Talend S.A.
Q3 2019 Earnings Call Transcript

Published: 6 Nov 2019

[Operator:]

Good day, and welcome to the Talend's Third Quarter 2019 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Lauren Sloane. Please go ahead Ma’am.

[Lauren Sloane:]

Thank you. This is Lauren Sloane, Investor Relations for Talend, and I'm pleased to welcome you to Talend's Third Quarter Fiscal Year 2019 Conference Call. With me on the call today is Talend's CEO, Mike Tuchen; and CFO, Adam Meister. During the course of today's presentations, our executives will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those contemplated by these forward-looking statements.

[Mike Tuchen:]

Thanks, Lauren, and thank you all for joining us today. We reported solid third quarter results. We continued to execute well on our cloud transition with strong momentum in adding new cloud customers. We're laying a foundation for future growth from both new customer adoptions as well as existing customers expanding their use of Talend. We continue to believe that cloud will drive the majority of future growth in the data integration market and the progress we've made in our cloud business positions us well to continue to gain market share. In the third quarter, we achieved record total revenue of $62.6 million up 20% year-over-year. Some additional highlights from the quarter include annual recurring revenue totaled $224.8 million and grew 24% year-over-year or 27% on a constant currency basis.

[Adam Meister:]

Thank you, Mike. Today, I'll review our financial results for the third quarter 2019, as well as provide our outlook for the fourth quarter and fiscal year 2019. As a reminder, we are reporting Q3 financial results under U.S. GAAP as required when we became a domestic filer at the beginning of this year. Annual recurring revenue or ARR grew to $224.8 million as of September 30, 2019, up 24% year-over-year or 27% year-over-year on a constant currency basis. We define ARR as the annualized value of all active contracts at the end of the period, and as a result, the FX impact at this point in time measure will differ from that of subscription revenues. The strong demand for Talend Cloud contributed meaningfully to this growth. Talend Cloud represented 49% of new ARR for the third quarter, up from 43% in Q2. We are pleased with our sustained cloud momentum in our progress towards reaching our goal of exiting 2019 with half of new ARR to cloud. This percent mix has been a key measure of our sales and marketing rotation to the cloud during this year. With Talend Cloud established as our largest sales engine, our measure of success entering 2020 will shift to overall cloud ARR, new cloud sales, continued expansion within existing cloud customers and the cross-sell of Talend Cloud to existing premise customers will each be meaningful contributors to our business in 2020. In our Q4 call, we will begin providing Talend Cloud ARR quarterly and we will also provide Talend Cloud full year ARR guidance for 2020. I like to expand further on Mike's comments regarding the sequential growth in total ARR. During Q3, we added $6.8 million of new ARR. Performance in Europe, weighed on overall sales for the quarter. It was the largest contributor to the lower sequential growth in ARR relative to last quarter. Cloud momentum in Europe remains relatively strong, but the IT spending environment there particularly impacted premise sales in the quarter for both new customers and expansions within existing customers. For the quarter ended September 30, 2019, our dollar-based net expansion rate was 114% in constant currency. As a reminder, this revenue-based metric was bolstered during 2018 due to ASC 606. As we have previously noted, we anticipated that this four-quarter rolling measure would come down over the course of this year to fully reflect the new revenue standard. However, the four percentage points change since Q2 2018 also resulted from lower expansions with an existing European customers during the quarter. Overall, customer retention during the quarter was in line with our historical trends. Customer additions in the quarter were strong. We now have nearly 4,000 customers with over 2,000 of them being cloud customers. We ended the quarter with 521 enterprise customers defined as customers with 100,000 or more of annualized subscription revenue. Enterprise customers contributed 67% of subscription revenue in Q3 versus 68% in Q2. We did see slightly higher down sells this quarter for customers around the $100,000 level, which resulted in a slight sequential decline from 525 enterprise customers in Q2. Customer retention in that group, however, was in line with prior periods. Down-sells are common as some customers adjust the number of seats required as projects evolve from initial deployments to steady state. These are more than offset by growth within accounts from other departments or projects as evidenced by our dollar-based net expansion rate. We've made a strategic decision to prioritize cloud with both new and existing customers. And we believe that this will result in some accounts deferring additional purchases as they evaluate their own cloud strategies. As Mike mentioned, as these customers move to the cloud, we expect to see their expansion rates increase. We've seen significant growth in the number of large cloud customers over the last year and ended Q3 with 74 customers with 100,000 or more of cloud ARR. This demonstrates our success and expanding cloud customers and the rapid adoption of cloud amongst large organizations. Please note that this ARR-based measure reflects the ending value of cloud contracts at the end of the period. First, our enterprise customer definition, which is revenue based and will lag because of sales linearity. On an ARR basis, total enterprise customers grew quarter-over-quarter in Q3. As we're focused on ARR as the primary measure of the business, we'll transition to an ARR based measure for enterprise customers starting next quarter. Total revenue for the third quarter was $62.6 million, up 20% year-over-year. The impact on overall revenue growth from FX and professional services growth moderation, we're in line with our expectations. Subscription revenue for the third quarter was $55.1 million, up 24% year-over-year or 26% on a constant currency basis. Subscription revenue from Talend Cloud grew more than 100% year-over-year for the 13th consecutive quarter. Professional services revenue was $7.5 million in the third quarter, an increase of 1% year-over-year. This moderation is largely related to lower average professional services requirement for Talend Cloud. Professional services revenue can fluctuate due to project timing as well as cloud mix. We are pleased with the continued mix shift towards subscription revenue which accounted for 88% of total revenue for the quarter. Regardless, we believe ARR growth is the best indicator of our momentum with both new and existing customers during our cloud shifts. As I mentioned earlier, we have seen softening demand in Europe, given the macro economic backdrop. Total revenue from our EMEA region grew 8% year-over-year in Q3. We continue to take a cautious outlook on EMEA for the near-term. Before moving to profit and loss items, I would like to point out that unless otherwise specified, all expense and profitability metrics I will be discussing going forward are non-GAAP results. A full reconciliation between GAAP and non-GAAP results can be found in our earnings press release issued today, which is posted on the Investor Relations portion of our website. Our total gross margin for the third quarter was 78%, compared to 77% in the same period of last year. Professional services gross margin was 16% this quarter, up from 13% last quarter. Subscription gross margin reached 87%, which reflects greater economies of scale as our cloud business continues to grow. Operating expenses for the third quarter were $51.9 million, up 21% year-over-year. Sales and marketing expenses for the quarter were $30.2 million, up 15% year over year. This lower growth reflects the change we made at the end of last year to focus sales hiring during Q4 to align new starts to the beginning of the year. R&D expenses for the quarter were $12 million, up 48% year-over-year. As we continue to drive investment in our cloud products and operations. It's also particularly impacted by the inclusion of Stitch where R&D accounted for most of the operating expense. G&A expenses for the quarter were $9.7 million or 15% of revenue versus 16% of revenue in the prior period. This reflects our ongoing focus to drive efficiency in the business. We incurred an operating loss for the quarter of $2.8 million or 4%, compared to an operating loss of $3 million or 6% in the third quarter of 2018. The performance versus initial guidance reflects efforts to drive efficiency during Q3 as well as some non-cash savings including benefits from reduced tax expense related to RSU vesting and a reduction in allowance for doubtful accounts. Net loss for the quarter was $2.6 million, compared to a net loss of $2.8 million in the prior year period. Cash and cash equivalents totaled $172 million as of September 30, 2019 versus $32.1 million at the end of June. Our cash position includes $149 million in net proceeds from the convertible notes offering we closed in September. We now have additional flexibility to invest in the business with this long-term capital. We are focused on shaping our business around the cloud opportunity and we believe the continued strategic investments in our cloud products and go-to-market strategy will position us to be a leader in data integration Innovation. Free cash flow for the quarter was negative $11.3 million, given the dynamics in Europe and the lower sequential ARR growth this quarter. We expect that free cash flow burn for the full year will be a few million higher than the $15 million we discussed in our prior call. I'll now turn to our outlook for Q4 and full year 2019. As a reminder, our guidance assumes similar business conditions and foreign exchange rates as of October 31, 2019. For the fourth quarter 2019, total revenue is expected to be in the range of $65.4 million to $66.4 million. Non-GAAP loss from operations is expected to be in the range of $4.5 million to $3.5 million. Non-GAAP net loss is expected to be in the range of $6.8 million to $5.8 million. Non-GAAP net loss per share is expected to be in the range of $0.22 to $0.19. This is based on a basic and diluted weighted average share count of 30.9 million shares. We're updating guidance for the full year 2019 as follows. Total revenue is expected to be in the range of $246.5 million to $247.5 million. Non-GAAP loss from operations is expected to be in the range of $22.6 million to $21.6 million. Non-GAAP net loss is expected to be in the range of $25.4 million to $24.4 million. Non-GAAP net loss per share is expected to be in the range of $0.83 to $0.80. This is based on a basic and diluted weighted average share count of 30.6 million shares. We are excited about the progress we have made in advancing our cloud strategy and expect to exit 2019 with Talend Cloud is the largest contributor to new business. We remain confident that our market leadership, strong customer and ecosystem relationships and cloud-first innovation will enable us to continue to drive durable growth over the long-term. Let me turn the call back over to Mike for some final comments.

[Mike Tuchen:]

Thank you, Adam. We're pleased with the progress we've made year-to-date. We’re executing well on our cloud transition with strong momentum and adding new cloud customers. We're well positioned to take advantage of the market shift to the cloud. With that, Adam and I would be happy to take your questions. Operator?

[Operator:]

Thank you. And our first question comes from Bhavan Suri with William Blair & Company.

[David Griffin:]

Great. Hey guys, this is David Griffin on for Bhavan. Thanks for taking the questions. So first I wanted to touch a little bit on Talend Cloud, that business is obviously scaled pretty considerably over the past five quarters here going from less than 1,000 customers and 14% of new ARR. In the year ago, quarter two over 2,000 and nearly 50% of new ARR today. So I think it'd be a good – kind of helpful if you could kind of unpack what you're seeing in terms of the expansion characteristics of cloud customers. I guess, specifically, can you give us some sense of what the expansion rates with the customers you've added over, say the past four quarters here have looked like. And how those compared to the expansion rates that you saw on the on-premise big data business when it was at comparable scale?

[Mike Tuchen:]

So I'll start and I'll hand it to Adam for the second part of that. Our cloud business, our cloud expansions have actually been increasing over the last year at a really nice clip to the point where they're now materially higher than our overall expansions for the rest of our business. It's really exciting to see and I think it demonstrates not just the increasing maturity of the offering that we have, but also the demand for it in the market as our – the market is increasingly moving to the cloud. In terms of how it compares to big data at an equivalent scale is a great question. I'm not sure if we have the data going back to there, but Adam…

[Adam Meister:]

Hey David, good to hear from you. The numbers for cloud expansion are in line probably a little higher than where big data was at this scale. Part of the dynamic that is driving the actual expansion in that for us over the last couple quarters is just frankly the small base that we were starting with from the last couple of years. And now it's really starting to take off. We're seeing expansion within those cloud customer cohorts. And what's not picked up in that is the way we're framing it doesn't actually include any conversions from premise to cloud. If you added that in, it would be even higher.

[David Griffin:]

Got it. That's helpful. And then as we think about the migration side of the equation, it's obviously still very early days there, but you did mention that you're starting to migrate a small number of customers. A couple of things related to that. I guess, first, can you talk a little bit about how those early migrations are progressing whether there’s been any unexpected challenges or maybe even positive revelations. And then as we enter the fourth quarter here and we start to think a little bit more about next year, how should we think about migration activity trending? It seems like your focus on delivering the bulk of incremental product innovation in the cloud. And then really just a broader cloud transition that we're seeing play out in the market really implies that there could kind of be a big uptick in migration activity in 2020. Is that the right way to think about it or do you think it could maybe take a little bit more time for that trend to build momentum?

[Mike Tuchen:]

The way we're looking at it right now is that during the first half of 2020, we'll be slowly ramping it up, bring more and more partners into the mix to make it into a repeatable and scalable motion. Because remember, we have about 2,000 premise customers and so over the next several years, this will need to be a very high velocity motion for us. So building that overall program with partners is going to be our primary goal for the first half of the year. You'll start to see us do an early ramp of higher volume towards the second half and really in 21 and 22, we want to be really in full steam. And you should see some migrations really ticking up towards the end of next year and going into the following year.

[David Griffin:]

Got it. That's helpful. Congrats on another good quarter here. And thanks for taking the questions.

[Mike Tuchen:]

Thank you.

[Adam Meister:]

Thank you.

[Operator:]

Thank you. Our next question comes from Raimo Lenschow with Barclays.

[Raimo Lenschow:]

Hey, Mike, can you talk a little bit about how competition is evolving in on the cloud side? Just obviously we started out with a lot of private vendors, but then – and you've got Stitch there, but now you kind of adding a lot more capabilities with pipeline builder, et cetera. Like what are you seeing in the landscape at the moment in terms of like kind of early lending spots versus kind of the expanding? And then I had follow-up on Europe.

[Mike Tuchen:]

Yes, hey Raimo. So right now the way we see the market hasn't changed that much over the last couple of quarters in the sense that we still see there being a segmentation of high speed land competitors that are largely new entrants. That are really doing a nice job of landing new customers quickly as we do with Stitch and then separate from that, the large incumbents really headed by Informatica that can help customers solve their most complex data problems and their trust problems and governance problems. And we remain the only company in the market that can land fast, help you get started solving your problems immediately and be live in a couple of minutes. And then seamlessly scale up and solve your most complex problems. And that so-called speed and trust positioning remains unique in the market and we think will be stable for some period of time. And that really is what drives our overall win rates, as I mentioned in the prepared remarks. Those would remain stable as we've scaled our cloud offering dramatically over the last several years. The win rates initially grew to a really nice level and now they stabilized.

[Raimo Lenschow:]

Okay, perfect. And then on Europe, like probably looking some companies in your space like have an impact and ours just kind of on a worry, but haven't seen anything, can you talk a little bit about maybe the vertical and geographical footprint where you see more or less stuff going on there just to maybe frame it across? Thank you.

[Mike Tuchen:]

Yes. Probably the most useful segmentation that we look at internally is actually less about verticals and is more about premise versus cloud. Because what we're seeing is our cloud business in Europe continues to grow really strongly. And our premise business is where we're seeing the impact and the read-through that we have on that is that cloud business – cloud projects tend to have a bunch of strategic drivers that customers are continuing to greenlight and continue to fund even in the face of macro uncertainty in the political environment. So that we're seeing over there, whereas delayable projects, premise projects tend to be seen as more delayable because it's adding onto more of something that's already working. And so I think that's the best read-through that we can give on that at this point.

[Raimo Lenschow:]

Okay, perfect. Okay, thank you.

[Operator:]

Thank you. Our next question comes from Jack Andrews with Needham.

[Jack Andrews:]

Good afternoon. Thanks for taking my question. I was wondering if you could drill down a little bit on the – I think you said, you have 74 customers in the cloud paying you more than $100,000. I was wondering if there's any specific common use cases or partners that have really been driving that growth. Is it for example, specifically focused on data warehouse use cases or just any more color about really driving that particular strength in the – I think you said, it was tripling year-over-year in terms of that metric?

[Mike Tuchen:]

That's right. It has. What we're finding is that cloud data warehousing is a very, very high volume use case for us right now. And is a very frequent initial landing spot for us. As we expand, typically for a customer that's using more than $100,000 with us, they're probably doing more than just that initial land use case. What we're finding on, add-on, follow-on sorts of opportunities tend to be around solving things like governance, helping companies solve their API problems. We mentioned on the call as well, Lowe's is a customer and they're using an API first approach as they move to the cloud. They're also looking at using API to share data. So using our API services offering that we launched last fall has been a key part of that expansion. So I'd say, absolutely cloud data warehousing is, underpins a lot of what we're doing in the cloud, but for the enterprise kind of account, think of it as, there's probably more going on there as we expand into solving more of their data problem, solve more of their real enterprise complexity.

[Jack Andrews:]

Great. Thanks for that. And then just as a follow-up question, is there any more color you can provide in terms of how you were thinking about making use of the additional capital, you talked about further investments in the cloud? Should we be thinking about just overall hiring or perhaps more a tuck-in M&A type of situations? How are you thinking about that?

[Adam Meister:]

Yes. Hey, Jack, it’s Adam. Really both of those will be the things we think about. The capital gives us a lot of flexibility to keep and grow – to keep investing in just the pace of growth in cloud. And so some of that will absolutely be just more feet on the street, more marketing dollars and then obviously, we keep our eyes open for tuck-in M&A, anything that would really accelerate our product roadmap more than anything else. And so this capital is just dry powder for those purposes. There's nothing really that we have in near sites on the M&A front.

[Jack Andrews:]

Great. Thanks for taking my questions.

[Mike Tuchen:]

Thanks Jack.

[Operator:]

Thank you. Our next question comes from Chris Merwin with Goldman Sachs.

[Chris Merwin:]

Okay, thank you. I was wondering if you don't mind talking a bit about the – what you asked with Snowflake. I guess, there's an offering now that automates the migration of on-prem data to Snowflake. Can you just talk bit about how that's different from what you were doing before and how we should also think about this as a driver of new customer growth? Thanks.

[Mike Tuchen:]

Yes, so with Snowflake we do a lot of business with Snowflake and we see them as a very, very compelling cloud data warehouse. And – but to-date the vast majority of our business with them has been with net new data warehouses. So, companies that are building a new data warehouse in the cloud for some problem that wasn't being solved before on premise. But on the other hand, there's roughly $50 billion worth of spend every year on premise data warehouses and our expectation, and largely I'd say the shared expectation amongst us and Snowflake is that all of that is going to move to the cloud over the next decade. And so we're now working with them to help move some of those premise data warehouses to the cloud. And we see that as a really nice opportunity to take to help companies modernize their infrastructure, take advantage of a lot of the new cloud capabilities. And with that, see a strengthened relationship with Snowflake and a strong growth and expansion within those accounts in the coming years.

[Chris Merwin:]

Okay, great. And I think in the prepared remarks, you mentioned that you're seeing some down-sells from customers. I know that's being offset to a degree by new projects. I mean, but to the extent that you see more of that from customers, does it make sense to contemplate solution based pricing, just given the strategic value being delivered?

[Adam Meister:]

It's a fair question. Hey Chris, it's Adam. So, reiterate what I said on the down sell side, it is really handful of customers right around that 100k threshold. And so it's what kind of explains the sequential change in enterprise customers. But from a dollar perspective, it wasn't really a material driver. We kind of constantly look at and think about pricing and packaging strategy and over time moving to more of a solution-based sale is vast majority of use cases in the cloud is something that probably makes sense. But I don't think we have a near term urgency around it given any particular business trend that we're seeing right now.

[Chris Merwin:]

Great. Okay. Thank you.

[Operator:]

Thank you. Our next question comes from Tyler Radke with Citi Group.

[Tyler Radke:]

Hey, thank you for taking the questions. Question maybe for you, Mike on what you're seeing on on-premise business. Obviously you called out some issues in Europe, I think weaker macro conditions that you think had a negative impact on the on-premise business. But I guess if you were to look aside of, outside of the macro impacts, how did that perform relative to your expectation? And have you had to kind of take your expectations for that business down, into Q4 and next year given what you've seen here in Q3.

[Mike Tuchen:]

Well, I'd say outside of Europe, the U.S. business is going really strong right now. And so and that's across, both follow-ons to existing premise customers as well as expansions into the cloud and new cloud customers. All of the above. And so what we're seeing really is a weakness in Europe. And as we mentioned about in the – the cloud business in Europe is actually going really well. And so that really is concentrated on the on-premise expansions in Europe. The – if you were to step back and say, move away from just Q3 and say, what do we expect to happen over the next several years, we certainly expect that the, this transition that we've been really happy to see over the course of 2019 is going to continue and more and more of our business becomes cloud and more and more of our customers first add on cloud and then ultimately migrate and become fully cloud customers. So, our expectation in the longer term is that the premise business declines as a percentage and as an absolute value and the cloud becomes the majority in all of what we sell. But in Q3 itself the trend that we saw was really in Europe on the premise side.

[Adam Meister:]

Yes. And I'll add, Mike alluded to this, in his response just then, but it's important to just reiterate, the vast, vast majority of our new logo lands now are cloud. And so that's a function of customer readiness, product market fit, getting better and frankly our sales organization just getting better and better at positioning cloud in generic opportunities. And so, as we move into next year with cloud, the biggest contributor to overall growth it's already the biggest contributor to new logo business. And that trend is definitely going to continue. And we'll just keep it, keep expanding.

[Tyler Radke:]

Great. And maybe a follow-up there for you Adam. So, obviously you kind of have this mix dynamic where you have, a large on-premise business as a percent of revenue that it sounds like ultimately may start to decline on an absolute basis at some point. And, cloud business is small but growing over 100%. ARR is as we look at that from a year-over-year growth rate. I mean that, that continued to grow kind of in the high twenties is on a constant currency basis. I mean, how should we be thinking about the kind of the growth rate of that going forward, just given the mix shift dynamics that you described.

[Adam Meister:]

Yes, it's fair question. I mean, it's important to pull this back to the whole conversation around how we think about migrations. And so as I had mentioned in my comments the next year, overall dollar of cloud ARR will be really the primary indicator of how we're doing on that cloud rotation because not just new sales but also the migrations of existing premise customers to cloud become a pretty material driver. And so you'll have more visibility into that. And so we think about that as being an important component of how you bridge the continued scaling of cloud versus the stability or decline of premise ARR over time. Frankly, at this point in Q4 and still pretty early in budget process in season, I don't want to point to anything that we really signal 2020 overall growth expectations for ARR. But just the most important thing to keep iterating is the most important thing that we can do as a management team, as a company is to get as much of our business to the cloud as fast as possible. Because that's absolutely where our customers are going and that's where their growth is going to be over the next 10 years.

[Tyler Radke:]

Thank you.

[Operator:]

Thank you. Our next question comes from Mark Murphy with JP Morgan.

[Pinjalim Bora:]

Great. Hey, this is Pinjalim on behalf of Mark. Thanks for taking our question. I just wanted to ask about Stitch. Could you talk about maybe the wind rates and the competitive dynamics you're seeing in that particular business? Because I know there are a few companies that, and you mentioned that that lands customers fast and kind of scales from there. But what are you seeing? And also do you view Kafka or any of the streaming services as in kind of an alternative technology to what Stitch does or is it completely different?

[Mike Tuchen:]

Okay, I'll take the first one and then the second one. The first question is what do we see for Stitch win rates? And the way that Stitch business works is it's much less of a sales driven process where, we're in head-to-head competition with someone else and, competing side by side, it's much more of a self service driven evaluation process. And so the way we look at the Stitch business is it’s a very, very efficient way to for us to acquire new customers. The payback period is really strong. The business is extremely linear and dilatable and predictable. And, as you've seen in the first nine months of 2019, we acquired about a thousand new cloud customers, many of them being Stitch. So that's proven to be a very, very effective new logo acquisition vehicle for us. But you really have to think about it differently where the – given the evaluation process is largely being done in a self-service way. We don't have competitive win rates because we don't see that process. It's not a sales driven process in general. In terms of how we think about Kafka, Kafka is a, really strong, streaming engine that's seeing a great adoption. We use it internally as part of our offering. Stitch actually uses Kafka internally as well, the rest of Talend cloud uses Kafka internally. We allow you to plug and play and use Kafka within a pipeline if you want to create a streaming pipeline. And so we see it as almost entirely complimentary to what we're doing. What our, since we don't provide any kind of runtime our goal is to help our customers take advantage of the most capable runtimes out there. And for streaming, I think we think Kafka is a great choice and we have a number of customers that use it. And as I mentioned, we use it internally for things like machine learning, runtimes, then Spark and general unstructured processing Spark is really good for structured data processing things like Snowflake and is really good. So our goal is to help customers use all of those in a really easy to use, web-based design environment.

[Pinjalim Bora:]

Understood, very helpful. And one, one follow-up on PS revenue for next year. I mean it's kind of going down, I guess as a percentage of revenue and with cloud, I guess it will – the cloud becoming a larger part of revenue and the business next year, do you think it could have maybe a further drag on total revenue next year and that's CFR is the right metric to look at?

[Mike Tuchen:]

Yes, that's absolutely right. So, we have seen some moderation in PS which is largely related to the cloud growth and scale. We're going to continue to be conservative on that and I do think that it will continue to be a drag on overall revenue, probably not as much as it's been in the last couple of quarters. But, we're really pleased and would like to continue to push the mix shift further towards subscription revenue.

[Pinjalim Bora:]

Thank you.

[Operator:]

And we have no further questions at this time. Ladies and gentlemen, this concludes today's call. We thank you for your attendance and participation and you may now disconnect.