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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day and thank you for standing by. Welcome to the Arrow Electronics First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. [Operator Instructions]
I would now like to hand the conference call over to your first speaker today, Rick Seidlitz, Principal Financial Officer. Please go ahead.
Thank you Patricia. Good day and welcome to the Arrow Electronics first quarter 2022 earnings conference call.
With us on the call today are Mike Long, Chairman, President, and Chief Executive Officer; Sean Kerins, Chief Operating Officer; and [Indiscernible] Interim Principal Financial Officer.
During this call, we’ll make forward-looking statements, including statements about our business outlook, strategies and future financial results, which are based on our predictions and expectations as of today. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors in our most recent 10-K and 10-Q filings with the SEC. We undertake no obligation to update publicly or revise any of the forward-looking statements.
As a reminder, some of the figures we will discuss on today’s call are non-GAAP. We have reconciled those with the most directly comparable GAAP figures measures in our earnings release. These non-GAAP measures are not intended to be a substitute for our GAAP results. You can access our earnings release at investor.arrow.com, along with the CFO commentary, the non-GAAP earnings reconciliation and a replay of this call. We will begin with a few minutes of prepared remarks, which will then be followed by a question-and-answer period.
I’ll now hand the call to our Chairman, President and CEO, Mike Long.
Thanks, Rick and thanks to all of you for joining us today. For the first quarter we built on the record performance we delivered in 2021. We thought continuation of a strong demand conditions from last year. As a result, demand for electronic components and associated design, engineering and supply chain services remained high. This led to record sales in the first quarter, exceeding the top end of our expectations. In addition, our record gross profit and earnings per share for the quarter were driven by strong execution in the face of fear supply chain demand and balance.
I’m pleased to report that our past investments to enhance our capabilities, especially in the area of supply chain as a service are leading to growth and our profit performance. While some bottlenecks persist demand for electronic components across key industries, and all three regions, particularly the Americas and the EMEA region remain strong. A favorable mix of higher margin products and solutions, along with regional mix resulted in record quarterly operating income and margin.
This points to Arrow helping customers navigate shortages and supply chain challenges in this environment so they can maintain production, bring new products to market and securely manage their applications and data. By helping to mitigate production risks and help ensure a steady stream of products to the market Arrow solidifies this position as a trusted advisor, working alongside customers and suppliers. Thanks to the focused execution our components business produced record results this quarter.
Our global components business delivered the highest ever operating income along with sales above our high end of expectation. The Americas experienced robust demand across most end markets and industries. EMEA performance was strong across all industries due to improved supply while Asia’s performance was impacted by product mix and supply. Design activity improved in all three regions and backlog continues to grow indicate that all customers are still concerned with securing supply.
Our enterprise computing solutions business delivered solid operating performance. We saw demand continue to grow for more complex solutions, including hybrid with backlog at record levels in all regions. With operating performance growing year-over-year our business has well performed in position for the remainder of the year as customers are anticipating longer fulfillment and placing orders further out resulting in a strong pipeline. While the IT demand environment was healthy business mix was skewed towards software and services due to customer preferences.
Hardware related sales continue to face challenges from supply chain bottlenecks, resulting in slightly lower net sales than we anticipated compared to prior year. I’d like to congratulate all of our teams for their strong execution and delivering a record quarter. Arrow is well-positioned to continue to deliver results given our investments that are driving our growth. Arrow strength also comes from consistently emerging stronger from downturns and disruption. My performance is indicative of just that. And we look forward to expanding our business to the benefit of our customers, suppliers and team.
We also believe our strength comes from working on technology solutions that make a difference in people’s lives that is engineering the power of innovation to make life better. Before I hand the call back over to Rick to provide more details on our results and our expectations for the next quarter I’d like to add a personal note. On Monday, we announced that Sean Kerins will assume the role of President and Chief Executive Officer effective June 1, and that I will become Executive Chairman. Over the years I have enjoyed our conversations about the business and the dynamics affecting our industry at large. I’m grateful for those relationships we’ve built. And I wish you all much success in your careers. Sean has been a leader with Arrow for 15 years, most of them working closely with me. So you already know that you’re in great hands with them.
With that, Rick, I’ll hand it over to you.
Thanks Mike. First quarter sales increased 10% year-over-year a non-GAAP basis. The average Euro dollar exchange rate for the quarter was $1.12 to 1 Euro. Changes in foreign currencies negatively impacted sales growth by $152 million year-over-year slightly below the prior expectation of a $160 million negative impact growth. First quarter gross profit margin of 13.3% was about 220 basis points year-over-year due to higher mergers in both global components and enterprise computing solutions. Operating expenses increased slightly as a percentage of sales year-over-year, but decreased significantly as a percentage of gross profit. As a reminder, many of our value added services and solutions can be independent to the sale of electronic components and therefore contribute more meaningfully to profits into sales.
Interest and other expense was $34 million, which was slightly below our prior expectation. This was mainly attributable to higher interest income offset partially by higher rates and floating rate debt. Our effective tax rate of 23.5% was in line with prior expectation in the target long term range of 23% to 25%. Turning to the balance sheet and cash flow, first quarter operating cash flow was negative $200 million. The first quarter is typically our most challenging quarter for cash flow generation compared to the fourth quarter our inventory days have increased. But this is largely due to us stocking higher value inventory with a greater design and engineering component. Our cash cycle of approximately 60 days was six days longer than the fourth quarter. However, our return on invested capital and return on working capital reached new highs for any first quarter and our near our all time highs achieved in the fourth quarter. We are making responsible working capital investments to capitalize on strong demand environment. Net debt totaled $2.9 billion and total liquidity was 2.6 billion when including cash of 243 million. Our liquidity position is in one of the best in the history of our company.
Our strong profitability in the effective management of our balance sheets enabled us to deliver on our commitment to return cash to shareholders through the repurchase of approximately $250 million of shares for the fourth consecutive quarter. This brings total cash return to shareholders over the last 12 months to approximately $1 billion reducing our diluted shares by approximately 9%. We remain committed to returning cash to shareholders as we are confident that we are repurchasing shares below their intrinsic value. At the end of the first quarter our remaining repurchase authorization stands at approximately $513 million. Please keep in mind that the information I’ve shared during this call is a high level summary of our financial results. For more detail regarding business segment results, please refer to the CFO commentary published on our website this morning.
Turning to guidance, midpoint sales and EPS guidance imply all time quarterly records. Midpoint global component sales guidance would be an all time record for any quarter. Our guidance reflects continued strong operating leverage for global components on a year-over-year basis with profit growing several times faster than sales. Our forecast suggests enterprise computing solutions profits grow year-over-year and it would achieve its strongest second quarter in several years. We estimate an approximately $300 billion headwind to sales and $0.20 headwind to EPS growth due to the strengthening of the U.S. dollar compared principally to the Euro. Finally, please note the CFO commentary includes information on our fiscal calendar closing dates.
With that, I’ll turn the call over to the operator for Q&A.
Thank you. [Operator Instructions] Your first question comes from the line of Toshiya Hari from Goldman Sachs & Company. Your line is open.
Hi, thank you so much for taking the question and congrats on the strong results. And congrats to Mike for a very successful career. I had two questions. First, I guess on the pricing environment. We’re obviously hearing from your partners, your suppliers about inflation and how they’re passing that through to partners and customers like yourselves. What are you seeing from a cost perspective? How are you translating that into your pricing? And how should we expect that to impact margins going forward? And then I’ve got a quick follow up?
Sure. Well, as you know, we’ve been talking about this for a few quarters, and the increases do get passed along all the way through to the customer base. And what we started seeing was, if they were coming more often at the end of last year going into this year. What I would say is, I believe most of it will stick because raw materials are up, trucking is up moving products around cost more and just generally manufacturing for the suppliers is up.
So I expect for that to go through. Having said that, too as you know that does have an effect on your inventory ratios, returns in those types of things, especially if you’re stocking more value added product, but the prices have gone up significantly. I would say that pricing will abate towards the second half of the year, but we’re still expecting some price increases through there. And by then I would say everybody will be caught up which would be good. It would be good to get some normalcy in the product.
That’s very helpful. And then as a follow up. I just wanted to ask about your views on the overall cycle. You guys sound really, really good. Your suppliers, your partners also sound very good about the demand profile going forward and the visibility you have. At the same time we hear about some of the consumer facing applications from a demand perspective. There is being signs of moderation. You’ve got a war going on in Europe. You’ve got the lockdowns in Asia. So I guess the fear is things kind of slow down from here onward. But what are you seeing and what are you hearing from your customers? And how are you planning your business for the next 6 to 12 months? Thank you.
Yes. I can address most of that by things we said in some of the new things we said, first off the size of this war is not as big as some of the others. However, during war conditions, obviously the military started spending more money and creates more demand. So while the war is a negative, as you guys know war economy isn’t always a bad thing. The second thing in general, where you’re coming across, especially on consumer products is some of the others think the point that was just made really plays into that. We have seen pricing go up. But unit shipments have gone down over the last year. So we’re not filling the full demand that is going to market and the question would be have some end use markets pulled their demand out what would happen and right now the answer to that is largely not much of anything.
Ukraine demand came completely out. Russia demand came completely out. And here we are in the exact same place. So I think we’re in a position of higher priced product, but lower units to get to a market that has a higher than normal expectation of getting product. I do not see manufacturing picking up to a point that is going to offset that all the way through the first half of next year. And possibly going further from what we can see today even though I wouldn’t commit to it. I would love to commit to it. But Sean’s going to be sitting here. So I don’t want him to have to live with what I say. But I will tell you, I think the demand forecast, separate from the economy is still good for a good period of time.
Very helpful. Thank you so much.
We have your next question coming from the line of Joe Quatrochi from Wells Fargo. Your line is open.
Yes, thanks for taking the question. And I will echo congrats to Mike and Sean’s new roles. I want to try to understand the incremental EBIT margin that you’re seeing in the components business on a year-over-year basis is pretty phenomenal. How do we think about that, looking into the second half of this year, as we start to maybe comp some more significant price increases that we saw in the back half of last year?
I think what we would say from our point of view is firm. If that’s a good enough answer for you. We don’t see things going the opposite way in our ratios right now because as I said, we believe demand is going to stay where it is. The supply factor is what really gives you pause. But now, we’re sitting here with roughly four quarters of demand from our suppliers. So it gets a little bit easier to forecast albeit still tough because we can get some upside but we expect it to probably continue to improve given some of the efficiencies we’re working on at the same time that the volume is going out the door. So I don’t see things declining for quite a while yet.
Okay, that’s helpful. And then just kind of curious you talked about the higher value inventory additions this quarter. Are we to take that as assuming that your inventory on a unit basis is continuing to still kind of decline or remain flat?
Yes. I think that’s exactly what we see. I wouldn’t say it’s declining, and I wouldn’t say it’s totally flat. I would definitely say it’s not up. So when we start to get more supply and I think it’ll be an irregular supply in the beginning as suppliers can increase their volumes. But that’s a long way off. But I think it’s still more of the same. I think there’s still some more price increases. And hopefully we start getting outside of product towards the second half of this year a little bit.
Got it. That’s helpful. Thank you.
And your next question is from Matt Sheerin from Stifel. Your line is open.
Yes, thank you and good afternoon. A question Mike just regarding the components business and the revenue decline in Asia year-over-year. You talked about constraints and some other issues. Yet your competitor, your biggest competitor, having had pretty strong double digit growth year-over-year. So I’m wondering what the difference might be in terms of customer mix, and also is the supplier relationship that you have with TI where we saw a lot of movement you took a lot of market share, but I know there’s some of that business going direct. So does that play into it at all as well?
Yes. Of course there’s several things. Number one you also saw WPG and WT has, I think you even wrote the article about it some growth, but that was primarily Taiwan. And as we’re not a large player in Taiwan, number one. Number two, the consumer end of the business has not been a strength for us. And number three, it is the supply. If you remember, when this first started to take off we were shipping a lot of product and China was overwhelmingly the biggest in the mix.
So most of those manufacturers got out of trouble, but I’m not going to say they’re out of trouble. But we went to a more hand to mouth situation there now than what we felt was an oversupply. If balance, is how much product you get and it just varies by how your backlog sets. But I think we’re in a good place there. I wouldn’t really ring the bell on any place like for example, if we really did great in North America, Matt, and the other guy didn’t do great, or they did great in Asia, and we didn’t do great or vice versa in Europe is about supply for each of us. And they have their supply issues. We have ours. And that’s what we’re dealing with. It is clearly not a demand problem anywhere for anybody.
Got it. Fair enough. That’s quite helpful. And then on the computing side, you talked about increased profits year-over-year for Q2 but your guiding revenue down. Again, is that a function of mix? And then in terms of the pipeline that you’re seeing, are you expecting the second half to be up versus the second half of last year?
Yes. Well, right now, what we are seeing are constraints on product in hardware and we’re trying to get that piece of it caught up. But that’s largely what’s missing. Virtually everything else we have in house is growing. So the hardware pieces is the toughest piece. When we get into the second half because Sean’s going to have to live with you. I’m going to let him in through that piece.
Okay. Thanks.
And by the way I may come down and go fishing with you in the sound after this.
Matt. So in addition to what Mike said, I would just point out that we love hardware, and we’ll continue to drive it. But we’ve also intentionally been driving a mix shift to more software, more hybrid cloud, more services. And by definition, that’s going to create a different dynamic for reported sales. We are actually going to grow on the billings line in Q2 by the way. At the end of the day, you want to kind of evaluate things on the basis of GP and operating income dollar growth year-over-year and we did that in Q1 and we’re calling for that again in Q2.
And as we look to the second half, it’s hard to say exactly when the hardware supply chains, improve. Your guess might be not much different than mine. But the good news is that hardware pipeline and backlog continues to grow. That gives us a little confidence that we’re seeing some renewed activity in the traditional on-premise piece of the data center, especially as it pertains to hybrid cloud activity. And we’ll keep building that backlog and be able to benefit from it when things loosen up, but we are expecting continued progress across the course of the year and we are looking for better performance in the second half.
Okay. Sean have you seen the supply constraints actually worsen in the quarter which we’ve heard some from some others? Or is it kind of the same?
No, we have Matt. Since we started to see lead times extend in our systems and storage and network business, I would say mid last year kind of late Q3 in some cases lead times that doubled, tripled or even quadrupled. So the news hasn’t gotten better. And we’re working in case by case and supplier by supplier and deal by deal. It will get better. It’s just tough to call exactly when.
Okay, great. Thanks and congrats to you and Mike.
Thanks Matt.
And the next question is from Ruplu Bhattacharya from Bank of America. Your line is open.
Hi. Thanks for taking my questions. I like to convey my congrats as well to Sean and Mike. Again, this quarter, you had a very strong quarter and ECS for software and services. And like you also talked about supply chain as a service do you think there’s a recurring revenue component to your ECS sales that probably is meaningful? And can you comment on is that something that you would disclose at some point? And how should we think about this mix of software and services trending over the next couple of quarters?
Yes. I think that you’re absolutely right. It’s going to pick up. And that would be something that we would look at disclosing at a later date as we saw the consistency start to build on those products. It’s really not in a position where you would call it a line of business. It’s really a product sale in our normal conditions of business. But as we start to see that diverge, you are correct. It will move into that. You’ll start to see that being recorded Like others, I wouldn’t expect that for another year or so though. And what I can tell you is we’re very pleased with the increases we’re seeing in the services, and then the cloud business. And that’s what we’ve been pushing for over the last couple of years, as we know that model is changing, we just want to be on the front end of it this time.
Got it. That makes sense. Maybe for my follow up, Mike, can you talk about your capital allocation priorities for the next 12 months? And as you look out into the next three, four quarters, what gives you the most concern? I mean, it looks like the backlog is strong, and the end market demand is strong. Doesn’t look like we’re going into a recession, or at least orders aren’t being cut. So, I mean, is there anything that gives you concern as you look out over the next 12 months? And how would you spend your cash and capital allocation? Thanks.
Yes, I think there’s a, you got a few questions in there, but that’s okay. I think as far as our cash and allocation of cash, it’s the same invest in the business where we can get the growth and the profit. M&A if that’s a possibility, which is rather remote during this period of time right now. And then the third is to do buybacks return cash to shareholders, which is we’ve been doing and we’ve been doing it with great consistency to give that comfort level. As far as that goes, I don’t see a big change right now going out. Things that would concern me are if inflation continues to go and higher value inventory, obviously, that takes more cash to buy the inventory, until you can get settled through the system and get to receivable prices matching your inventory level. So you might sell a part for $1 today, but then that part, I’m going to use an extreme example, might go to $1.50 next month and you’re still pulling your receivable then at a lower price that plays a little bit of havoc with your cash short term but certainly on your sales and profit you get it there. So for us, it’s really about I think cash and continuing buybacks on a certain level balance with our cash.
Okay, and thanks for all the details and congrats on the strong execution.
We have your next question from William Stein of Truist Securities. Your line is now open.
Great, thanks for taking my question. And I want to add my congratulations on your relative ascension to these new positions and also especially on the great results that you’re posting today and the guidance. And you deserve quite a bit of credit for that. But I do want to ask about the cyclicality of each of the businesses for a moment. In components in the past, we’ve seen periods like this, for example, post the financial crisis and calendar 10 to 11 and in fact, if you go further back to the tech bubble in 2000 margins are dramatically higher. Now we’re seeing this expansion again and last few quarters. Those are great results. But I wonder if there is enough it’s changed in this business that might keep those margins at this elevated level through the cyclical times that we’re almost certainly going to face.
Yes. We’ve kind of laid out how these saw the pricing go. But there’s several things that have changed. And there’s obviously several things that have changed within Arrow. And one happens to be engineering as you know, we’ve put more focus on that over the years and our services and software business, which [Audio Gap] I think you’re going to see that. The other thing is, the amount of inventory on hand is likely to move closer to a just in time inventory, thereby they’ll be less inventory being held for two reasons. One is going to be more visibility in the system, so customers are going to have to place their orders out further.
And customers are going to be more concerned with supply than trying to get that extra penny off the part like they’ve been conditioned to. And all of that will come into play. The question is, will we give back any of it? I think anytime you’re dealing with an inflationary market and hard to get parts at one time of course, some will go back. But I don’t believe it’ll be dramatic, as dramatic as last time, because that was really an economic situation more than the semiconductor business. This time was a pure on supply problem, and now coupled even with a little pullback in the market that’s not going to fix the problem. We’re still going to have the short for the next year or two. Hopefully, that helps.
Yes that helps a lot Mike. I was focused on the components side, I think you put some commentary in systems. But I want to focus on that business separately just for a moment. I was talking with an investor earlier today who said look at the multi year growth in revenue in this business. And I know that in the past had this target of 1.5 to 2 times IT industry spend. And I don’t necessarily track that so carefully. But this business has declined in each of the last four years on a revenue basis anyway. The revenues down to where it was about nine years ago. And, as you call out and I appreciate that the profitability here maybe if we look at the operating profit, that’s the right way to measure it, because it’s not. It looks better in that regard. Is that the way we should think about this business in terms of how you manage it internally, you’re managing it to the operating profit level? And that’s what we should target from a growth perspective and if so maybe what’s the growth rate that we can expect in the future? Thanks so much.
Yes., I think you hit the nail on the head. We have been pushing this business to a services and software business. The operating income has been getting better. That business has been growing with the market. If you go 9 or 10 years ago, our hardware business was basically all we had. We just had hardware that we were selling. And over that period of time you may or may not remember based on your age, but I’ll show mine a little, we used to buy storage systems from EMC at a million dollars and they used to get put in. Now that product is $50,000. So the price of hardware has come way, way down over the years. And we thought then it wouldn’t be sustainable as we started building the rest of the business. But given how we account for things and how we have to legally account for things, you don’t get to see the growth in the top line and sale. So the best place to either see it is really on the bottom line and where we’ve applied money over the years to improve the bottom line. And we’re also seeing the point now of what I would say is that crossover point where we should be saying a little more consistent growth, because we’re getting to those levels now.
And the next question is from Nikolay Todorov from Longbow Research. Your line is open.
Yes. Hello everyone and my congrats as well to both of you. a question I think Mike you mentioned when you talked about the components business in each geography loosening supply, maybe you can touch upon that and expand a little bit where exactly which areas of maybe products you’re seeing signs of supply starting to loosen up? And I guess related to that the outlook for the components business into the second quarter is stronger than most of your suppliers and peers. Is that also because of expectation of supply loosening up?
Yes. We believe we’ve got a handle on the supply we’re going to get for the second quarter. And we believe that we’ve been looking at it for a while, and it looks pretty good. I think since we started looking at it and thought of our own guidance, we also saw other suppliers come out with a little stronger market than we thought was going to happen. So it’s very good. It’s purely a supply demand and when the orders are in the system, but virtually every vertical market in North America, in Europe, and in Asia with the exception of one or two are up in their demand counts. So the ability to really forecast to you immediately by region where that’s going to fall is a difficult thing. We know the prices, we know the inventory levels, and we tend to know where the inventory is coming in. And that’s how we build it up. So pure supply right now, nothing else to it.
Okay, thanks. That’s helpful. And second question, just double clicking on a comment, you made the pricing you will update towards the second half. Can you expand maybe a little bit on what do you mean by that simply because we’ve seen obviously, the raw components or raw materials continued to increase throughout the first couple months of the year? And maybe can you talk broadly about the sustainability of pricing power for the suppliers? Are you starting to see any increase in pushback from customers on the price increases on the semi sides which we’ve heard are quite substantial?
Yes. I think that customers have a choice. I’ll start there and they can pay it or not get parts. Unfortunately, that’s the draconian answer. And that’s basically the answer from the suppliers too. The reason that I say a base, I didn’t say go away. So we might as well put that out there right now a lot of suppliers came out with 20%, immediate price increases, 25% immediate price increases to get caught up to where they thought they needed to be. I don’t believe we’re going to see that kind of increase again in the second half of the year. I think those numbers will go down.
And I think largely it is a big exercise for suppliers to raise the price and go through everything on their side. And I don’t see a lot of them coming back and revisiting that to the following year. But the pricing power is there. And as I said before, the difference is either a supplier builds a $10 million fab or they farm it out somebody else who has, and whoever builds the fab is going to have the ability to charge to have those products built. And customers have frankly been getting a deal for a good many years. They’ve been getting better, faster, cheaper, in their products, and they haven’t had to pay for that. Now they’re going to have to pay for it. And I think that’s here for good.
Got it. I appreciate the answers. Thank you.
[Operator Instructions] We have a question from the line of Jim Suva from Citigroup. Your line is open.
Thank you so much. Congratulations, Sean and Mike having known you for decades, it’s going to be a pleasure for me to say congratulations, but you will be missed. My question is on the inventory build I’m not saying inventory is a bad thing. It’s not. But when I look at the percent increase year-over-year up over 40%, and quarter-over-quarter up, say 10%, 11%. And I look at your outlook for sales yes, prices are going higher, but your sales outlook isn’t even close to those type of builds. So can you help me understand and maybe some of it is it’s already completely shipped out of your building and gone or I just don’t understand the magnitude seems like a big difference. Again, not that it’s a bad thing, but I’m just trying to get my arms around why there’s such a big difference between the two numbers.
I think what you have Jim is the age old answer that when you take it over time. The inventory changes here daily. One week can make a huge difference. One day of shipments can make a huge difference. So you’re seeing an end of the period number but there’s a lot of activity and a lot of churn in the period itself. The vast difference though, remember, I said before, we may be carrying a part today at $1.50, that we sold 30 days ago with $1 because the supplier just came in raise the price on it. And we have to pass that through on all future shipments. So you get the dollar value of the inventory today and you get the future sale of that higher level inventory tomorrow. Does that make sense?
Yes but just a difference, again, of your sales outlook isn’t close to. Let’s call it close to 9%, 10% for your sales outlook. But the inventory build was up year-over-year 40%. And what came out there’s still a disconnect.
Well, yes, that but you also have, as I said, before, this time for us, we had a bit of a freeing up of the higher, more expensive type parts that were more of what were the golden screw parts. If you remember, that was the biggest stream that most of the customers had, they didn’t have the parts to fulfill their build. Those parts are coming in now. And that’s one of the other reasons that you see the inventory is actually more of a SKU with the higher dollar value part than it was before.
Okay, that makes complete sense. And remember we do go fishing here in San Francisco also in Silicon Valley. Thank you.
I know you do and I know, I was waiting for you to get on maybe your July 4 party.
Congratulations.
And there are no further questions. I would like to turn the call back to the speakers for further remarks. Speaker please go ahead.
Thank you for your interest in Arrow Electronics and have a nice day.
This concludes today’s call. Thank you for participating. You may now disconnect.