PENG - NASDAQ

Good afternoon. Thank you for attending today, the SMART Global Holdings Second Quarter Fiscal 2023 Earnings Call. My name is Bethany and I will be the moderator for today’s call. All lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. [Operator Instructions]. I would now like to pass the conference over to our host Suzanne Schmidt, with SMART Global. Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us on today’s earnings conference call and webcast to discuss SGH’s second quarter fiscal 2023 results. On the call today are Mark Adams, Chief Executive Officer; Jack Pacheco, Chief Operating Officer; and Ken Rizvi, Chief Financial Officer. You can find the accompanying slide presentation and press release for this call on the Investor Relations section of our website. We encourage you to go to the site throughout the quarter for the most current information on the company. I would also like to remind everybody to read the use of forward-looking statements note that is included in the press release and the earnings call presentation. Please note that certain of the statements made today may constitute forward-looking statements and that these statements are the company’s present expectations and that actual events or results may differ materially. We will also discuss both GAAP and non-GAAP financial measures. Non-GAAP measures should not be considered in isolation from, as a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance. A reconciliation of the GAAP to non-GAAP measures is included in today’s press release. And with that, let me turn the call over to Mark Adams, CEO. Mark?

Thanks, Suzanne, and thank you all for joining us today. Our team at SGH delivered solid results in our second quarter of fiscal 2023, in what has been a challenging macroeconomic environment. While Ken will review the financials in more detail, I'd like to call out a few highlights that demonstrate the resilience of our business in times like these before turning to a review of each of our segments. SGH achieved record non-GAAP gross margins of 28.9% and non-GAAP earnings per share of $0.76, which exceeded the high end of our guidance range on sales of $429 million. We generated strong cash flow from operations in excess of $100 million in the quarter and exited Q2 with a strong balance sheet, including $376 million in cash and cash equivalents. While not immune to market headwinds, SGH continues to execute well throughout the cycle. With our deep manufacturing expertise, extensive customer relationships, disciplined operating model and strong balance sheet, I believe SGH will successfully navigate these near-term challenges. Longer term, we believe we are well positioned for growth and attractive returns as our business is tied to multiple secular tailwinds, including AI, Machine Learning, Data Analytics, 5G, Enterprise Storage and Specially Lighting. Now, let me review each of our business lines. Starting with IPS, which is comprised of our Penguin Solutions and Stratus Technology brands, we design, manufacture and deploy hardware, software and services for high-performance computing, AI and high availability applications on-premise, in the cloud and at the edge. In Q2, IPS had another record quarter of sales at $222 million, which represented 52% of total SGH sales, reinforcing the transformation we are going through at SGH. Q2 IPS sales more than doubled versus the year ago quarter, excluding Stratus Technologies, and were up by 170% including Stratus. As part of SGH, Stratus Technologies has performed very well with revenues and gross margins ahead of the guidance given at the time we announced the transaction. With the addition of Stratus, the services portion of IPS sales more than doubled from the year ago period. This highlights our ability to offer more value to our customer base, resulting in a higher margin, more stable revenue stream. During Q2, we were pleased to see Penguin Computing’s Jade System, a 1,300 node Intel Xeon-based system that is amongst the world's largest open compute platform-based installations, receive recognition as one of the two supercomputers to power the recent nuclear fusion ignition breakthrough at Lawrence Livermore National Labs. This is the first time that more energy was produced by an artificial fusion reaction than was consumed. This is a historic win that provides important insights into the future of clean fusion energy, and we are proud to be part of this effort. Also during fiscal Q2, Stratus was recognized with Processing Magazines 2022 Breakthrough Product Award in the Edge Computing category. Our second generation Stratus ztC Edge Computing Platform offers a zero touch, secure and highly automated system, which enables digital transformation across multiple industrial segments, and it's one of the industry's only solutions offering built-in application virtualization and fault-tolerance in an easy to install ruggedized design for the edge. As we have noted on prior calls, IPS sales can be lumpy due to the deployment cycle of larger customer installations. Nonetheless, over the mid to longer-term, we see significant growth drivers for this segment and remain bullish about our ability to expand our customer engagements. With Penguin Solutions and Stratus coming together, IPS has a portfolio breadth that can support our customers' compute needs on-premise, in the cloud and at the edge. We are still in the early innings of AI, Machine Learning and Data Analytics. Given our over 20 years of system design and deployment expertise, working with large enterprise customers, we believe we are well positioned to capture long-term growth. Now turning to our LED Solutions Group, which operates under the Cree LED brand and produces application optimized LEDs for specialty lighting, video screens, gaming display, horticulture, outdoor and architectural lighting. For the second quarter of fiscal 2023, LED solution sales totaled $56 million or $0.13 of overall SGH sales. Cree LED faced ongoing challenges due to soft demand stemming from the current economic environment, which was further suppressed as customers continued working down inventory levels. Given such marketing conditions, the team is focused diligently on cost controls to tightly manage the business and navigate near-term challenges. While being mindful of spending, Cree LED continues to invest and strengthen this position as a leader and customer-focused innovation. During the second quarter, Cree LED introduced three new high brightness LEDs targeted for large format video displays such as stadium signs, airport displays and full color roadway signs. Additionally, the team announced the release of its new XLamp Pro9 High Efficiency, high CRI or color rendering index LEDs, with the industry's highest operating temperature rating, which makes it ideal for commercial indoor lighting applications that require high-quality light. We believe that our outsourced manufacturing model and continued innovation leadership has us well positioned for recovery in the LED sector. Based on our most recent customer touch points, we are starting to see signs of improvement in customer demand and expect revenue to be up modestly in fiscal Q3. Shifting to Memory, our Memory Solutions Group is made up of two businesses: Specialty Memory, which is focused on the enterprise, industrial and federal end markets; and our Brazil-based Module Business. Overall, Q2 Memory sales came in at $151 million or 35% of total SGH sales. Sales were lower sequentially, primarily due to a continued decline in both worldwide memory pricing and the global demand for PCs and mobile phones, the latter significantly impacting our Brazil business. Focusing first on our Specialty Memory Business, sales were slightly down from the first quarter levels. Higher sales of our flash-related solutions were offset by weakness in our DRAM-related business. Our DRAM business was challenged due to continued downward pressure in pricing and a higher level of inventory at a few key accounts. As part of our longer-term growth strategy to grow our specialty memory business revenues, we remain focused on enterprise applications in the data center, primarily around DDR5 and Compute Express Link or CXL. CXL plays into our strength of combining DRAM memory with an intelligent controller to meet the desired requirements of our customers. CXL is a new interface technology which allows the expansion of memory capacity, as well as the ability to share memory among servers. We believe the result will be an increase in our memory TAM, along with the proliferation of form factors and feature sets that should increase the opportunity for our Specialty Memory Solutions. In our Brazil Memory Business, we continue to see downward pressure in what is already a challenging environment for PCs and mobile phones. Based on our latest customer interactions, we believe our sales in Brazil are starting to stabilize and feel that growth from solid-state drives or SSDs, 5G and DDR5 applications will drive our recovery over the coming quarters. Despite the headwinds within memory, we have continued to operate the business well. Unlike traditional memory semiconductor manufacturers, our business model is different as we incorporate memory chips as part of the bill of materials and then add value above the Core Chip Technology for our customers. Therefore, our results have been relatively stable as demonstrated by our segment operating margin for our memory business, which was approximately 10% for Q2. In addition, we are optimistic that the steps being taken by larger memory suppliers, such as reducing capital expenditure and selectively lowering wafer output will achieve a better supply demand balance and ultimately have a positive effect on the recovery of SGHs memory business. I'll stop here and hand it over to Ken for a more detailed review of our Q2 financial performance and our guidance for next quarter. Ken.

Thanks Mark. I will focus my remarks on our non-GAAP results, which are reconciled to GAAP in our earnings release tables. Now, let me turn to our fiscal second quarter 2023 results. Despite the continued macro-economic headwinds, we reported a solid quarter in Q2, helped by on operational discipline and the strength of our IPS segment, which had both record revenues of $222 million, as well as record segment operating income of approximately $38 million. Total SGH revenues were $429 million and non-GAAP gross margin came in at a record 28.9%, above the high end of our guidance range. Non-GAAP diluted earnings per share was $0.76 for the second quarter, also above the high end of our guidance range. Last quarter, we began providing the breakdown of our overall SGH revenue by products and services. As a reminder, our services revenue includes longer term services, as well as point in time services such as logistics and implementation services. In Q2 our overall services revenue totaled $55 million, up from $36 million in the year ago quarter, helped by the inclusion of Stratus Technologies, which we acquired in the beginning of this fiscal year and product revenues were $374 million. Second quarter revenues by business unit was as follows: IPS had a record $242 million, LED had $56 million and Memory at $151 million. This translates into a sales mix of approximately 52% for IPS, 13% for LED and 35% for memory, and for the first time IPS represents more than 50% of our total sales. Non-GAAP gross margin for SGH in Q2 was a record 28.9%, up from 26% in the year ago quarter, helped by the inclusion of Stratus within IPS and higher sales from Penguin Computing. Non-GAAP operating expenses for the second quarter were $72.5 million, down from $74.4 million in the first quarter of 2023. Operating expenses were down from the prior quarter, primarily due to cost containment initiatives. Operating expenses however were up from $59.5 million in the year ago quarter due to the inclusion of Stratus. In addition, operating expenses benefited in the second quarter of 2023 from $1.4 million in financial credits in Brazil, which was down from $2 million in the first quarter of 2023 and down from $6 million in the year ago quarter. This credit is expected to provide approximately $1 million of benefits in our third quarter of 2023. Non-GAAP diluted earnings per share for the second quarter of 2023 was $0.76, compared with $0.87 per share in the year ago quarter. Adjusted EBITDA for the second quarter of 2023 was $63 million or 15% of sales compared to $66 million or 15% of sales in the year ago quarter. Now turning to balance sheet highlight. For working capital, our net account receivables totaled $229 million, compared with $306 million last quarter. Day sales outstanding came in at 36 days, up three days from last quarter, primarily due to the timing of invoicing and collections for IPS. Inventory totaled $294 million at the end of the second quarter, down from $416 million at the end of the prior quarter. The decrease in inventory as outlined during our last earnings call was driven primarily by higher levels of IPS shipments in our second quarter. Inventory turns were 6.3x in the second quarter versus 7x in the prior quarter. Consistent with past practice, net accounts receivable, days outstanding and inventory turnover are calculated on a gross sales and cost of goods sold basis, which were $573 million and $463 million respectively for the second quarter, and as a reminder, the difference between gross and net revenue is related to our logistic services, which is accounted for on an agent basis, meaning that we only recognize the net profit on logistics services as revenue. Cash and cash equivalents totaled $376 million at the end of the second quarter, up $51 million compared with $325 million at the end of the prior quarter. Second quarter cash flows from operating activities totaled $101 million, compared with cash used for operating activities of $74 million in the prior quarter. As a reminder, we used cash and operating activities in the first quarter, primarily due to the $101.8 million earn out note from the Cree LED acquisition. We accounted for a majority of this pre-payment in our operating cash flow, given it was a contingent consideration. In the second quarter, we repurchased 677,000 shares in aggregate, spending $11 million during the quarter, inclusive of approximately $5 million in connection with a convertible exchange executed in January of 2023. To-date, we've spent approximately $58 million under our $75 million share repurchase authorization since April of 2022, repurchasing approximately 3.2 million shares in aggregate. For those of you tracking capital expenditures and depreciation, Capital expenditures were $12.6 million in the second quarter, and depreciation was $9 million. In the second quarter of 2023, we strengthened our balance sheet further through privately negotiated exchange agreements with some of our convertible note holders. We exchanged $150 million in principal amount of our 2026 convertible notes for new 2029 convertible notes. The new 2029 convertible notes have a slightly lower coupon of 2% as compared to 2.25% for the 2026 notes, and a slightly higher conversion price of $21.23 as compared to $20.30 for the 2026 notes. In addition, they also have a higher cap call, which protects us economically up to $29.14 per share, whereas the 2026 notes are protected economically up to $27.07 per share. Now, let me turn to our fiscal third quarter 2023 guidance. We expect that revenues for the third quarter of 2023 will be approximately $375 million at the midpoint plus or minus $20 million. Our guidance for the third quarter incorporates the following assumptions: For IPS as we've discussed on prior calls, we expect lower sequential revenues. For memory, we see our business stabilizing from second quarter levels and for LED we expect a modest improvement in revenues from the second quarter. Our GAAP gross margin for the third quarter is expected to be approximately 26% at the midpoint, plus or minus 1%. Non-GAAP gross margin for the third quarter is expected to be approximately 28% at the midpoint, plus or minus 1%. Our non-GAAP operating expenses for the third quarter is expected to be approximately $72 million, plus or minus $3 million consistent with the prior quarter. GAAP diluted earnings per share for the third quarter is expected to be approximately negative $0.03 plus or minus $0.10. On a non-GAAP basis, excluding share based compensation expense, intangible asset amortization expense, debt discount and other adjustments we expect diluted earnings per share will be approximately $0.40 plus or minus $0.10. Our GAAP and non-GAAP diluted share accounts for the third quarter is expected to be approximately 50 million shares based on a current stock price, and cash capital expenditures for the third quarter were expected to be in the range of $12 million to $15 million. Our forecast for the third quarter of 2023 is based on the current environment, which contemplates the global macroeconomic headwinds and ongoing supply chain constraints. We continue to manage our operations in a prudent manner as we navigate a challenging environment, while also continuing to invest in our long term growth. Please refer to our non-GAAP financial information section and reconciliation of GAAP to non-GAAP measure tables in our earnings release for further details. And with that, let me turn it back over to Mark for a few comments prior to Q&A.

Thanks, Ken. Despite the near term economic uncertainty, we remain optimistic about our competitive positioning in the end markets we serve, which include AI, machine learning, data analytics, 5G, enterprise storage and specialty lighting. I want to thank our global team at SGH for their execution in Q2. To achieve record non-GAAP gross margins, exceed our EPS guidance and strengthen our balance sheet during these turbulent times, is a testament to the efforts of our global team. With that operator, we are now ready for Q&A.

Thank you. [Operator Instructions] Our first question comes from the line of Kevin Cassidy with Rosenblatt. Please go ahead.

Hi. Thank you for taking my question. We have memory solutions stabilizing, that's just very good news, and can you give us a little more detail on how that would be split between the specialty memory and the brazil memory? Are they both stabilizing equally or you know is one doing better than the other?

One moment while the speakers reconnect. We now have the speakers back on the line.

Hello? Sorry about that. Hey, Kevin. Hopefully you can hear Mark. We have some technical difficulties here. You have Mark and Ken, but can you answer your question again – or ask your question again?

Sure. Yes, I was just asking for the details on the memory solutions. It’s great news to hear that it's stabilizing, and I just wanted to know, how that split is in the stabilization? Is it mostly the specialty memory doing better or is it both specialty and brazil, both stabilized?

Thanks, Kevin, for your question, Kevin. Thanks for your patience. Where we've seen just more – what it feels like it’s kind of a bottoming out on the pricing side of the business. It kind of feels like we're bouncing around the bottom on the price side and demand appears to be stabilizing. And as we think about Q3, Q4, hopefully seeing that play out is such, as you've kind of heard from some of the more recent announcements of the larger semi guys in memory, it’s been an unprecedented period, probably dating back to 15 years or so. And as such I think the steps being taken to get a better supply/demand balance are in place, and again, we're pretty optimistic that there's a recovery forthcoming. It's a little bit hard to call timing-wise, but we're seeing some stability in the business.

Okay. And as a follow-up on the IPS business, you’ve been telegraphing that your visibility beyond this second half of the fiscal year was getting weak, and I just wanted to note that since there’s clearly a guiding for a lower third quarter, but what are you seeing as far as out beyond the third quarter? Do you have backlog building or is it still low visibility?

I think that's a good way of putting it. We are in the process of building up our backlog towards the end of our fiscal year heading into fiscal ’24. As I commented earlier, did the –the tailwinds on the market environment long-term, they are in good growth markets being AI, machine learning, data analytics and the likes for IPS. Of course, we're coming off of three years of 30% growth plus or minus in that range. One of the things, we're in the middle of April right now, in a business that two years ago wasn't making money, and I think we're going to report something like 17% operating income for this quarter, so it's been an incredible turnaround. But as I would just say that in the middle of April 2023, budgets are kind of in process, and the one caution I would say there is just we don't know how enterprise will manage their budget process. We think it's going to be a good year for us, but we don't have line of sight yet on fiscal ‘24. So it might be a little too early for us to call the number, so to speak. But in general, the customer engagement is good, the backlog building process is on a good path, and we feel optimistic. But just again, normally budgets get set in kind of mid to – mid-summer to early fall in this business, and we want to just kind of make sure that we can tap into the visibility that we get as we approach our Q4.

Okay, thank you.

Thank you. Our next question comes from the line of Brian Chin with Stifel. Please go ahead.

Hi there. Good afternoon. Can you guys hear me okay? I know that it’s kind of a little bit faint.

Yeah Brian, we can hear you. Can you hear us?

Yeah, yeah, I've got you. Clear. Thanks. Yes, I'm curious, especially on the memory business, a pretty big sequential decline in the February end quarter, although also a pretty big memory, a pretty big decline in the memory market pricing also over that period. So I'm curious, in terms of the pass-through of lower memory prices, is that kind of a real-time event, particularly on the specialty memory part of your business, plus if the ASP declines do start to lose momentum, I guess if that's the right way to put it. That's part of that reduced headwind you're seeing?

Yeah. So, Brian, let me answer it, the exposure we have. So typically, on our balance sheet, we carry in the neighborhood of four to five, four to six weeks of inventory for memory, and so that, there is some exposure. They are both good and bad, depending on where ASPs move, but it's fairly limited to that. But when you look at our business, especially around the specialty segment, our customers know for the most part what the pricing is for various memory components, and therefore that piece is more of a pass-through, and it's really the value add that we provide on top of the memory for those specific applications, and that's why customers work with us. And it's also part of the reason that you saw the strong operating margin performance in Q2 from our overall memory segment. So even though we've seen some headwinds in the overall revenues if you looked versus a year ago quarter or year-over-year on the quarterly results, the op income percent has still remained fairly healthy, which is a testament to the strength of that business and how we operate the specialty memory segment.

Yes, yes, of course. And that, I think that's always helpful to point that out, how you guys had a memory downturn. It kind of affects you guys differently than maybe some of the suppliers. In terms of the – in terms of the IPS business, it looks like most of the sequential revenue decline is going to be from IPS and kind of consistently what you said about sort of the momentum being a little bit more physical first half versus second half loaded. I'm curious what kind of went better within the IPS mix in fiscal 2Q to drive gross margins to nearly 29%. And how do you see that sustaining or not in physical second half relative to your gross margin guide and revenue outlook?

I’ll take the first part of that, Brian. As we've talked about in the past, we're not kind of a revenue only play. We're not looking to boost up revenues at lower margins, and part of that initiative is driven by our commitment to provide value ad managed services to our customers who we engage with. And as we commented on services, it continues to be a really strong part of this business, and when you complement our systems and solutions, software solutions bundled with services, we think the gross margin profile of the business continues to be relatively stable and strong. So that's kind of what's driving it for us. So it’s just really been a discipline not to focus on revenue, but really focus on value add solutions that we bring to our customer base.

And Brian, as you look at the guidance that we provided and even the strength that we had in Q2, where we had record gross margins at 28.9% and our guidance, even though we have revenues coming down in Q3, the margins just still remain very healthy at that 20% on a non-GAAP basis. A lot of that is driven by what Mark just mentioned the combination of solution sales within IPS and a large portion of services, big services component. Now there's always going to be some lumpiness that we talked about in terms of having hardware sales or more hardware centric quarters, and that can move the margins around a bit, but I think what you've seen over the last couple of quarters is that we've been able to maintain these margins in part due to the overall services mix, which is primarily focused around IPS.

Maybe just quickly on LEDs, since you mentioned recovery there. At this stage have you pretty much drawn down that channel inventory that you spoke about in terms of channel-in versus channel-out, and is that sort of allowing you to think you can kind of grow with whatever recovery and demand occurs in that market.

Yeah I think, Brian I think that's spot on. So if you look at it over the last two quarters and we talked about it a couple of quarters ago that typically if you look at where we are in the cycle, it takes in that neighborhood of two to three quarters to burn down the inventory in the channel. We've seen that over the last two quarters. We've probably burned down close to $12 million of inventory in the channel. So that means that the sell-in is less than the sell-through. As we head into Q3, we are seeing more stabilization. There could be a little bit of channel burn, but back to normalized levels, and so we should start to get back to a demand environment and a revenue environment where our revenues equal end demand, and we're starting to see an uptick at least as we look at Q3. We’re expecting revenues to be modestly up from Q2 levels, which is a good sign.

Great, thank you.

Thank you. Our next question is from the line of Sidney Ho with Deutsche Bank. Please go ahead.

Thank you. Maybe a couple of questions. First on the IPS side, I think last quarter you guys talk about first half or is the second half being 60/40 or 55/45. What is your view now, maybe you can double click on it and highlight what has changed and maybe as part of that, you guys are talking about software. I guess software and services mix is kind of lower this quarter. If my math is right, it's about 20% IPS versus a quarter ago it’s like 32%. How are you thinking about the software services mix going forward for the back half of the year?

Yeah, so Sydney, thanks for the question, it's Ken. In terms of that range, I think that still is true, as we look at the back half of the year relative to the first half of the year for IPS specifically. We had a number of great projects in Q1 and Q2 and we tried to highlight the fact that it was going to be more of a front half loaded year, although still continued strength in the second half for IPS, especially if you looked relative to where that business was a year or two years ago. On the services piece, as I mentioned last quarter is that there's two components. There is some ongoing services where we have visibility, call it up to a year, sometimes even beyond that, and then there are services that are more what I would classify as point-in-time services, those can be designed. Implementation services and the like and so that's what adjusted from Q1 levels, as we had more point in time services as a portion of our overall services pick. Now as we look at Q3, if he asked me, where will that services portion be in terms of dollar figures, I would expect that to be in a similar range of Q2 levels, potentially a little bit higher in Q3 versus Q2.

Okay, that's super helpful. Maybe switching gear is a little bit to – you guys talk about DDR5 opportunity. What is your expectation in terms of timing of the ramp now versus maybe a standard DDR5. I think some of the memory supplies are talking about crossover being mid calendar ’24. And maybe reminders where you see the strength in DDR5 versus some of the memory manufacturers there maybe. Could it be the similar timeline or you have a different timeline than those guys. Thanks.

And thanks for the question. I think by and large, it's similar. We think we've got kind of the two businesses, right? Brazil, more consumer focused. We'll actually see some of that we think in the mid to late ’24 timeframe, similar timeframe that you talked about. And then in our specialty business, it's a little bit less dependent so to speak on leading edge. We have a fair amount of current technology platform solutions and then obviously we have some legacy on some of the more traditional now or networking telecommunications solutions that people want, continuity of supply of an existing legacy product. So I'd say specialty is a little bit less dependent on DDR5, although we will have offerings around the timeframes you talked about. And Brazil being more consumer focused is going to be probably more prevalent on leading edge out in the middle of calendar year ’24.

Okay, great thanks.

Thank you. [Operator Instructions]. Our next question comes from the line of Nick Doyle with Needham. Please go ahead.

Hi! This is Nick Doyle on for Raji Gill. I wanted to ask a question about the LED business. Great to see that you think you're kind of bottoming there, maybe some sequential increase. Brian kind of spoke about how it may be related to the inventory situation, but I was wondering if you could kind of expand on any demand signals, maybe specific to China that you're saying now and if that's contributing to your outlook.

Yeah, I'd say there's a combination of those two things that you highlighted. Yeah, they are certainly and again, I think Ken also comment on this. The channel is behaving in a way that's showing that they're starting to have more confidence in the business. And yet we have seen some more direct customer demand signals come in, but giving us encouragement for Q3 visibility in a business for a modest increase.

Okay. And could you expand a bit on the channel inventory for the Memory business. Yeah, any kind of timeline there would be great.

Yeah, if you look at the memory business, we don't have a real channel exposure. Many times we’re either – we’re selling directly either to the OEMs or the contract manufacturers and so very limited to know just the inventory per se. The area that we do have this distribution exposure is really primarily related to the LED business. And it comprises of the LED business that’s probably about 60% or so plus or minus of the LED specific business that we had just the exposure too.

Thank you. There are currently no more questions waiting at this time. I would like to pass the conference back to Mark Adams for any closing remarks.

Thank you, and thank you all for joining today. As we mentioned at the outset, we continue to operate the business very well, and the resilient nature of our business, generating the cash that Ken alluded to over $1000 million in the quarter with record non-GAAP gross margins. We continue to be bullish on the secular tailwinds of the markets we serve and we look forward to further growth and expanding our business in the future. Thank you.