for Sequans because you can monetize this as well because you can create the business model where the dual mode nature is plus and servers you’re giving and this was part of our go to market that we’re discussing currently with them. So in brief, for us it’s 100% in line of what predicted, what we’ve predicted, we have LTM and adding NB and we have the two solution and we can go dual mode or single mode approach whether NB or LTM for all the carriers.

[Scott Searle:]

Hey Georges just to confirm one last thing you for IoT this year two to three times of which is on 2017 and looking for that to double again in 2019, correct? Thank you.

[Georges Karam:]

Yes, absolutely.

[Operator:]

Thank you. [Operator Instructions]. We have a question from the line of Craig Ellis with B. Riley. Please go ahead.

[Craig Ellis:]

Yes, thanks for taking the question. Good morning, oh good evening Georges and Deborah. First wanted to follow-up on some of the comments around the design win activity, it seems like that continue to be strong in the second quarter, Georges the question is, is there any way to quantify what you’re seeing through the second quarter or early here in the third quarter versus what you saw in the first quarter and how that impacts visibility as you look beyond this year into 2019?

[Georges Karam:]

Hi Craig. I mean in terms of the design win very frankly, we didn’t see any cooling down at all, I mean even my challenge is really to filtering all those applications, I mean we have on a daily basis whether we are hunting new deals or we're getting people to us through the carrier, requesting solutions. So very frankly the market is booming, lot and lot of people coming with applications, some of them driven simply by replacing the 2G and CDMA servers and this is really now it’s a matter of fact in all the U.S. and all the application needs to move to this and some are with a new kind of application, we talked about the palette tracking or we talk about container tracking, we talk about logistics as a new application in general. So it's very hard to go into the exercise start counting unit because we are really, we have big, big long list of customers and design wins, we obviously continue to focus on the top, I will say 20% that will create 80% of our revenue next year which is in other words -- and at the same time we have long, long list of application, we are using more and more district distributor we are putting in a place really to expand our business not to have direct business because very frankly some of the accounts we’re not able to handle them. And just we're moving them to some distributor with whom we have relationship and we are training them to take those accounts, so things are going really great and I don’t see anything going in the wrong direction here, I mean from quarter to quarter.

[Craig Ellis:]

Thanks for that. The next question is really a clarification and this is maybe more for Deborah. But with respect to the guidance for the third quarter, the ranges are little wider than normal but it looks like and it sounds like that is due to sheer number of projects that are hitting in the September and October timeframe but as we hit the really behind the curve here with the IoT ramp should we expect a wider range for the next couple of quarters or is there just something that you need that you’re seeing this quarter and then beyond this quarter we go back to what I think has been an error range in the past?

[Georges Karam:]

No, really no, I mean very frankly the range is essentially really array to the initial start, in other words the cautious there is that it’s very, very hard to say only when you look to the number really we can exceed this, if we go we go fine but obviously if things delay, you could be more on an over level. So that's why we one of the debates we have it this quarter because really market is starting and we were getting the order and they're getting, I expect to have for sure much better visibility in Q4 and next year because we’ll have more revenue stream moving on as when you look at to our CAT 1. I can tell you our CAT 1, I can predict it within almost 50, 100k units in a quarter, so Cat M is going to be like this just only first phase. Now can we see this also in Q4, we will see but it’s really the Q3 this is more relevant item to say than in the future.

[Craig Ellis:]

Thank you and then the last question Deborah, we are still expecting cash flow breakeven at $20 million in revenues?

[Deborah Choate:]

I think it really depends on the product mix, so I think it’s closer to $23 million something like that.

[Operator:]

Thank you. And at this time, I have no further questions. Please go ahead.

[Georges Karam:]

Okay. Thanks for all of you for the questions and staying on the call and listening. Hope to see you soon. Many thanks, Sean.

[Operator:]

Thank you and ladies and gentlemen that does conclude our conference for today. Thanks for your participation for using AT&T Executive Teleconference. You may now disconnect.