WisdomTree, Inc.
Q3 2016 Earnings Call Transcript

Published: 29 Oct 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the WisdomTree Q3 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Jason Weyeneth at WisdomTree Investments. You may begin.

[Jason Weyeneth:]

Good morning. Before we begin, I would like to reference our legal disclaimer available in today’s presentation. This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are generally identified by terms such as believe, expect, anticipate, and similar expressions suggesting future outcomes or events. Forward-looking statements reflect our current expectations regarding future events and operating performance and speak only as of the date when made. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which may prove to be incorrect. Such statements should not be read as guarantees of future results and will not necessarily be accurate indications of whether or not, or at the times at or by which results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in forward-looking statements, including but not limited to, the risks set forth in this presentation and the Risk Factors section of the company’s Annual Report on Form 10-K for the year ended December 31, 2015 and quarterly reports on Form 10-Q for the quarter ended, June 30, 2016. Now, it’s my pleasure to turn the call over to WisdomTree’s CFO, Amit Muni.

[Amit Muni:]

Thank you, Jason, and good morning, everyone. This is a challenging quarter due to the continued negative sentiment towards our two largest ETF exposures. However, despite the challenges we are pleased with the continuing flow momentum and performance of our U.S. equity products suite and remain focused on continuing to position our business for the long term, because of the continued growth of the ETF structure and the significant regulatory changes soon to go into effect that we believe will further accelerate growth in our industry. Now let’s get into the results for the quarter beginning by first reviewing the U.S. ETF industry statistics. U.S. ETF industry flows rebounded to 90 billion this quarter. On the right, you can see all categories had inflows with the exception of the international developed world equity categories. The negative trend to the international category was a significant driver of our results this quarter, which we can begin to review beginning with the next slide. Our AUM declined slightly to 37.7 billion as 2.4 billion of outflows were partly offset by positive market movement. Hedge and DXJ drove the majority of our outflows, however, the outflow levels have started to decline. On the right side, you can see industry wide both hedged and unhedged Japan and Europe strategies experienced outflows. Ex-hedge and DXJ, outflows were positive this quarter and on a year-to-date basis. We are continuing to see positive momentum in our U.S. equity ETF which took in 50% greater flows this quarter and reached 759 million. We take a deeper dive into our U.S. equity flows on the next slide. As you can see from the chart on the left, on Slide 5, our leading U.S. equity ETFs, most with 10-year track records are generating solid annualized organic growth. The U.S. equity space is extremely crowded and competitive, yet our U.S. equity complex has grown at a rate of 31%, which is significantly higher than the industry organic growth rate of 19%. We believe this trend comes from a combination of positive momentum for U.S. equities as well as many of these funds achieving a stellar 10-year track record. As reflected on right, our U.S. equity product suite has outperformed actively and passively managed mutual funds and ETFs across all time periods. We believe in an environment where investors are continuing to shift from active to passive, our proven smart beta approach brings together the best of both worlds and separates us from others just competing on price in a commoditized space. This will be a competitive differentiator for us in a post-DOL world. Turning to Slide 6, as is already known, our largest exposure has continued to be negatively impacted by market sentiment, which has affected our industry ranking. While we are disappointed with these rankings, it represents more short-term market conditions not the long-term growth prospects of our business. On the next slide, we can review our results in Europe and Canada. Our European AUM surpassed 1 billion and with the accelerated buyout for the majority shareholders last quarter, our new leadership is preparing a strategic plan to accelerate growth of our European platform. We are also excited to have launched our Canadian listed products in July, which have 68 million in AUM today. Let’s get into the financials, beginning on Slide 9. The AUM decline from negative sentiment towards hedge and DXJ led to a decrease in our revenues. Total revenues were 52 million in the quarter and net income was 8 million or $0.06 a share. Turning to Slide 10. As you can see from both charts, strong flows in our U.S. equity products contributed to a shift in AUM concentration and revenues. Our average revenue capture ticked down to 51 basis points in the quarter, due to the change in mix of our AUM. On the next slide, we can review our key margin metrics. Gross margin for our U.S. listed ETF business was 80.5% in the quarter, down to lower average AUM. At AUM levels today, gross margins are expected to be around 80%. In the chart on the right, consolidated pre-tax margin was 27.5% and our U.S. margins were 32.3%. Turning to the next slide, we can review our expenses. First quarter expenses, excluding the buyout charge last quarter, was 38.8 million. Sales and marketing costs decreased due to lower levels of spending. Professional fees decreased due to lower recruiting expenses. Fund-related expenses declined due to lower average AUM in our U.S. products. Compensation cost increased as we adjusted year-to-date incentive compensation to our targeted full year guidance of 24% to 28%, as you can in the chart on the right. In total, expenses declined to 37.6 million. Let’s review the balance sheet on the next slide. We ended the quarter with total assets of 249 million and cash and investments of 194 million. On the right, you can see this quarter we generated 15 million of cash from our operations and returned 14 million back to shareholders through dividends and buybacks to end the quarter with 178 million of cash. Before I turn the call over to Jon, let me give you an update on where we are so far this quarter. As of yesterday, our AUM was up slightly to 37.8 billion and on the right you can see positive U.S. equity flows are continuing and outflows in hedge and DXJ are slowing. So in summary, despite the continued challenges around our two largest products, we see encouraging signs in other parts of our product suite and are focused on growing in those areas. As we always do, we will continue to balance expense management with investments for growth. Now let me turn the call over to Jon.

[Jonathan Steinberg:]

Thank you, Amit. Good morning, everyone. The third quarter was incrementally better than the second quarter, but we are still obviously not pleased with the results. For perspective, I would categorize our performance as having very little market momentum but significant strength overall as a firm. WisdomTree remains one of the best positioned firms for where the asset management industry is headed. The Department of Labor’s fiduciary rule is accelerating change across the entire industry impacting product manufacturers and distributors. We have a business model designed to both coexist with low fee data and compete with it, as our long-term track record underscores. We are strategically investing to ensure WisdomTree remains one of the best positioned firms for a post DOL environment. Our investments are intended to maximize our long-term growth potential. Few companies are as well positioned to succeed in this hyper-fast changing global industry as WisdomTree. Thank you. Let’s open up the call for questions.

[Operator:]

[Operator Instructions]. Our first question comes from Craig Siegenthaler with Credit Suisse. Mr. Siegenthaler, your line is open.

[Craig Siegenthaler:]

Thank you. Just as a follow up on the DOL rule commentary, I just wanted to see which products you think are best positioned to take share? And when could we start to see the positive impact on flows?

[Jonathan Steinberg:]

So, I’m not sure specifically DOL changes any one specific funds strategies. I think that DOL is very, very positive for ETFs in general and that our differentiated proprietary approach I think lines up extraordinarily well with the new regulations. We are starting to see positive flows but they’ve been overwhelmed by the outflows of our largest exposures, as you’re aware. Recently, and when we update on Saturday you’ll see there has been some positive movements just on DXJ as the dollar/yen has been moving. But in general, we have to see market sentiment at least to continue to moderate those large exposures.

[Craig Siegenthaler:]

Thanks. Also I was wondering if you could provide a quick update on the S&P 500 China ETF. I think as you last left it, you had a European share class but not a U.S. share class yet, so maybe just an update there?

[Jonathan Steinberg:]

Sure. So let me introduce for this call our global head of distribution, Kurt MacAlpine. Kurt, would you take that first?

[Kurt MacAlpine:]

Sure. Thanks, Craig. So in regards to the S&P China 500, as you’ve heard on the last call, we do have a global exclusive product partnership with ICBC, Credit Suisse and WisdomTree. We’ve chosen to launch that strategy first and use the format in Europe with the expectation that we’d be bringing the product to other markets around the world. So, nothing as of yet but it’s still our intention to take that strategy and the global exclusive partnership that we have in place and bring it to new markets, including the U.S.

[Craig Siegenthaler:]

Thank you.

[Operator:]

Our next question comes from Chris Shutler of William Blair. Mr. Shutler, your line is open.

[Chris Shutler:]

Hi, guys. Good morning. I wanted to follow up on that same topic on the DOL and just better understand what specific initiatives are underway at WisdomTree, or what investments you’re making to take advantage of the rule?

[Jonathan Steinberg:]

I read a lot of the transcript of the other public asset managers and unlike them, we’re not changing our business model. We don’t feel the need to reduce our fees. We built this business for the commoditization of non-exclusive indexes. We don’t have conflicts within our business model as others have to deal with. And we have been making steady investments from the very, very beginning of the launch of the firm. And so WisdomTree really doesn’t change anything. But I’ll let Kurt add a couple of other points if he has.

[Kurt MacAlpine:]

Sure. As we think about how many wealth managers are responding and many of them are still working through their strategies for DOL, we’re really seeing a few I guess themes or trends emerge. One is around providing more guardrails around the investment decision-making process for advisors. Second is they’re trying to deliver more consistent client experience. And third is, they’re hoping to package this execution more through fee-based accounts than transaction-based accounts as a way of normalizing that experience. So the impact on asset managers, which we’re hearing focus on a high-quality – focus on differentiation and looking for high value, lower cost products. As Jon and I just mentioned, we feel our business model was essentially designed for DOL. The combination of an ETF focus, differentiated and proprietary products and our consultative selling process that touches both platform, gatekeepers and advisors should position us very well when the dust settles and the firms have executed their strategy.

[Chris Shutler:]

Okay, great. Thanks. And just one other quick one for Amit. Amit, you have a very strong balance sheet, no debt. I know this hasn’t been an issue historically, but what kind of debt levels would you be comfortable with as a business given the market sensitive nature of the revenue?

[Amit Muni:]

A lot of that will be dependent upon who’s providing the debt, right? There’s obviously certain levels, how many times EBITDA the firm would be willing to give out. So I think a lot of it would just depend on sort of why we would take on debt, right. Then that would really define the level of comfort of how much leverage we would put on the balance sheet.

[Chris Shutler:]

Okay. Thank you.

[Operator:]

Our next question comes from Michael Cyprys with Morgan Stanley. Mr. Cyprys, your line is open.

[Michael Cyprys:]

Hi. Good morning. Thanks for taking the question. Just curious if you guys could talk a little bit about how you’re thinking about packaging your ETF products on portfolios and SMA [ph] accounts?

[Jonathan Steinberg:]

So in terms of packaging our products in model portfolios, so if you think about asset allocation in the role that WisdomTree has been providing in delivering asset allocations to our clients for the last number of years, there’s really been two components to it. So one is, we have a suite of model portfolios that Luciano, our Chief Investment Strategist oversees that asset allocation team and the standardized models that we have available for FP access today. We also internally have a customized asset allocation capability where we work individually with our clients to come up with asset allocation recommendations, and then WisdomTree product recommendations within those asset allocation strategies. What you’re starting to see us do more of over the last few months is taking this foundation and framework that we built and applying it to asset allocation models that will be available for execution across a number of the different strategists and model managers that exist in the marketplace today. So we’re in the midst of taking a process that we’ve been refining and using for the last number of years and applying it to the market in a way that people can execute our strategies in a more simpler, kind of easy to access way.

[Luciano Siracusano:]

This is Luciano. I would just add that we are actually running against the models, so we can create a real-time performance track record. And we intend to have that monitored and updated by an outside third party so that performance record can get out there to the market, and we think that will help facilitate the process for us going forward.

[Michael Cyprys:]

Great, thanks. And if I could just ask a follow up on a separate topic, just around distribution as you’re building out Europe, Japan, Canada. Just curious how you’re approaching distribution differently in perhaps each of these different markets relative to the U.S., how the markets are different and what your approach is in distribution, how that differs?

[Jonathan Steinberg:]

Sure. If you look across the markets, there’s a lot of similarities – despite a different operating environment across each of the markets, there’s a lot of similarities in terms of our business model which is focused on the financial intermediaries, the more influential gatekeepers and ultimately the advisors that are placing assets. So, at that level things are largely the same. The intellectual property that we’re bringing to our clients is consistent across markets and the role that we have to play in educating our clients, both those platform gatekeepers and the advisors is quite consistent. So there’s definitely subtleties as we think about how you sell in Japan versus how you sell in Canada or Europe, but for the most part the approach is largely consistent.

[Michael Cyprys:]

Okay. Thanks.

[Jonathan Steinberg:]

Next question?

[Operator:]

Thank you. The next question comes from Bill Katz with Citi. Mr. Katz, you may begin.

[William Katz:]

Okay. Thanks very much. I joined the call just as the comments started so I apologize if you did cover this. Could you talk, Amit, a little bit about the guideposts that you’d have that would range the comp for the fourth quarter between the high and the low-end, what kind of dynamics are you looking at for that?

[Amit Muni:]

Sure. So, Bill, the biggest outflow dynamic will obviously be the levels of flows, right. That’s been the biggest driver of volatility in our compensation as we’ve seen quarter-over-quarter. If you go back a couple of years ago, we had a big spike in the fourth quarter in our comp because we did see higher levels of flow coming in. So that will be the biggest driver of it. Remember, we’re targeting that full year amount, the 24 to 28. And as based on performance so far, I would say towards the low end of the range of that.

[William Katz:]

Okay, that’s very helpful. And then Jon, perhaps one for you. All we keep hearing from many of the traditional managers is sort of the downward pressure on pricing. You have on one side of the table a reduction on pricing on core ETFs by BlackRock and Schwab and others and then just the inevitable decline in more the traditional mandates, hedge funds. And then you look at the smart beta, it’s been relatively resilient on pricing so far although competition is picking up. Can you talk a little bit about how you sort of see the volume versus maybe the fee rate dynamic playing out over the next couple years for smart beta?

[Jonathan Steinberg:]

Again, it’s very – the trends that you’re seeing are not new. There was always incredible price competition on non-exclusive indexes. So we’re certainly not focusing on what the hedge fund industry is doing to make themselves more competitive. But when you look at what iShares recently did on some of their core, that really doesn’t change the dynamic of what monetized beta was doing when we launched the firm in 2006. In terms of smart beta, again, it helps that we’re doing it off of a proprietary index that we got in early. So we haven’t seen very significant at all pricing pressure. I’m not trying to say that we are immune to pricing pressure. We’ve never been immune to pricing pressure. We were just created for this environment. So it’s just – continue as we go.

[William Katz:]

Okay. And just maybe one housekeeping item and maybe it’s me and my numbers, but it looks like there’s been a restatement on the second quarter fully diluted share count. Is that right, or I just have a bad number in my model?

[Amit Muni:]

Yes, because we had some noise in our share count last quarter because the reclassification of – because our unvested securities, they do carry dividend and voting rights, so they are considered participating securities on how we calculate EPS other than [indiscernible]. So that had an immaterial reclass in our share count from last quarter. There’s no change in EPS.

[William Katz:]

Okay. Thank you very much.

[Operator:]

Our next question comes from Ann Dai of KBW. Ms. Dai, you may begin.

[Ann Dai:]

Hi. Good morning. Thanks for taking my questions. I did want to start again with DOL and understood that your kind of seeing it from a long-term perspective, but I’m just wondering in the short term, if you do feel like maybe there’s some assets that are going to be in motion as people move towards fee-based accounts. And if so, are you doing any kind of enhanced outreach to distributors to try to take up a larger share of flows around the implementation date?

[Jonathan Steinberg:]

This is Jon. Really DOL is extraordinarily positive for the ETF industry. So we’re very excited about how behavior will be changed as the rule gets implemented. There’s also a lot of questions from the distributors on how they should navigate this, and we spent a tremendous amount of time and energy with our partners in helping them to navigate. And so I think we are being viewed as a very constructive partner in these very challenging times for the distributor part of the asset management industry. Kurt, is there anything or Luci you want to add to it?

[Kurt MacAlpine:]

I’ll just say that if you look at where the assets are and actively managed mutual funds, they’re predominantly overwhelmingly in U.S. equity and U.S. fixed income. So I would expect that to be the face [indiscernible].

[Ann Dai:]

Okay. Thank you. And if I could just get one follow up. When you talk about your European distribution and talk about broadening the platform to some other geographies and I’m kind of curious what’s ahead? And then when you think about what you have upcoming, is there anything that you can comment on from an expense perspective for the coming year, so just what type of incremental expenses are driven by that build out?

[Jonathan Steinberg:]

So right now, globally – obviously we have a very large presence in the United States. We have our first efforts internationally. We’re actually in Latin America with the Compass Group. We’re very, very strong with them and it’s been a long deep relationship now coming on almost eight years. Europe is a very big effort for the firm. We’ve just launched in Canada. We have people, a team in Japan. I don’t expect adding any new markets beyond the bet that we’ve made – investments that we’ve made to-date, but we are positioned for actually the very largest ETF markets right now around the world and they’re also facing the greatest regulatory changes which should spur faster growth of ETF adoption.

[Luciano Siracusano:]

And as far as the expense guidance, how we’re thinking? As we typically do on our next call, we’ll give guidance on 2017 on how we’re thinking about the expense growth from there.

[Ann Dai:]

Okay. Thank you.

[Operator:]

Our next question comes from Mike Grondahl with Northland Securities. Mr. Grondahl, your line is open.

[Unidentified Analyst:]

Hi, guys. Thanks for taking my questions. It’s [indiscernible] on for Mike Grondahl, and maybe if you could just talk about from a high level, not guidance or anything, but how you’re looking at managing costs versus growth across your current geographies in the upcoming year if we assume AUM is flat?

[Jonathan Steinberg:]

Sure. As we always do, we found some need for expense management with – there’s a lot of tailwinds in our industry, as we’ve spoken about over the years, particularly with the DOL rule coming in place. We’re making the right investments to continue to position ourselves for that growth. As far as future guidance, as I said, at our next call we’ll be giving more guidance on sort of how we’re thinking about expense growth, the key initiatives we’ll be working on next year to help you sort of model out the future.

[Unidentified Analyst:]

Got you. And then maybe just a quick follow up towards that. Not an exact number but do you see a trend for the next year of new funds launched, maybe similar to what we’ve done over the last few years?

[Jonathan Steinberg:]

Again, that will also give – we give that usually on our next earnings call.

[Kurt MacAlpine:]

Yes, on our next call we’ll give you guidance on new product launches that we’re targeting.

[Unidentified Analyst:]

Got you. Thanks.

[Operator:]

Thank you. Our next call from Mac Sykes with Gabelli Financial. Mr. Sykes, your line is open.

[Mac Sykes:]

Good morning, gentlemen. I have a two-part question and I’ll just ask the whole thing. I think we’ve talked about this before, but thematic ETFs and we had a traditional competitor launch at thematic week this summer. I was just wanting your thoughts on how much opportunity is there for this approach, how much of your thoughts have been given about innovation here for your platform? And then in light of sort of that launch of ETFs, we’ve heard some commentary just before this on – or ETF products, maybe you can talk about the competitive aspects in terms of your marketing to advisors who may be seeing more approaches come at them?

[Jonathan Steinberg:]

So whether it’s smart beta, rules-based active, thematic ETFs, it all rolls into sort of this giant bucket of index innovation. We think it’s very, very constructive. Even the fee cost that Schwab and Barclays or iShares are doing constructive, making it almost impossible for any advisor to look anywhere else to put their money to work. In terms of WisdomTree from a competitive standpoint, really the energy has always been to compete with iShares and Vanguard and State Street, the largest firm to have been in the business the longest. We certainly have seen over the last 10 years numerous new competitors come in but they come in – most of them have come in just in the last couple of years. They’ve done a lot of work to build their name recognition within these channels, get their sales organizations geared towards communicating this new structure to the clients and potential clients. Luckily, we established our funds. We’re a known entity. We’re building these very strong track records and quite frankly the industry is evolving exactly the way the executive management team thought 10, 12 years ago.

[Kurt MacAlpine:]

Just in terms of ensuring that we’re well positioned in fund advisors. So since inception, WisdomTree has been playing a very active role in educating advisors on our products and methodologies and how to best execute them. So as you look, there’s a lot of new entrants in the market, as we mentioned, a lot of new products. But we feel very strongly that we have both the infrastructure and the quality of the team that is well positioned to compete as new entrants come and go from the marketplace.

[Jonathan Steinberg:]

Yes, and one last point. We also had probably the strongest regulatory freedom for both active and self-indexing which over a longer period of time will help us deliver the best after-tax returns. And so net-net, we are again very well positioned.

[Mac Sykes:]

Great. And congrats to Jason. I look forward to speaking with him.

[Jonathan Steinberg:]

Very kind of you to say that and he’s blushing. Next question?

[Operator:]

Our next question comes from Keith Housum with Northcoast Research. Mr. Housum, you may begin.

[Keith Housum:]

Good morning, gentlemen. I hope you guys can provide a little bit of color. I think in the past, one of the challenges has been the 401(k) administrators haven’t been able to have a platform that can accommodate ETFs. What are you guys seeing in the marketplace in terms of progress in that market, and where would you say the opportunity perhaps starts best?

[Jonathan Steinberg:]

So as you know and those on the call know, we have been making a 401(k) effort for seven or eight years now, maybe longer. We and the industry, we’d had very little penetration as a structure into the 401(k) market. We believe we have very, very strong IP for the retirement market. We recently hired a retirement expert. We’ve really build up our institutional channel. But we’re going to have to continue to figure out a way to penetrate that market. As an asset manager you don’t want to admit such a large pool of money but so far the ETF industry just hasn’t been successful.

[Keith Housum:]

And [indiscernible] has push back in terms of why they haven’t been able to – they haven’t update their platforms to accommodate it?

[Jonathan Steinberg:]

It’s not the administrator in my opinion, it’s more of the advisor that administrates the advisor to the plan. They’re already in tax protected accounts, taking away one of the major benefits of the ETF structure. And then the ability to trade intra-day is not necessarily something that they’re comfortable with for a 401(k) plan. But almost every administrator has the ability to trade 401(k), they just don’t know it.

[Keith Housum:]

Got it. Okay, I appreciate it. Thank you.

[Operator:]

Our next question comes from Alex Blostein with Goldman Sachs. Your line is open.

[Grayson Barnard:]

Hi, guys. It’s Grayson Barnard filling in for Alex here. Jon, I wanted to get your take on the M&A environment. Recently, we’ve seen obviously Janus and Henderson announce a deal and we’ve seen a number of traditional players entering the smart beta space via M&A. So I wanted to get your view on how that landscape will evolve going forward and how you think traditional firms will evolve under the DOL standard? Thanks.

[Jonathan Steinberg:]

I think that there’s a tremendous amount of capacity through all the different structures, just a tremendous amount. I think that you will see aggressive M&A. I think the rationale for Janus and Henderson to scale up giving them more time to work through their transitions makes a lot of sense from their perspective. In terms of the ETF industry, there’s been tremendous amount of M&A. Historically Invesco, BlackRock, all have been buyers. You see lots of the traditional firms most of them buying smaller entrance into the business, but it gives them a little bit of ETF DNA within their organizations and I would imagine that it continues.

[Grayson Barnard:]

Great. Thanks for the color.

[Operator:]

Our last question comes from Michael Cyprys with Morgan Stanley. Mr. Cyprys, your line is open.

[Michael Cyprys:]

Hi. Thanks for taking a follow-up question. Just curious how you guys are thinking about using data and analytics to improve your sales efforts and more efficiently target financial advisors in the intermediate? Maybe kind of just talk to what you’re doing today but then also what the opportunity set is there longer term?

[Jonathan Steinberg:]

Sure. So we’ve had a big – as Amit has talked to you too in previous calls around our strategic priorities and strategic spending, using data as a tool to be more predictive with the advisors that we’re talking to and then the conversations that we’re having with those specific advisors has been an important initiative for us. We feel like we’ve made very good progress down that path. We’ve, as you can imagine, aggregating data sources from multiple different places is a task in and of itself. We’ve essentially completed that and we’re in the early stages of running predictive models against any predictive algorithms that will give us a better sense for who specifically we should target, what we should target them with and then what’s the message that we should deliver to them when we talk with them. So, we’re making very good progress. This as you probably know is a continuously evolving and improving capability and we feel that we’ve made the investments required to be best in class in it.

[Michael Cyprys:]

Any sense early stages on what that could translate into in terms of better sales?

[Jonathan Steinberg:]

No. We’re still in the process of refining the algorithms and the models and we’ll continue to test this in the market, which we’re already doing and we’ll get a better sense on it as we continue to spend more time using it as a key sales filler.

[Michael Cyprys:]

Great. Thank you.

[Jonathan Steinberg:]

So, if there are no more calls, we thank you for your interest and support and we’ll speak to you next quarter. Have a good day, everyone.

[Operator:]

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