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Thank you for standing by. This is the conference operator. Welcome to the Westport Fuel Systems First Quarter 2019 Financial Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Shawn Severson with alphaDIRECT Advisors, Westport's Investor Relations representative. Please go ahead, Mr. Severson.
Thank you, and good afternoon, everyone. Welcome to Westport Fuel Systems first quarter conference call, which is being held to coincide with the press release containing Westport Fuel Systems financial results that was distributed this afternoon.On today's call, speaking on behalf of Westport Fuel System, is Chief Executive Officer, David Johnson; and Acting Chief Financial Officer, Jim MacCallum. Attendance at this call is open to the public and to media, but questions will be restricted to the investment community.You're reminded that certain statements made in this conference call and our responses to various questions may constitute forward-looking statements within the meaning of the U.S. and applicable Canadian securities laws, and as such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties.Actual results may differ materially from those projected in the forward-looking statements so you're cautioned not to place undue reliance on these statements. Information contained in this conference call is subject to and qualified in its entirety by information contained in the company's public filing. I'll now turn the call over to David. David?
Thank you, Shawn, and thank you all for joining the Westport Fuel Systems Q1 2019 Conference Call. I'm pleased to share our Q1 2019 financial results and also talk to you about our key drivers advancing the clean transportation industry globally and discuss how those forces are impacting our business.Our strong Q1 results are a validation of our strategy. They are the latest proof point that stringent emission regulations and increasingly urgent calls for action on urban air quality and climate change are advancing the deployment of alternative fuel vehicles.Our market-ready solutions align well with the market's need for clean, cost-effective transportation and enable us to respond directly to our OEM customers, partners and to consumers.We are encouraged by how the market for clean transportation is developing and by the demand we are seeing for our products.Since our prior earnings call, I have had the opportunity to meet with even more employees, partners, customers, suppliers and shareholders around the world. Next, I'm on to South America, Japan and then back to Europe. Our Westport Fuel Systems team is committed to deliver clean, market-ready, cost competitive technology to transportation customers around the world. Given the company's long legacy, it is particularly rewarding to see that our entrepreneurial, research and product development efforts have created a diverse portfolio of products that we sell in nearly 70 countries for applications from small single cylinder engines to large engines for commercial vehicles.As a clean technology company, we are proud of what we're doing, and we're excited to grow our business and respond to regulations and market demand. I'm also pleased to announce that last month, we published the first Westport Fuel Systems sustainability report. It was prepared in accordance with Global Reporting Initiative Standards and encompasses our entire global operating footprint.It establishes our baseline for corporate and social environmental performance. While the economic and environmental benefits of our products are well established, we took the opportunity more transparent in reporting environmental and social impacts at our global operations.This is really an important milestone for our team, and documents our leadership position in the clean transportation industry. Let me now turn to our Q1 results.Q1 2019 revenue was $73.2 million, an increase of 15% over Q1 2018 and 21% over Q4 2018, a great quarterly performance result following our 18% full year increase in 2018 versus 2017 as reported during our last call.Sales of Westport's HPDI 2.0 in Europe are accelerating and we're working hard to deliver Weichai's launch of HPDI 2.0 in China later this year.With Q1 2019, we recorded our fourth consecutive quarter of positive adjusted EBITDA. We earned a positive $7.3 million on an adjusted EBITDA basis compared with negative $3.4 million in Q1 2018. That's a $10.7 million improvement in operating results. Our trend line is positive and consistent and speaks to the sense of urgency we have to deliver results quarter-after-quarter.Cummins Westport also had a great quarter with Q1 2019 revenue of $92.3 million. Overall, a very strong quarter with contributions from across the entire Westport Fuel Systems business. Let me now make a few observations that I see regarding the market. As we discussed last time and as we expected, Europe has enacted its first CO2 regulations for heavy-duty vehicles with a vote on April 18 in the EU Parliament.Under these new rules, heavy-duty truck OEMs will be required to achieve a fleet average CO2 reduction of 15% by 2025 and 30% by 2030 compared to a 12-month baseline that will be created starting this July 1.Our HPDI 2.0 technology provides a 20% reduction of CO2 when implemented on current generation heavy-duty truck engines, which means current generation trucks can meet these new regulations through 2029.If we combine HPDI with the blends of renewable natural gas, that will enable compliance with 2030 regulation and beyond. This means that HPDI 2.0 allows OEMs to preserve their considerable investment in existing engines and existing trucks and to meet these new regulations with a technology that's clean, affordable and commercially available today.We have already seen the impact of these regulations via increased demand for HPDI. First, fleet customers are buying HPDI-equipped trucks from our OEM lead customer in Europe. Second, we see demand for development activity to support customers who will add HPDI to their truck portfolio. Westport's HPDI 2.0 is the only technology that is developed, validated, certified and in production and for sale today that fully and affordably responds to the new CO2 regulations in Europe. Next, we've noticed the drumbeat for cleaner passenger vehicles and light commercial vehicles continues the markets around the world. There's been a rolling newsfeed of different countries announcing bans on petroleum and diesel vehicles. Our internal tracking counts 15 countries across Europe and Asia with target date as soon as 2030.Target date is an important phrase since most if not all of these statements remain simply that, targets and intent. Nonetheless, we expect the regulations will come and consumers and OEMs share this expectation.The trend and the market signals are loud and clear. One example of the impact of this changing sentiment, especially against diesel, is the reduction in sales of diesel passenger cars in Europe. The share of diesel cars purchased is down by 5 percentage points from 36% in March 2018 to 31% this March.Alternative fuel vehicles are picking up some of this share. And we do hear it also from our OEM customers. Our customer in India, for example, Maruti Suzuki, announced in April that they're evaluating the phaseout of diesel cars as the new Bharat Stage VI, which is equivalent to Euro 6 emissions, when these regulations come into effect April 1 of next year. Meeting this BS VI standard with diesel engines will be costly, and the Indian market is very cost sensitive. Natural gas powered vehicles will pick up some share because ours is a cost-effective solution. Next, let's talk about climate change and the urgency of action to address this challenge.We need to deploy market-ready, cost competitive, efficient transportation solutions like ours, and we need to do it now. Natural gas and renewable natural gas remain a foundational element of an all of the above transportation strategy. There is no silver bullet that decarbonize the freight sector and all technologies have a role to play.Commercial fleet purchasing decisions are driven by economics, and fleets will deploy what works best for them. Natural gas has already addressed the infrastructure, logistics and scale of challenge that are now faced by other technologies. Natural gas is market-ready now.The transportation sector is on the cusp of a dynamic change. It's important not to confuse trade show announcements around prototypes and demonstrations with production solutions like ours that could be purchased and put to use right now.And just to wrap up, clean fuels like natural gas, are available and cost competitive today. Natural gas for transportation is a renewable energy story. The significant increase of renewable natural gas as a transportation fuel offers another proof point that there's a pathway for deep decarbonization using gaseous fuels.A recent report from NGVAmerica and the Renewable Natural Gas Coalition highlights that since 2014, RNG use in transportation in United States has increased sixfold, displacing over 7 million tons of carbon dioxide equivalents.In California, where we had a strong penetration of natural gas in transit buses, refuse trucks and other applications, about 70% of the natural gas used in transportation is already renewable. And Sweden is leading the way to a fossil-free transportation sector by 2030. They already have 91% renewable natural gas share in their transportation mix.These examples reflect what we hear from our customers that market trends continue to strengthen, trend that we also see in our financial results, our order book and our development pipeline activities for future customers. The strength of our OEM and aftermarket business in key markets and the growth of HPDI in Europe and China ensures that we're well positioned to capitalize in the opportunity.Before I wrap up and hand over to Jim, let me remind you of our strategic priorities for 2019. Number one, deliver sustained growth of our light-duty and medium-duty businesses through both the aftermarket and OEM channels.Two, acceleration of HPDI commercialization. This means more volume with existing customers, successful launch in China, new customers, lower cost and increased margin.And third, continued focus on aligning our corporate cost structure with our revenues through cash flow and operating results.2019 is already off to a great start, we're looking forward to the rest of the year and beyond. With that said, I'll turn it over to Jim to review Q1 2019 financials. Jim?
Thank you, David. I too am pleased with the results from our first quarter. All of our businesses performed well and coupled with strong results from our Cummins Westport joint venture led to improved earnings.To review our Q1 results in more detail, I'll begin on Slide 2. We closed the quarter with sales of $73.2 million, a net loss of $3 million and positive adjusted EBITDA of $7.3 million. This continues our trend of positive adjusted EBITDA, and importantly, is a significant increase over both last quarter and the year ago quarter.Operating expenses are trending lower, but remain elevated due to legal expenses related to the ongoing SEC investigation and one-off cost associated with the executive management transition during the first quarter. Our Q1 2019 adjusted EBITDA was a significant improvement over both the prior quarter and Q1 2018. The overall improvement in adjusted EBITDA was driven by demand in our products resulting in increased gross margin and secondly, from CWI earnings.Turning to Slide 3. We look at our transportation business segment. Revenues for the first quarter improved by 15% to $73.2 million as compared to the same quarter in 2018, primarily due to strength in HPDI sales. Excluding the decrease in the euro against the U.S. dollar, our transportation revenue would have been approximately 19% higher than Q1 2018.Despite the lower euro, Q1 2019 independent aftermarket revenues increased by $0.9 million or 2% over the prior year quarter. Q1 2019 OEM revenues increased by $8.5 million or 48% over the prior year quarter. HPDI product sales were the primary driver for the OEM increase. As a result of higher revenues, gross margin increased to $17.2 million in Q1 2019 from $14.6 million in Q1 2018.R&D expenses decreased by 21% in Q1 2019 compared to the prior year quarter from $8.4 million to $6.6 million but were consistent with the fourth quarter of 2018. We expected this year-over-year decrease in R&D spend as we transition to the commercialization phase of HPDI 2.0.Current year R&D expense was also lower as a result of the lower euro and Canadian dollar compared to the prior year quarter. Due to the fundamental market forces that David mentioned, we continue to experience strong demand for our market-ready technologies and have a number of development programs underway for both light-duty and heavy-duty vehicle applications of our clean, affordable technologies including HPDI 2.0.As a result of the increased sales and reduced R&D spend, adjusted EBITDA in our transportation segment improved significantly over both last quarter and versus Q1 2018.Turning to Slide 4. We'll review the results of the CWI joint venture. CWI had a strong quarter and reported revenue of $92.3 million in Q1 2019, a 77% increase over Q1 2018 but consistent with Q4 2018.CWI revenue in the first quarter of 2018 was impacted by prebuy activities in the fourth quarter of 2017 in advance of onboard diagnostic compliant engines.In Q1, CWI recorded net income of $17.2 million or 19% of sales. And during the quarter, Westport Fuel Systems received cash dividends of $6.0 million.Turning to Slide 5. We'll review our corporate segment. SG&A cost increased over the prior year, mainly due to legal expenses related to the SEC investigation, which were $1.8 million net of expected D&O insurance recoveries. As noted previously, we have not received any new subpoenas since August 2018.We continue to review corporate expenses and expect to see reductions through the rest of 2019. Turning to Slide 6. This shows our cash walk.We started the quarter with $61.1 million and ended with $46.0 million. The cash decrease is primarily due to increased accounts receivable balances associated with the higher sales. Other key movements in the cash balance were principal and interest payments of $5.9 million, capital expenditures of $2.0 million, net cash outlays relating to the SEC investigation of $0.6 million and as mentioned, CWI dividends received of $6 million in the quarter.We continue to service and pay down our debts on schedule. In April, we paid Cartesian its annual royalty payment and other amounts, and during the remainder of the year, we expect to reduce our term debt by approximately $7 million. We will continue to repay principal out of our existing cash flows and financing facilities and do not have any specific plans to raise capital.We are maintaining our annual revenue guidance of $265 million to $295 million for 2019. The year is off to a strong start, but as mentioned in our previous call, the Weichai volumes resulting from the launch of HPDI product in China are heavily weighted to the latter half of the year and difficult for us to forecast at this point in time.We look forward to attending the Oppenheimer investor conference in New York City next week, and the Craig-Hallum investor conference later in May in Minneapolis, and we will meet with many of you then.With that, I'd like to turn it over to the operator for questions.
[Operator Instructions] Our first question comes from Rob Brown with Lake Street Capital Markets.
On the HPDI business, you had nice growth in the quarter. Could you give us a sense of how that's developing? Is it moving from -- I think last time, you said it's moving from small trials to larger kind of grouping rollouts. So how is that trending in terms of the order flow? And then has it shown up yet in the numbers?
Good to hear you. So what we see from our end is a good order flow from our European launch customer. And then we see the same kinds of reports that are available to the others in the marketplace regarding fleet buying units here and there. And so overall, we're very pleased with the forecast and the order book, but I can't -- I struggle to give the granularity that I'd love to give because in the end of the day, I'm the supplier, I'm not the OEM of the product. So we don't have real crystal clear detail on all those sales in the marketplace. But certainly, the pull is good, the outlook is good, and we continue to be encouraged by the feedback we get from our European launch customer for that product.
Okay. Good. And then with the new EU regulations, I guess, will you see that impact first in development partnerships? Or do you see fleets actually taking steps now to try to meet those ahead of time?
Yes. So we have -- as mentioned in our remarks, we have really good pull from the marketplace, and we're seeing those development programs starting, and that is encouraging to us. There is some lead time, of course, to go from making the decision to move forward to having it in production. And so we have to work through that development, production validation and launch. Now just like we're doing right now with Weichai. Of course, they made their decision back last year, and we're able to announce it at that time and so we're looking forward to making announcements in the future as additional types of customers reach those important milestones and production decision.
The next question comes from Eric Stine with Craig-Hallum Group.
So just sticking with HPDI. I mean obviously one of your key objectives is securing additional partners. Just curious, in your conversations, I mean, do you sense that those partners are looking for a solution that's similar to your launch partner? Or are they looking for a unique solution? Just trying to get a sense of kind of thoughts about time to market for these partners.
Yes, that's a great question so thanks for asking it. Basically, what we see is that customers are in kind of some element of urgency as this new regulation hits the books. And so they know that regardless of whether they take kind of strictly off-the-shelf solution from us and simply apply it to their vehicle or whether some adaptations are required, they need to go quickly. And I can tell you as a general principle, therefore, they want to do the minimum amount of work to get the product in the field with quality. But nonetheless, the reality is everybody's engine, everybody's vehicle, everybody's own requirements are different OEM by OEM, and so that we got some years of work to do in the development and validation before the production hits. So we have the European launch customer last year. We have the Chinese launch customer this year, and we're looking to other ones to follow in subsequent years.
Got it. And then, I know you just mentioned or talking about the CO2 standards and voted on approved. I know it still needs to be officially signed into law and that might be late May, mid-June. I mean, is that kind of the thing where you think that sets off that urgency? Or maybe you're seeing activity behind the scenes that obviously is not seen in the public and that activity is already starting to ramp?
Yes. As a supplier to the OEMs, we do see the activity in advance of when it's seen in the marketplace, and so we see it already. And that's work -- I don't think anybody is waiting for anything further with respect to innovation. What actually happens, I would tell you, is that inside the major OEM, they need to make the decisions. And they're big companies and they have their processes and procedures, and frankly, they do have alternatives. There's other things they consider doing to respond to this regulation. But I think when they finish the analysis and we see this with our internal deliberations in support of our customers, when they finish those analyses, they come back to the conclusion, this is the best way forward to respond to the regulation. And so we're quite busy with those discussions right now.
Got it. Maybe last one from me and then I'll turn it over. You mentioned that in the OEM business that the majority of the year-over-year increase was HPDI. I'm curious if you're able or willing to just disclose kind of that mix between the 2, between your traditional OEM light-duty business and HPDI?
Yes, I don't have those figures handy at this moment in time. I think Jim said it well in his comments that we see strength in every element of our business, from our aftermarket business to our light duty OEM business to business in India, basically everything around the world, including HPDI as you mentioned specifically. But in terms of a breakout, I don't think we have those numbers at this juncture, but we'll take it under consideration. Perhaps we'll have that in the next round.
The next question comes from Colin Rusch with Oppenheimer.
This is Kristen on for Colin. Just wanted to dig in a little bit on the light-duty opportunity. You talked about some of the demand drivers going out to meet some of those long-dated targets. I was really hoping to get some color on what you're seeing in terms of the demand expectations over the next 12 to 18 months, call it, in EU.
What we see is that basically to respond to the CO2 requirement and really customer pull, if you think about the light-duty segment, we're already supporting the customers directly through our aftermarket solution. So these are customers that already own the vehicle and decide they want to save some money and change their vehicle from running strictly on petrol to running with LPG or CNG. And so they add our technologies. They can take advantage of the cost-effectiveness of those gaseous fuels. And so what we're seeing is basically OEMs saying, "I can do that for the customers," and deliver that as an OEM solution. But their process to go from making those kinds of decision to bring to production does take 12, 18, 24 months depending on the OEM exactly what we need to do and their capabilities and our capabilities to support them. So -- but as a general premise, the cost effectiveness is there. As oil prices go up, the cost effective gets even better and the demand get stronger.
Okay. That's very helpful. And then just wanted to switch gears a little bit here. You talked about your SG&A costs going down throughout the rest of the year. Where do you see the biggest opportunities to optimize that operating cost structure?
I would tell you that, as mentioned, we're looking forward to the opportunity that someday we're not paying cost for SEC lawyers and so forth. So that's an opportunity that we're keenly focused on but unfortunately don't have a lot of control over. But it is on our list of things that we look forward to. Beyond that, we do see some opportunities for efficiency in terms of our operation, but I would tell you that's more around getting higher top line and better absorption of our SG&A than anything else.
The next question comes from Amit Dayal with H.C. Wainwright & Co.
David, Jim, in regards to HPDI 2.0, you're not breaking down specific dollar contribution levels over here, but can you talk about percentage growth maybe that the HPDI 2.0 seen year-over-year or even sequentially?
Yes, the growth curve is rather significant. I'll let Jim provide any figures if we're able to. And we recognize -- let me be real clear at the start, we recognize your desire and your colleagues' desire to have more transparency in the business and breaking up some of those things. And so we're working on how and when we'll be able to do that. Certainly, adding second and third and fourth customers will really help us to provide that kind of data in the future without divulging customer-specific information. So I apologize that we can't be more specific, and we look forward to doing that in the future.
No problem. Is all of this growth that you saw in HPDI, all is in Europe, right? I mean Weichai hasn't hit yet for HPDI 2.0?
That's correct. The launch of Weichai now could include some of the early preproduction units that we've shipped them, but that would be a relatively modest amount. So I would say the majority of the growth is due to our European launch customer in the European market.
Got it. And just one final one for me...
Amit, if I could, I mean this is along the lines of what we expected, what we're planning for. So it's very encouraging to see that the market take the product and our European customer continue to order more of it. So we're really excited about the results, and of course, eager to have second and third customers and we'll add the Weichai volumes later this year.
So then in that context, do you expect this level of momentum to continue for HPDI 2.0 in Europe? Or was this sort of onetime-type situation?
No. I think it's more of the former. So we expect that we're in a "launch curve" and so it will continue to grow. And we're not expecting linear growth either. We're expecting solid growth as the marketplace recognizes that this is not only a very robust and good solution, but it's one they can buy right now. So as we discussed in prior calls, a fleet to go out and buy a handful or 10 or 2, and then their next order will be a bigger number as they recognize that the product actually delivers all that's promised including the CO2 reductions and the cost-savings. So I do expect -- and then there's a -- this happened to us with passenger vehicle market. You see your neighbor with that product and then you want it too. And so as the fleets compete with one another, we expect that this is something that will really grow and be very exciting for us.
So why a little conservative on the guidance, I guess, given the momentum you're seeing, your strong year-over-year growth, good margins? On the top line you are being a little conservative it feels. Is there a possibility you might raise guidance or update your guidance later in the year?
Well as Jim mentioned and as you recognized, we indicated that we'll maintain our guidance at this juncture. Certainly, as the market develops, we reserve the right to revise guidance in the future, but that will be some future event that we'll talk about in that future. So I apologize for that, but at this juncture, there's a big tail on our plan, our business plan for the year, which is the launch of Weichai. And I think I may have mentioned it before, but launches almost never get pulled ahead and have a fairly good chance of being delayed. We're working very hard to avoid that delay. But then of course once the launch happens, there's also what is the rate of the launch and what rate is achieved and sometimes that can be slower than is hoped for. So that's really I would say a major consideration. Of course, the other consideration you see it already in these results, it's kind of buried in there, is that the foreign currency exposure and how that continues to move. And so that's also a risk to the business plan. And with those 2 risks in mind, we thought it was the better path to maintain guidance at this juncture.
That's fair. Understandable. Just one last one from me, David. Can you talk about the fueling infrastructure that is coming up to potentially support the uptake of these types of vehicles in your key markets?
Yes. We've seen announcements and we continue to see installations. I don't have specific numbers for you but we'd be glad to follow up with you on that and talk about kind of what market intel we actually have country-by-country, throughout Europe primarily, but also we see the growth in India and China putting infrastructure in place. But I don't have those statistics all handy, but I'd be glad to separately go through that with you and share what we know.
[Operator Instructions] The next question comes from Christopher Souther with Cowen and Company.
Congrats on a great quarter here. Taking the first quarter forward, essentially if the rest of the year was flat, you're already at the high end. And so to kind of piggyback on the question before on guidance, what is kind of some of the puts and takes? Looking at obviously there's the big factor of the Weichai launch, which is not in your control, but can you maybe discuss some of the other markets, maybe some of the legacy things, kind of the puts and takes that might lead to the low end to the high end or above the current guidance?
Yes. Just to -- I'll add. We talked -- so thanks for your question. We had just talked about the fact that we're not sure exactly, can't confirm and know what's going to happen, what the launch curve looks like with Weichai. Both timing and the volume of that curve, we don't know, so can't predict with certainty foreign exchange but adding just another fact that could give you some more flavor about the business. Some of our markets respond strongly because of government actions, incentives and other programs that are in place that really help our customers to realize the financial gains associated with our technology. And sometimes these get stopped. So there's other uncertainties in the marketplace that really aren't within our control. Frankly, our products are very competitive, and they do offer our customers and our -- whether those be consumer customers or OEM customers a strong lever for responding to the portions of the marketplace. But sometimes those portions do change, and so we thought at this time maintaining guidance was the best path forward.
Okay. That certainly makes sense. And then just wanted to make sure there's nothing kind of to flag beyond typical seasonality for the third quarter in Europe with kind of the aftermarket-type business. Anything else cadence-wise we should be looking at?
My inclination is a no. Jim, do you have a further comment?
No, I have nothing other than what you mentioned, David. I think the Weichai launch is the biggest thing in the second half.
Understood. And then to shift gears, I wanted to see if there's any update on the hydrogen side. Seems to be a bit of a momentum in that space in some OEMs, and you guys have discussed in the past interest in this space as well given there's kind of some transferable technology from the natural gas side. Could you guys maybe discuss that market a little bit and any updates there?
Yes, absolutely. I'm glad you raised it. It is a part of our business and one that we're very excited about. Frankly, the hydrogen -- fueling a fuel cell with hydrogen requires tanks and valves and regulators just like fueling with natural gas and the other fuels that we deal with. So this is an area of our expertise. We have specific products that support the growing hydrogen marketplace. Most of the business that we're supporting is relatively low volume and preproduction units and development, but nonetheless, our customers are giving us strong indications that, one, we're a competent and capable supplier with products that they need to support their hydrogen fuel cell products; and two, that we compete in the marketplace and they see a future for this technology and we're glad to support it.
And then just the last one. I want to make sure that -- are there any time periods or exclusivity with the European OEM or with Weichai that we should kind of be aware of as far as launching with new partners? I know there's going to be obviously testing and that kind of stuff but wanted to see if there's any time period before you'd be able to start any of that kind of activity.
No, I don't think we have any issues in that regard that would slow our growth curve in any way that we need to delve into.
This concludes the question-and-answer session. I would like to turn the conference back over to David Johnson for any closing remarks.
Thank you very much. I really appreciate the chance to bring these results to you today. I'm thrilled to have such great progress. I mentioned in the first earnings call that I joined you for back in March that we're on a continuation path of the strategy that was put in place over the past 2 years. And I'm very encouraged by the results bearing out that strategy and really the market forces better supporting our growth and our response to helping clean up transportation on a global basis.We have a lot of work ahead of us. We have huge growth opportunities on a global basis. Our share is still small, and so really we see that the time is right for our technology. And we're pleased that we can bring that technology to the market at this time as we call that market ready. There isn't long development time line to develop new technologies and research. We're simply talking about one application after another, and we can grow the market and respond to the need for cleaner air and saving money. So with that, thanks very much for your time. We look forward to seeing you all and talking to you again in the future.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.