© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings, and welcome to the Gentherm First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. It is now my pleasure to introduce your host, Yijing Brentano, SVP, Investor Relations. Thank you. You may begin.
Thank you, and good morning, everyone, and thanks for joining us today. Gentherm's earnings results were released earlier this morning, and a copy of the release is available at gentherm.com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of Gentherm's website. During this call, we will make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance, and actual results may differ materially. We undertake no obligation to update them, except as required by law. Please see Gentherm's earnings release and its SEC filings, including the latest 10-K and subsequent reports for discussions of our risk factors and other risks and uncertainties underlying such forward-looking statements. During this call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation. On the call with me today are Phil Eyler, President and Chief Executive Officer; and Matteo Anversa, Chief Financial Officer. During their comments, Phil and Matteo will be referring to a presentation deck that we have made available on our website at gentherm.com/events. After their prepared remarks, we will be pleased to take your questions. Now, I'd like to turn the call over to Phil.
Thank you, Yijing. Good morning, everyone, and thank you for joining us today. I am proud of Gentherm's strong execution to start the year. While the global automotive environment remained volatile in the first quarter and near-term light vehicle production volume softened compared to what was forecasted by S&P Global just 2 months ago. We continue to see strong demand from our customers for our thermal comfort, massage and lumbar solutions, winning 80% of our quoted pursuits for thermal and pneumatic solutions during the quarter. We secured nearly $530 million of automotive new business awards, a record for the first quarter. Adjusting for the impact from foreign currency exchange and onetime recoveries, our automotive climate and comfort solutions revenues, which include primarily CCS, seat heaters, steering wheel heaters and lumbar and massage comfort solutions outperformed the light vehicle production in our relevant markets by approximately 300 basis points in the first quarter with many new launches and ramp-ups still to come throughout 2024. On the profitability front, our Fit for Growth 2.0 initiatives drove over 200 basis points year-over-year improvement in gross margin rate through supplier cost reductions, value engineering and increased productivity at the factories. Before I cover the details of the quarter, I'd like to share some exciting news fresh from the Automotive News Award ceremony held last night on Slide 4. At Gentherm, we pride ourselves on our industry-leading innovative product portfolio, and I am extremely pleased to share that we won the Automotive News PACE Innovation Partnership Award for our partnership with General Motors for launching ClimateSense, the industry's first scalable, software-driven automotive microclimate solution. If you recall, we are launching two ClimateSense production programs with General Motors this year. In addition, we previously announced a breakthrough scalable ClimateSense Software Award for nearly all future architecture General Motors, ICE and electric vehicles. ClimateSense was recognized as one of the 33 finalists globally for the overall Automotive News PACE Award. Automotive News PACE Awards identify and recognize automotive suppliers for their technological innovation and product and process that has reached the commercial market. I would like to congratulate the global Gentherm team for winning such prestigious awards, for bringing to market game-changing innovations. Now, turning to our Q1 automotive highlights on Slide 5. In the first quarter, we launched our automotive solutions on 27 different vehicles across 13 OEMs, including BMW, General Motors, Great Wall, Honda, Li Auto, Stellantis, Subaru and Volkswagen. We continue to see expanded application of our CCS solutions. In the first quarter, our CCS solutions were launched on the BMW 5-Series, Chevrolet Traverse, GMC Acadia, Honda Prologue, Subaru Forester, Volkswagen Magotan, and a popular BEV with one of the largest global EV manufacturers. In addition, we launched our first CCS solution on Li Auto's L9 and L8 flagship SUVs, as well as our hands-on detection-enabled gearing wheel heat solutions on multiple vehicle platforms for Li Auto.As I mentioned on previous calls, software and electronics are fundamental to our strategy. As the automotive industry prepares for the proliferation of software-defined vehicles, we expect to add incremental electronics and software features through our ClimateSense and WellSense platforms that will enable greater energy efficiency, more personalization, and novel comfort and wellness experiences. To prepare for the increased demand for resources and competencies, I'm very excited to share that we have established an extended advanced engineering lab and team in Hyderabad, India with the support of an established partner. The India location will focus on the development of software and technologies that aim to improve agility, scalability and efficiency and product development. Now on to Slide 6, where, as I mentioned, we secured a first quarter record of $530 million of automotive new business awards, winning 80% of our quoted pursuits in the quarter. And I'm pleased to announce that we continue to grow our business with our largest customer, General Motors, and we recently won a conquest high-end lumbar and massage award for their next-generation truck platform, including the Chevrolet Silverado and GMC Sierra. With this win, we will supply our entire suite of climate and comfort seating solutions, including CCT, PCS, lumbar and massage, as well as multifunction electronic control units and ClimateSense software for our largest customer on their largest platform.I would like to recognize our global team for winning against significant competition. We won several CCS awards in the quarter. Of note, we won the new Ford Bronco, several Great Wall models in China, Hyundai Genesis G80, a Hyundai fuel cell EV and Volkswagen Tehron. In addition, we won a CCS award for a midsized crossover for one of the largest global EV manufacturers for the North America market. This is on the heels of winning the CCS awards for Europe and China for this EV manufacturer in the fourth quarter of 2023. It's worth noting that this EV manufacturer has some combination of our climate and comfort products across all their vehicle platforms and regions. In addition, we received 17 steering wheel heater awards across 9 OEMs. Importantly, we won hands-on detection-enabled steering wheel heater awards with Geely, General Motors, Li Auto, Mercedes-Benz and Volkswagen. On the Pneumatic Comfort front, we won lumber awards for the Audi Q5 and Volkswagen ID 4, both in China. In addition, we continue to strengthen our relationship with Li auto, winning a high-end massage award for their all-electric SUV Li M6. With this award, we will supply the combined seat heat, CCS and pneumatic solutions for the Li M6. These wins confirm our strong market-leading position in thermal and pneumatic comfort. We are seeing strong interest from a growing number of OEM customers for Comfort scale, our combined thermal and pneumatic lumbar and massage product. Comfort scale can be integrated with any foam and with any seat. It's adaptable for all OEMs and all Tier 1s. This is one of the unique value propositions that Gentherm offers. In addition, our innovative, differentiated proprietary solutions such as ClimateSense, WellSense and Comfort scale, position us to be a significant contributor to software-defined vehicles of the future and continue to increase Gentherm's content per vehicle. Now, let's turn to Slide 7 for a discussion of our medical business. I'm pleased to share that we have entered into a new partnership agreement with U.S. Med-Equip for both Blanketrol equipment and MaxithermLight consumables, as well as field services. This is our second key partnership agreement to provide world-class patient temperature management solutions to the U.S. health care market, and after our successful first partnership with Source Mark Medical, a certified minority supplier. In addition, we added 21 new hospital customers in China in the first quarter, including Sanxia Hospital at the Chongqing Medical University. And we continue to gain momentum with Astopad-resistave patient-warming technology as a result of increased demand for more sustainable solutions. In the first quarter, revenues from Astopad grew 36% year-over-year. We remain laser-focused on growing both the top and bottom line in medical, leveraging large partnerships, distribution channels and white label opportunities. Before I turn the call over to Matteo, I'd like to close with a couple of key highlights. Gentherm is an independent partner that can cooperate with any combination of the 50-plus vehicle OEMs and the 30-plus seat manufacturers globally, including those that are vertically integrated to create truly differentiated solutions. Our award momentum over the last couple of years is a true testament of this key differentiator. Let me give you 2 examples on Slide 8. First, for the BMW flagship next-generation electric and ICE X Series SUVs, including the X5, X6 and X7 and the IX5, 6 and7. We have won climate and comfort awards that include CCS, seat heat, interior surface heat and pneumatic lumbar and massage. Second, as I mentioned earlier, we will supply our entire suite of Climate and Comfort seating solutions, including seat heat, CCS, lumbar and massage, as well as the multifunction electronic control unit and ClimateSense software for the General Motors for their next-generation truck platform, including Chevrolet Silverado and GMC Sierra. Expansive climate and comfort Conquest wins on large vehicle platforms like these demonstrate that our unique value proposition resonates with customers. Turning to Slide 9. You will see that Gentherm's anticipated compound annual revenue growth rate to be above 14% between 2020 and 2024 compared to the corresponding growth in light vehicle production of under 4% in our relevant markets for the same period. This is a strong testament that our focused growth strategy is translating into above-market revenue growth. Now, let me summarize. Our first quarter results continue to validate the effectiveness of our strategy and demonstrate our unique positioning to deliver profitable growth. The industry environment remains volatile and dynamic. Nonetheless, our relentless focus on strong operational execution, innovation, and cash flow generation, along with our record performance on new business awards positions us well to continue to drive shareholder value over the long-term. With that, I'll turn the call over to Matteo for a little more color on the financial results.
Thank you, Phil. Let me turn to Slide 10 and focus on the most significant items in our first quarter results. For the quarter, total revenues decreased by 2% compared to the same period of last year, consistent with our expectations. If we adjust for the impact of foreign exchange, our overall product revenue decreased by 1%. Starting with the Automotive segment. Automotive revenues were $345 million, reflecting a 2% decrease compared to the prior year period. Adjusting for negative foreign currency translation, phasing out of the nonautomotive electronics business, as well as onetime benefits from recoveries in both periods, automotive revenue remained relatively flat. Actual light vehicle production in our key markets of North America, Europe, China, Japan and Korea decreased by 1% year-over-year. And as Phil mentioned earlier, revenues from our automotive Climate and Comfort solutions outperformed light vehicle production in our key markets by approximately 300 basis points. We saw growth in several of our product lines, excluding the impact of foreign exchange. And more specifically, steering wheel heaters revenue increased by 10% compared to the prior year period due to the start of production of Li Auto L6 and a battery electric vehicle in Asia with one of the largest global EV manufacturers, as well as several Mercedes and Stellantis programs. Automotive cables revenue increased by 6% due to higher volume with Bosch and Samsung. CTT revenues increased by 3% due to growth with several GM models in Asia. CCS revenue increased by 2% due to the start of production of Li Auto SUVs, as well as a battery electric vehicle in Asia with one of the largest global EV manufacturers. Revenues from lumber and massage and bulk systems remained relatively flat ex FX. Revenues from a few of our product lines decreased year-over-year ex FX, and specifically, BPS revenue decreased 33% due to the end of production for the Jeep Wrangler 48-volt BTM and the BMW E-mini cell connecting board, as well as the volume ramp down for the Mercedes 48-volt BTM. And as a reminder, we announced on the last earnings call that we are phasing out certain battery performance solution products. Electronics revenue decreased 25%, primarily due to the phaseout of nonautomotive electronics. Other automotive revenue decreased by 55% or $5 million primarily due to onetime material inflation recoveries received in the prior year period. Turning to Medical. Medical revenues increased 5% ex FX, primarily as a result of higher filter flow and Astopad sales. Moving to adjusted EBITDA. Adjusted EBITDA in the quarter was $44 million, up from $42 million in the prior year period. The adjusted EBITDA rate for the first quarter was 12.2%, and this compares to 11.4% in the first quarter of last year. The 80 basis point year-over-year improvement was driven by Fit for Growth initiatives, including supplier cost reductions, value engineering activities and net productivity at the factories, as well as lower freight costs. And these were partially offset by annual price reduction and negative impact from foreign exchange. Operating expenses were $71 million in the quarter compared to $63 million in the prior year period. And if we adjust for acquisition, integration and restructuring costs, as well as noncash stock compensation expenses in both periods, operating expenses were $60 million, relatively in line with the prior year. Finally, adjusted diluted earnings per share in the quarter were $0.62 per share compared to $0.49 per share in the first quarter of last year. Our effective tax rate for the quarter was approximately 19%, lower than the guided range of 26% to 29% due to a onetime benefit related to the Alfmeier acquisition. Now, moving to the balance sheet on Slide 11. Our cash position at the end of the quarter was approximately $125 million, and our net debt stood at $97 million. Net debt increased sequentially by $24 million as a result of increased working capital and higher capital expenditures. Our net leverage ratio was 0.5 at the end of the first quarter, well below our target of 1.5x. Based on the trailing 12-month consolidated adjusted EBITDA ended March 31, we had approximately $278 million of remaining availability on our line of credit, and the total available liquidity as of March 31 was $403 million. Now, let me turn to Slide 12 for our 2024 guidance. We are reaffirming our 2024 guidance as discussed in the prior earnings call. We're expecting revenue to be in the range of $1.5 billion to $1.6 billion, assuming a Euro to U.S. dollar exchange rate of 1.1 and light vehicle production in our relevant markets, decreasing at a low single-digit rate in 2024 versus 2023. Adjusting for approximately 30 basis points of FX benefit year-over-year, the midpoint of our guidance implies an organic revenue growth rate of approximately 5%. We continue to assume higher revenue in the second half compared to the first half as a result of the timing of new program launches. Adjusted EBITDA margin rate is expected to be between 12.5% and 13.5%. And as a reminder, our guidance assume a 50 basis point headwind associated with the start-up cost of our new plants in Morocco and Mexico, and product engineering and launch costs associated with our record new award. Due to the revenue cadence that I just mentioned and a onetime cost associated with our new plants, we expect the adjusted EBITDA margin rate in the second quarter to be in line with the first quarter, and for the rate improved in the second half. Our full year effective tax rate is expected to be in the range of 26% to 29%, and capital expenditures to be in the range of $65 million to $75 million. I would like to thank the global Gentherm team for continued progress on our Fit for Growth initiatives, which allowed us to deliver an 80 basis point improvement in adjusted EBITDA margin rate in spite of market volatility. And with that, I will turn the call back to the operator to begin the Q&A session.
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from Matt Koranda with ROTH Capital Partners.
Just wanted to start with the growth outlook. It sounds like we're still expecting sort of a higher second half revenue run rate than the first half. Just wondering on a relative basis in terms of growth for the second quarter, how we're thinking about growth relative to light vehicle production. Are we still expecting to outperform sort of the light vehicle production forecast, which I think stands at sort of a low single-digit growth rate in the second quarter?
Morning Matt, this is Phil. I'll take that one. I think the way to think about it is it will be a gradual increase in revenue for us throughout the course of the year as we kind of forecasted when we laid out our guidance. And that's driven heavily by very strong backlog of new business awards, and also the ramp-up of programs that are just launching here early in 2024. So, pretty excited about the launches that are coming and those will gradually be phasing in, which give us a pretty strong feeling.
Okay. And then just a follow-up on that. I guess, given the reiteration of the guide, even though you guys said the first quarter was a little choppy in terms of production and what it came in relative to sort of the expectations of the forecast from some of the industry groups. No change to any sort of what you're seeing in terms of the launch environment and SOP for some of the key programs that you have in the second half?
Well, we had a few puts and takes throughout Q1. But in general, all of the SOPs that were in our -- a few of them had a little bit of a delayed start. Those were documented by those customers, but they're back on track as far as we know it, and the remainder of the year is looking pretty much on our plan.
Okay. It sounded like you were suggesting that sort of the margin rate should continue. The merger rate we saw in the first quarter should continue into the second quarter. And then we see some improvement in the back half of the year is sort of how you're thinking about the full year. Maybe just EBITDA margin run rate in the second quarter. And then in terms of the second half, what are the good guys that sort of boost us in the back half of the year, maybe just a bridge on a year-over-year basis in terms of where we're getting that margin improvement from?
First, address your question. On the second quarter specifically, I think we are starting well based on where we closed the first quarter. We're off to a good start, and particularly to highlight on the positive side, some of the acceleration that we have seen on the Fit for Growth side of the -- some of the projects on value engineering, so taking cost out of the bill of material as well as accelerating some of the negotiations with our sourcing partners. So, we are very pleased on where the first quarter ended probably a little better in what -- we entered the second quarter going to have a couple of dynamics happening. We are expecting a slight sequential increase in revenue that should obviously help us also on the margin side, continued progress on the Fit for Growth. But on the other side, we will have a little bit of timing on the end in moderate, which where the cost will increase sequentially in the second quarter compared to the first. So, that's why in my prepared remarks, I indicated the second quarter and the first quarter. So, these are the puts and takes. As far as the margin progression towards the second half of the year. So, at a high level, we are expecting an incremental volume to Phil's point, and that will help us to continue to improve the profitability. But this will be partially offset by the start. So, if we are assuming the second quarter adjusted EBITDA rate to be similar to the first, then the midpoint of our guidance implies that the second half EBITDA rate will be towards the higher end of our annual guided range, and that's worthless on the Fit for Growth actions as well as the volume.
Our next question comes from Luke Junk with Baird.
Maybe to just bridge off the last question there. Fit for Growth showing some nice returns in the first quarter gross margin here. Matteo, you mentioned that some things are tracking even ahead of your expectations at this point. I don't know if it'd be possible to update us just where we stand on a run rate basis, and as we move through the remainder of 2024, if there'd be any potential upside or just in general, how to frame Fit for Growth as an incremental contributor this year?
Yes. So maybe let me use the first quarter as a kind of a proxy on what we are seeing. So, the 80 basis point improvement year-over-year was if I unpack this improvement you have on the positive side, gross productivity at the factories, created a margin expansion of 170 basis points. Fit for Growth, specifically around sourcing savings and value engineering was 160 basis points of margin expansion. And then we had a little bit of a lower freight cost, about 20 basis points. And these were offset by wage inflation, which is about 120 basis points drag. And then the annual price reductions of -- that we always see at the beginning of the year, accounted for about 80 basis points. And all in all, actually, if you look at the gross margin of the company, we were able through these actions to improve the gross margin rate compared to last year in spite of the lower revenue by more than 200 basis points. So, we are pleased really where we are on the gross margin side and what the team did. The Fit for Growth in total at a high level, so as you know, we are counting on $80 million of net savings between 2023 and 2026. We have achieved about $10 million last year, as we said in the prior earnings call. And all the projects that we have either implemented or we are implementing are expected to deliver about 75% of the $80 million, and we have a good line of sight to the remaining 25%. So, this is the latest status on Fit For Growth.
Okay. Thank you for all that detail. For my follow-up, maybe a bigger picture question, Phil, and then just be around the market reaction to your booking of the software-centric climate since booking with GM. Just curious if it's changing the threshold to book with other customers, given the modularity if you've seen a competitive reaction as well? Or do you think there would be structural barriers to them?
Not seeing any competitive reaction, but we've certainly seen growing interest from customers around the world. We're in active discussions with several of those. We've also been actively presenting demonstration vehicles with ClimateSense, and including the ClimateSense software, which is driving not only interest on the software itself, but also continuing to guide OEMs to add more content to the vehicle as they're seeing the benefit of not only the software but also more hardware content in the vehicle. So, we're really optimistic and excited. Obviously, we're getting really close to launching SOP with General Motors. And so, this will become a nice proof point for us as the vehicles hit the market, and clearly thrilled to be working with a progressive OEM like GM, who has really bought into this as a solution. And I think that was Capstone last night with our partnership award at the PACE Awards by General Motors for our ClimateSense collaboration. So more to come, but we're feeling really excited about how we've eased the implementation of ClimateSense going forward.
Our next question comes from Glenn Chin with Seaport Research Partners.
I have some questions around the awards. So, congratulations, another record booking quarter. Specifically, on the conquest high-end lumber and massage award for GM's next-generation truck platforms. So, you mentioned the full-size pickups, but does the award also include the SUVs, which I think historically have carried even more content than the pickups?
It's the truck platform so far. But obviously, trucks are the flagship for General Motors. So, the level of confidence that they have in us for this product line, I think, is clear.
Okay. Very good. And then just some detailed questions about the other awards. So, the impressive content you have in the BMW X Series, what heated surface content do you have there? And what is hypothetical high-end CPV on these vehicles?
Well, we don't give CPV for individual vehicles. That's a customer confidential information. But in terms of interior heat, it will be multiple surfaces that will be used to warm the body on touch and to enhance radiative heat as well.
Okay. And then similar on the Prologue, Phil, what content do you have there? Just curious since it's an EV.
Yes, multiple surfaces. So, for example, the door and armrest, and in some cases, areas under the steering wheel, kind of areas.
Okay. Interesting. And then the Ford Bronco, I mean, that's not a new vehicle. Was this conquest or is that new content for that vehicle?
New content.
Okay. And then just lastly, so you've had long impressive win rates, I think, 80% plus for a while, record bookings. This all comes despite at least the perception of increased competition. Are you guys actually gaining share? These conquest wins suggest that you are at least in lumber and massage anyway? Or is the pie just getting bigger?
Well, it's probably both. We don't totally analyze share on a real-time basis. So, that's something we'll have to come back to when we run those. But clearly, 80% plus win rate in multiple quarters in a row is a strong testament to our positioning as the largest independent provider of thermal and pneumatic comfort. I really believe that, that value of being able to provide these solutions to any OEM and any combination of seat manufacturers within those OEMs is something that's really an important differentiator for us.
Our next question comes from Ryan Sigdahl with Craig-Hallum Capital Group.
Maybe just following up on Glenn's last question. So, you guys are winning at an incredibly impressive rate, 80% this quarter. But what percent of opportunities are you actually bidding on? I guess are you very isolated in or narrowly focused in what you're bidding on, driving that rate? Or are you kind of casting a wide net?
It's a fairly wide net. There are maybe a few out there that we don't see, but we see the vast majority.
Great. One follow-up on the GM truck award. Is that across EVs and ICE models?
That's ICE.
Was the EVs also out for bid and just wasn't put on? Or was that not part of the RFP process?
They are different bids.
Our next question comes from Ryan Brinkman with JPMorgan.
I had to ask around the drivers of profit in the quarter after it looks like margin tracked nicely above analyst estimates, starting with whether the margin in Q1 tracked higher, lower or in line with your own estimates, as I know your guidance is really for the full year, not the quarters. And then looking at the 80 bps of year-over-year margin improvement, how much of that increase would you say roughly correlates to expense leverage on the higher sales that would be typically expected versus other more structural factors like the Fit for Growth initiatives you talked about versus maybe anything else, such as less structural or more period specific customer recoveries or any other factor?
Sure, Ryan. So let me take that. Let me start with your first part of the question. First quarter came in, as I mentioned earlier, a little better than what we were expecting a couple of months ago. And this is driven by two factors. One is really a great execution by the Fit for Growth team, particularly around -- accelerate some of the negotiation with suppliers on material cost reductions, as well as the acceleration of value engineering projects, taking cost out of a bit of material. And then also the annual price reduction, while the environment as expected, became more normal. On the pricing side, the annual price reduction was a drag of about 80 basis points in the quarter year-over-year, which is smaller than what the pre-COVID and pre-inflation rate used to be for a company, which is about 200 basis points. So, these are the positives. And more a timing aspect is around the cost -- the start-up costs of the two new plants, which came in a little lighter in the first quarter, but will be pushed out to the second quarter. So, that's a combination of really good work by the team as well as a little bit of timing. I think on your second part of the question, I think I answered earlier to, I think, looks a question before. But really, gross productivity was 170 basis points margin expansion. Fit for growth was 160 basis point margin expansion. And then these were offset by wage inflation, which still remains elevated, particularly in Mexico and Eastern Europe, which accounted for 120 basis points of degradation. And then the annual price reduction was the 80 bps that I mentioned. Volume to your question actually was a drag because year-over-year volume was actually negative. So, we're pleased with the fact that we were able to increase gross margin rate by more than 200 basis points year-over-year in spite of the lower volume. So that goes to, again, back to the great work that the team has done on fixed growth.
Ryan, just I'd be remiss not to highlight the great work our purchasing group is doing, very strategic relationship building and negotiating has really accelerated. And we're very pleased what that team is doing.
We have reached the end of our question-and-answer session, and this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.