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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and welcome to NetEase Second Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead.
Thank you, operator. Please note, the discussion today will contain forward-looking statements relating to future performance of the company and are intended to qualify for the safe harbor from liability, as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.
A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F. The company does not undertake any obligation to update these forward-looking information, except as required by law.
During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the 2018 second quarter financial results news release issued earlier today.
As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com.
Joining us today on the call from NetEase's senior management is Mr. William Ding, Chief Executive Officer; Mr. Charles Yang, Chief Financial Officer; and Mr. Hilton Huang, Co-President of NetEase Game.
I will now turn the call over to Mr. Yang, who will read the prepared remarks on behalf of Mr. Ding.
Thank you, Brandi, and thank you, everyone, for participating in today's call. Before we begin, I would like to remind everyone that all percentages are based on renminbi. With that said, I will deliver opening remarks on William's behalf. We are pleased to report the strong quarter with continued growth momentum in each of our core divisions. Our total net revenue reached RMB16.3 billion, a 15% increase from the previous quarter and our non-GAAP net income more than doubled from the prior quarter coming in at RMB2.7 billion.
Our online games reached RMB10.1 billion, representing 15% sequential growth. The strongest growth rate for this segment since the first quarter of 2017. Our mobile and PC client games remain our dual growth engines for online games.
On the PC side, our self-developed PC client game Justice was officially launched on June the 29th. Justice has taken us five years to develop and as one of the very big PC game productions in recent years it was long anticipated by game players in China featuring state-of-the-art technology and stunning graphics. The new game immediately attracted millions of fans and reset expectations for PC games. Justice appears not only to traditional PC MMO gamers, but also encourages [ph] Generation V gamers, many of whom became first time PC gamers because of this game. Our primary goal for Justice at this stage is to expand its fan base, establish a strong and stable gamers' community and create another valuable IP for NetEase.
On the mobile side, our diversification strategy is progressing smoothly. We launched several new games in non-MMO categories during the second quarter, including Shadwoverse, Identity V and QwQ. Each of these titles quickly climbed to the top of the download chart in China. While we continue to dominate the MMO market, we are rapidly finding a place in the non-MMO space. Importantly, our games in more casual genres are cultivating a completely different and incremental user base.
We are fairly new to non-MMO games, but we have come a long way in a very short amount of time. Our decade of focus on technology, creative art and fostering talent have laid the foundation for us to quickly gauge and adapt with changing trends. We are large but nimble and we have gone through similar transitions within this ever technology market. We did it successfully with the PC to mobile transition and we are now doing it again expanding from MMO to include more casual genres. Since we began diversifying our product mix we have already established some hugely successful game titles such as Onmyoji, Knives Out, and Terminator 2.
In recent quarters we have started to experience higher success rates than before with many of our new casual titles Identity V, QWQ and several other games all did very well in their respective categories. And we believe there a still a number of avenues we can pursue to further increase our hit rate.
Moving on to our overseas strategy. Now that we have non-MMO games in our portfolio, international expansion comes naturally. Our new non-MMO games are typically less impacted by cultural influences making them more suitable for a global audience. The advanced quality of these games coupled with our decade long experience in marketing and operations have let us to see early signs of success in the global market.
In Japan Knives Out has been consistently ranked in the top three on the iOS grossing chart and took the number one position for most of June. Similarly Identity V was launched in Japan in early July and has become number iOS and Google Play downloads chart in Japan. To broaden and deepen our geographic footprint, we will be adding more localized content to our games specifically to cater to local user appetite. In the U.S. we also had a strong start with the launch of Rules of Survival and Onmyoji Arena earlier this year. We are also very encouraged by the performance of Identity V in the U.S. launched in July.
Turning on to our legacy titles. Our leading PC client and mobile games such as Fantasy Westwood Journey, Westwood Journey Online, Onmyoji and Invincible continue to captivate longtime fans. These flagship titles are steady performers and we expect this trend to continue throughout 2018. The prevailing success of these games demonstrates our remarkable ability to operate games for long period of time. We have created a massive social community within each game. And we continue to supply our users with engaging content through periodic introductions of high quality expansion packs.
We also host supporting gaming events and tournaments to maintain community competition and general enthusiasm around our games. Our focus remains on quality and innovation as we continue to introduce games that thrill audiences domestically and overseas and strengthen the NetEase brand. We are excited about all of our games in the pipeline including Ancient Nocturne and Night Falls: Survival, which we currently plan to introduce at the end of the third quarter or the beginning of the fourth quarter.
Looking at our e-commerce business both Kaola and Yanxuan mentioned continue to drive. For the second quarter, we grew our e-commerce revenue by 75% year-over-year to RMB4.4 billion. Our gross margin for this business also improved to 10% from the previous quarter despite a promotional season. Our main objective for e-commerce at this stage is to continue to grow at scale, while maintaining a reasonable gross margin.
Over the long run, we believe we will achieve a sustainable profit margin through continuous optimization of product mix, upgrading our supply chain management and achieving economies of scale. With the growing trend of consumption upgrades amongst the rising middle class in China quality e-commerce is in growing demand. The incumbent e-commerce business model in China has not yet fully addressed this opportunity. Kaola and Yanxuan are designed to fill this void in the market.
Cross border and private label has been our two primary inroads into the e-commerce business. But the entire quality e-commerce market is what we are after. For Kaola, we intend to bring the best products available across the world to Chinese consumers. For Yanxuan, we pioneered the ODM model in China where we are in-charge of the design of the product and our manufacturing partners are the very best manufacturers in their respective categories.
Over the past two years of operation and even before that we worked, tested and evaluated thousands of manufacturers and carefully selected top echelons to work with. This is one of the biggest barriers to entry that we have created. Going forward, we will further strengthen our first mover advantage in supply chain management and continue to upgrade our product offerings to give our Yanxuan customers the best online shopping experience in the market.
Turning onto our other business segments. For advertising services, revenues in the second quarter increased by approximately 7% year-over-year to RMB634 million or $96 million. With automobile, internet services and real asset sectors as a top performing verticals. Over 85% of advertising net revenues were generated from setting advertising space on the NetEase News App and NetEase website with a year-over-year increase of nearly 10%.
E-commerce and others were RMB1.2 billion or $185 million in the second quarter with a year-over-year increase of 43%. Within our other services, there are a number of incubated businesses we are very excited about. For Youdao, we set a new record for online education live streaming with close to 50,000 concurrent viewers on one of our online English language test preparation classes.
For our K-12 education offering, we rolled out new summer school classes, which were very well received by the market. As a result, our Youdao Online Education revenue grew considerably.
For music, we continue to run the largest social community for music lovers in China measured by user engagement and UGC. Our offering reflects our passion for music, attracting the largest consistency of independent musicians and genuine music enthusiasts in China. This community of our user will shape China's future music trend and our objective is to help them promote their original content.
Innovation and craftsmanship continue to serve as the cornerstone of each of our businesses. For more than two decades, we have maintained these principles, propelling our relevancy and competitive edge. We believe these core values, our considerable R&D capabilities, and strong business acumen will continue to drive our future success. This concludes Williams comment.
I will now provide a very brief review of our second quarter 2018 financial results given the limited time on today's call, I will be presenting some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details.
Net revenue for the second quarter of 2018 were RMB16.3 billion or $2.5 billion, this compares with RMB14.2 million and RMB13.4 billion for the preceding quarter and second quarter of 2017 respectively. The year-over-year and quarter-over-quarter increase was driven by revenue growth across all business segments. Net revenues from online games increased by approximately 15% quarter-over-quarter due to the strong performance from Chu Liu Xiang, Knives Out and Identity V.
Mobile games accounted for approximately 75% of net revenues from online games for the second quarter of 2018, compared with 72% for both the preceding quarter and the second quarter of 2017.
Our gross profit for the second quarter of 2018 was RMB7.2 billion or $1.1 billion, compared to RMB6 million and RMB6.7 billion for the preceding quarter and the second quarter of 2017, respectively. Our gross profit for our online games segment increased year-over-year and quarter-over-quarter in the second quarter primarily due to the increased revenue contribution from some of our aforementioned self-developed mobile games. Consequently gross margin for our online games segment improved to 64% in the second quarter, compared with 63% a year ago and 62% in the preceding quarter.
During the second quarter, gross profit for our e-commerce business increased as we continued our rapid expansion of Kaola and Yanxuan. Gross profit margin for our e-commerce business was 10.1% in the second quarter, compared with 9.5% and 12.6% for the preceding quarter and the second quarter of 2017, respectively. The quarter-over-quarter increase in e-commerce gross profit margin was primarily due to improved product mix and procurement process. The year-over-year decrease in e-commerce gross profit margin was primarily due to certain sales discounts in the second quarter of 2018 to support the rapid development of Kaola and Yanxuan.
Gross profit margin for advertising services for the second quarter of 2018 was 67%. This compares with 59% and 68% for the preceding quarter and the second quarter of 2017, respectively. The quarter-over-quarter increase was primarily due to seasonality.
Gross loss margin for our e-mail and other business for the second quarter of 2018 was 7.3%. This compares to the gross loss margin of 9.9% and gross profit margin of 7.7% for the preceding quarter and the second quarter of 2017, respectively. The year-over-year decrease in gross margin was primarily due to decreased revenue contribution from certain online platform businesses, which have relatively higher gross profit margins as well as higher licensed music content costs related to our cloud music business in the second quarter.
As we have mentioned before, our businesses include many promising business initiatives that we are incubating such as Youdao, Cloud Music and our live broadcasting services like CC amongst others. Many of these businesses are undergoing an investment phase as they require upfront spending to acquire content and talent. We believe their upside potential in the longer term will more than justify our current spending.
Total operating expenses for the second quarter were RMB4.9 billion or $742 million. This compares to RMB4.7 billion and RMB3.3 billion for the preceding quarter and the second quarter of 2017, respectively. The year-over-year increase in operating expenses was mainly due to the overall increase in business scale, the quarter-to-quarter increase was mainly due to increased R&D costs, which is partially offset by decreased marketing expenditure related to online games.
E-commerce related shipping and handling costs included in selling and marketing expenses for the second quarter of 2018 were RMB387 million or $58 million. This compared to RMB326 million and RMB281 million for the preceding quarter and the second quarter of 2017, respectively.
The effective tax rate for the second quarter of 2018 was 16% compared to 26% and 19% for the preceding quarter and the second quarter of 2017, respectively. The year-over-year and quarter-over-quarter changes in the effective tax rate were mainly due to the fact that certain of our subsidiaries have been recognized related tax credit in the second quarter of 2018 as explained in the previous quarter due to the rapid expansion of some of our loss making subsidiary. We expect effective tax rate for 2018 on an annualized basis to be in the high-20s.
We incurred a foreign exchange gain of RMB233 million or $35 million in the second quarter of 2018. This compared to exchange losses of RMB375 million and RMB131 million for the preceding quarter and the second quarter of 2017, respectively. The changes of foreign exchange gains and losses were primarily due to the unrealized exchange gains and losses arising from the U.S. dollar denominated bank deposits and short-term loan balances as the exchange rate of the U.S. dollar against the RMB fluctuates over the period.
Our net income attributable to shareholders for the second quarter of 2018 was RMB2.1 billion or $318 million. This compared to RMB752 million and RMB3 billion for the preceding quarter and the second quarter of 2017, respectively. Non-GAAP net income attributable to our shareholders for the second quarter of 2018 totaled RMB2.7 billion or $412 million. This compared to RMB1.3 billion and RMB3.5 billion for the preceding quarter and the second quarter of 2017, respectively.
For the second quarter of 2018, our basic and diluted earnings per ADS were $2.45 and $2.44, respectively. Our non-GAAP basic and diluted earnings per ADS were $3.17 and $3.15 respectively for the second quarter of 2018. Our cash position remains strong. As of June 30, our total cash and cash equivalents, current and non-current time deposits and short-term investment balance totaled RMB44 billion or $6.7 billion. This compares with RMB43 billion as of the December 31, 2017.
Returning value to our shareholders remain the top priority. For the second quarter 2018 we plan to pay of dividend of $0.61 per ADS, representing the 25% of the net income attributable to our shareholders. Under our current share repurchase program, which began on November 16, 2017 and amendment announced on June 11, 2018 authorizing a total repurchase amount up to $2 billion. We had repurchased approximately 3.4 million ADS for approximately $912 million as of June 30, 2018.
Thank you for your attention. We would like now to open the call to your questions. Operator, please go ahead.
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Thank you. The question-and-answer session will be conducted electronically. [Operator Instructions] Our first question today comes from Thomas Chong of Credit Suisse.
Hi. Thanks management for taking my questions. I have a question about our second half mobile games outlook, given the fact that we showcase a lot of games more than 20 games in China Joy, should we expect mobile games revenue to remain strong momentum in second half? And how should we think about the deferred revenue in Q2? And my follow-up question is about our overseas strategies. How should we think about our overseas mobile games revenue contribution over the next few years? Thank you.
Okay. Thomas, I'll translate the question for William and management. So I'll translate the answers for the questions, Thomas. For your first question, we remain confident for our second half mobile games outlook. As you have noticed on China Joy we have announced quite some new products in the diversify game genres as well as some very promising upgrades of our existing titles. So those are, we believe those are the foundation for a very solid second half.
For the overseas strategies Knives Out and Identity V have so far achieved very successful performance, in particular in Japanese market. Going forward, we plan to bring more products across more genres and hopefully also diversifying the overseas market. So that summarizes our overseas strategy. Next question please.
Certainly, our next question will come from Eddie Leung with Merrill Lynch.
Hi, good morning. I'm just wondering, if you could share a bit of a color that you have seen on the user profile difference between your MMO games and non-MMO games.
So Eddie to translate for the answers. Well as you all know, since last year we have successfully introduce couple of hit games in the non-MMO genre. That has attracted and differentiated an incremental user base to our core MMO user base. The users who play our non-MMO games are generally speaking younger and covers a more diversified geography of these new incremental users actually serve as a very good data point and guidance towards our future R&D development and introducing new non-MMO games.
And next will be - I'm sorry go ahead.
So Eddie, William further commented that in our view MMO and non-MMO these two core categories are equally important in the China's game market. So for us while maintaining the dominance in MMO, we're also expanding more and more into the non-MMO genre.
Next question please, operator.
Thank you. Our next question will come from Alicia Yap with Citigroup.
Hi, thank you. Good morning William, Charles and Brandi, thanks for taking my questions. And congrats on the solid results. Have questions related to the overall PC games industry. So if you can give us some insight into how you view the PC games industry. So given your recent success of new PC games Justice, have you - despite the whole industry facing some declining trends of the PC gamer shifting to mobile. Could you share with us some of the success factor? Is it because of the game general or the promotional effort that you guys have?
And then similarly on some of these user profile, are these more hardcore players that always play PC games or you actually have attracted some mobile gamers to actually go back and play the PC game. And is Justice also attracted to younger group or the older group? So just in general how do you see the PC game industry outlook in China?
So to translate the answers. First of all, when you look at PC and mobile, you can't look at them from a rigid framework because it's on a relative terms. And the main driver for the outlook of the PC industry is highly dependent on whether the industry witnesses high quality products, game content, such as Justice we've introduced or last year when PUBG [ph] is another good example of the high quality PC products.
So in a way maybe mobile games are easier choice for amateur level beginner gamers. But for a real hardcore gamer and a game enthusiastic it is very common to have multiple devices, PC, mobile, even console and switch devices, and to attract these users what you need is high quality content.
And going back to your other half of the question on Justice, the game is designed as a top notch, high quality PC game, highly attractive to the hardcore gamers. So we are seeing some of the real hardcore gamers even in their 40s, 50s relatively older, as well as the game is highly appealing to the younger generation post 95. Because some of those users may have experienced MMO mobile games in the past. Now when they are seeing a high quality state-of-the-art top notch MMO game that is available on the PC device, it is also very attractive to convert them into a Justice user.
And our next question come from Natalie Wu with CICC.
Hi. Good morning, management. Thank you for taking my question. I just have a follow-up question on your PC game Justice. Could management share some color on how should we think about the longevity or the life span of justice and the social revenue contribution to a PC game. Could we expect PC game revenue to grow again with the help of Justice from the next quarter? Thank you.
So Natalie, let me translate the answers for the broader audience. So Justice has been launched for slightly over a month now. We saw the data gathered so far it indicates good signs of a confidence success particularly two remarks. One is that we are seeing the community, the user community around the game slightly being established. And secondly, we are also seeing very good progress on the new user growth. So we saw these data points it gives us confidence that - we are confident that Justice will perform in line with many of our other legacy PC games for very longevity and lifespan.
And our next question will come from Alex Poon with Morgan Stanley.
Hi, William. Hi, Charles. Good morning, thanks for taking my questions. So for different segments, it looks like most have gone through the investment phases in the past two, three years including Yanxuan and Kaola, CC live music, et cetera. And also game diversification is seeing good progress overseas. Gaining user base, brand establishment and margin has started to improve.
Are you - do you think we are at a stage that you can accelerate the monetization in the second half of 2018 and 2019 for example for across all these businesses and we could see accelerated margin expansion in the coming quarters? Could you please touch a bit on every segments?
And finally, could you give us a separate say for non-core business how - what is the net - roughly what is the net profit level, so we can have a better sense of valuation so everybody can push the price higher. Thank you.
Thank you, Alex. Let me take this question. So as you know for our games that is the longest track record. And we have commented quite a bit just now on the previous questions. We are confident that for our games segment while maintaining a steady performance of our legacy titles. The growth will be mainly driven by the performance of our newly launched games. And we are confident about maintaining strong momentum into the second half of this year.
With respect to the other incubated businesses. E-commerce, music, Youdao, et cetera we believe it is still in the relatively early phase of investment. So the near-term focus on these business segment is not solely focused monetization. We think in the near-term for the second half of next year, the top priority is still to grow its scale maintaining its leading position amounts of the user reputation and user recognition. Because for us we have full confidence about the potential future upside of all these businesses that we are incubating and we want to do it right, do it in a healthy way to ensure a sustainable longer term growth of all these respective segments.
And moving on to Han Joon Kim with Deutsche Bank.
Great. Thank you for the chance to ask question. Just one on my end. We continue to hear about some delays to game approvals even outside of PUBG in China. So do you think there is a risk that there is some slowness in game releases into 2019. And wondering if that may affect first half or second half of 2019 or if you see no problem at all of getting approvals from the government. Thank you.
So Han Joon, to answer your question to NetEase the impact is insignificant because as you all know all the games actually go through a relatively long phase of development and testing. So for our games particularly the games in our pipeline is not so much affected by the current delay on the game approval due to the government bureau restructuring.
And our next question will come from Karen Chan with Jefferies.
Great, thank you management for taking my question. So first we saw a question declining in sales and marketing expense. Just wondering if we should be expecting similar trajectory in second half as we adjust our sales and marketing strategy? Secondly, on the deferred revenue we noticed around 10% sequential drop there. It seems to be coming from a higher than usual game revenue recognition. Can management share more color on why is that so? Thank you very much.
So Karen for our selling and marketing expenses, we made a comment that it's been - we'll start normalizing the selling and marketing expenses. Doesn't necessarily mean we are decreasing it. We will still continue to invest into selling and marketing, R&D and all the operating expenses that is required by the ordinary course of business, for instance, new game launches, game development, et cetera. So in this way, we think increased investment is the trend. However, from a margin - from a percentage of net revenue perspective, we don't think we are deviating too much from our historical levels.
On your second question on deferred revenue. Because this is again, deferred revenue is an accounting treatment. So part of the gross billing is recognizing in the quarter. Some of the gross billings are deferred and recognized in future quarters. So a decline in deferred revenue indicate some of the games if experience some decline in the gross billing. But I think with all the new games in particular many of the games we only launch towards the end of the second half. So its financial contribution or it's not fully released in the second quarter. So we still remain fairly confident about our second half performance on the game side and the overall business segment.
Moving on to Marcus Yang with Macquarie.
Thanks for taking my questions. My first question is, we understand that NetEase had a series of investments in overseas company such as PUNG and Improbable in the first half of this year. Can you talk about your investment status on these companies and your strategy within going forward? And also on financial wise, you mentioned that the gross margin expansion in your e-commerce business was primarily driven by the improved product mix and also procurement process. Can you elaborate more about that and do to consider that kind of gross margin level sustainable? Thank you.
Our investment thesis and strategy still remains very prudent and more focused on the strategic side. When we are screening and exploring potential investment targets or potential partnership collaboration. The main focus is to look at our own product portfolio, R&D pipeline finding companies and partners that are synergistic to us either by supplementing our existing products or filling some of the relative weaknesses that we need to further improve. So that is the overall kind of investment thesis and strategy.
For your second question on the gross profit margins. As explained for e-commerce our near-term primary focus is to continue to grow its scale and to expand its addressable user market and further enhancing its brand awareness and user reputation. So with that in mind, our focus is not - in the near-term is not to expand its gross profit margin. Having said that, while we are growing our scale in a robust way, we are also cautious to maintain the gross profit margin at a relatively steady level.
And our next question will come from Bill Liu with Goldman Sachs.
Thank you management for taking my question. I have one question about our R&D expense. So I understand that we have probably two, three dozens of games in the pipeline. And we are actively expanding into more genres. So how should we think about this R&D expense going forward? Thank you.
Bill for the R&D expenses, as you have noticed that starting from Q1, we have increased our investment into R&D. But I think that's what a tech company should do to invest into its core competence. After all I think comparing to our top-line growth, if you look at the R&D from a ratio perspective, it is still in a very controllable manner, but we think with increased investment into R&D it is hugely beneficial for our longer term sustainable growth.
And by the way, the R&D increase it's mainly driven by the headcount. So in a way the company is growing, company is expanding and we are attracting more and more talent into NetEase.
And moving on to Jin Yoon with New Street Research.
Hi, good morning guys. So gross margin stayed across all your segment lines much better than expected. Just kind of want to touch upon your music business. I was wondering if you guys could ready to share some metrics behind that in terms of membership growth, usage and the trajectory we should see for that business going forward. Thanks.
For music, so first of all music has been growing the total registered user has surpassed 500 million. And paying ratio for the whole industry, the music paying ratio is still at a relatively low level even comparing to the live streaming and video site. So there is huge potential of enhanced monetization potential from the subscription base. And with the growing scale in user and increased focus on the content, we think our Cloud Music is doing - what we are doing is building a very solid foundation for a lot of monetization potentials in the near-term.
And we have a question from Billy Leung with Haitong International.
Hi, management. Thanks for taking my question. Just have one question on Minecraft, I think we discussed this last time, but there seems to be lack of information this time around. So I was just wondering if there is any updates development on Minecraft. And any changes in terms of the amortization strategy we discussed last time.
So over the last year, we have brought quite some innovative and new experiences to the Chinese Minecraft users that is different from the offshore global version of Minecraft. Going forward, we will continuously to work with Microsoft to enhance the user experience. And also in our earnings release, we believe we've also announced that Minecraft registered user has already crossed over 100 million user benchmark.
And we'll take the next question from John Choi with Daiwa.
Good morning, guys. So thanks for taking my question. Just quickly on your live broadcasting CC I know that NetEase has concern to invest quite a bit here. Can you - is there any metrics that you could share and what kind of development procedures management has put in place?
And secondly also just to follow-up on your overseas strategy, right now you guys doing pretty well in Japan. Any other regions or countries that will be a focus in the near-term? Thank you.
Okay to translate the answers. So for CC it is a strategic platform to our overall NetEase games ecosystem. So we will continue to invest into CC and making the game broadcasting platform a strategic asset to our game profiles.
Secondly to your overseas strategy. So aside from Japan, our focus will also be on the North America and European market. We think that our games has the potential to also excel and prove itself amongst those mainstream western markets.
And that does conclude our question-and-answer session. I'll now turn the conference back over to management.
Thank you once again for joining us today. If you have any further questions please contact NetEase's IR Director, Margaret Shi, based in Hangzhou, or TPG Investor Relations. Have a great day.
Thank you. That does conclude today's conference. We do thank you for your participation today.