Good day, and welcome to Intevac's Second Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, that this conference call is being recorded today, July 27, 2020.

And at this time, I would like to turn the call over to Claire McAdams, Investor Relations for Intevac. Please go ahead..

Thank you, and good afternoon, everyone. Thank you for joining us today to discuss Intevac's financial results for the second quarter of 2020, which ended on June 27. In addition to discussing the Company's recent results, we will discuss our outlook looking forward.

Joining me on today's call are Wendell Blonigan, President and Chief Executive Officer; and Jim Moniz, Chief Financial Officer. Wendell will start with a review of our business and our current outlook then Jim will review the second quarter results and provide guidance for the third quarter before turning the call over to Q&A.

I'd like to remind everyone that today's conference call contains certain forward-looking statements, including, but not limited to, statements regarding financial results for the Company's most recently completed fiscal quarter, which remains subject to adjustment in connection with the preparation of our Form 10-Q as well as comments regarding future events and projections about the future financial performance of Intevac.

These forward-looking statements are based upon our current expectations, and actual results could differ materially as a result of various risks and uncertainties relating to these comments and other risk factors discussed in documents filed by us with the Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form 10-Q.

The contents of this July 27 call include time-sensitive forward-looking statements that represent our projections as of today. We undertake no obligation to update the forward-looking statements made during this conference call. I will now turn the call over to Wendell..

Thanks, Claire, and good afternoon. Thank you for joining our Q2 2020 earnings call. I trust and hope all of you and your loved ones are staying healthy and safe. Today, we reported a quarter of strong execution in both our Thin-film Equipment, or TFE and Photonics operations.

Despite the manufacturing limitations and supply chain disruptions faced during the quarter, we delivered a record $12.2 million in Photonics revenue and shipped the two 200 Lean systems in backlog on time, growing our Thin-film Equipment revenue to $16.6 million.

With the blended 40% gross margin and prudent control of operating expenses, we delivered a profitable and positive free cash flow quarter, all while growing our cash balance to $45 million. We were very pleased to report these strong results in light of the stress placed on our operations by the ongoing COVID-19 pandemic.

Our results for the second quarter and continued progress in each of our businesses, provides us increasing overall confidence for improved profitability and cash flow this year compared to our outlook on our April earnings call.

The number one priority at Intevac has been and continues to be ensuring we do everything we can to keep our employees as healthy and safe as possible, while we work through this ongoing health crisis. Our number two priority is to ensure that we continue to innovate and deliver our products and services on time with the highest quality.

While these are unprecedented and challenging times, Intevac's performance in the second quarter is a testament to both the essential and critical roles each of our businesses play in the global Defense and IT infrastructure and our ability to manage through unpredictable and chaotic times.

Our performance is also a testament to the resilience, ingenuity, and dedication of our employees and delivering products to our customers on time while maintaining strong margins and being highly disciplined in our spending in order to generate positive cash flow.

Operationally, Intevac employees carrying out essential engineering, manufacturing and logistics responsibility are on-site in each of our operating locations, including Singapore, which enabled us to ship two 200 Leans on schedule in Q2.

We have been taking and continue to take extensive precautionary measures to mitigate the risks to our employees following all mandated local safety protocols. All employees who are able to work remotely continue to do so.

Nearly all of our equipment business is Asia-based, which means we continue to face challenges caused by rapidly evolving travel restrictions and quarantine requirements, sporadic transportation and freight disruptions and some support logistic issues as well. In some ways such as travel, these challenges have escalated since our last call.

However, as is the case in Singapore – with our Singapore operation, the challenges have eased somewhat. That being said, international air travel is an important component of our operation and the inability to travel continues to be a hindrance in our ongoing TFE system evaluation programs, each of which requires timely and close collaboration.

Nonetheless, we are making better progress in these programs than we were a quarter ago when customer engineering activity was just resuming from shutdowns in China. These programs have certainly been delayed and are moving slower than they would in a pre-COVID environment.

However, we continue to be engaged with our customers at a distance and adapting to drive for success.

So while we haven't seen any reduction in customer demand for our products, particularly in our Photonics and hard drive-related businesses, engineering collaborations and product evaluation cycles continue to elongate and stretch out our TFE growth initiative timelines.

For our VERTEX system evaluations in the display cover panel market, our initial eval tool shipped last year has ramped up development activity from Q1 levels. During Q2, at the request of our customer, we amended our agreement with them.

First, given the shutdown experienced by our customer during the evaluation period, we agreed to extend the evaluation timeframe in order for them to continue to engage with handset makers and secure production orders.

The amended agreement also includes a good faith VAT-related cash payment and importantly, a restructure of the revenue conversion terms. Instead of being solely a time-based condition for our customer to purchase the system, the amended agreement now contains volume production order threshold terms as well.

We continue to be engaged in projects with top five handset OEMs in multiple stages of maturity at this Tier 1 cover glass manufacturer, with particular focus on the design that is closest to a production order decision.

Last quarter, I indicated that we had moved into a second design cycle on the project, which is completing this week, including nine color variants of the design. These samples will be evaluated on phones and drive the next steps, which include a possible decision to move into production.

We are optimistic that a move into production of this initial design alone would generate an order surpassing the volume production order threshold term in the amended evaluation agreement. Progress with our second VERTEX evaluation program has been a different story.

While we were very pleased to complete this agreement in Q1 in spite of the emergence of COVID, problems getting this system from Singapore into China continued to persist. At issue is the import codes and associated VAT required under the customer's temporary import license request.

As this process has taken unnecessarily long and appears to be at an impasse between our customer and China customs, we intend to temporarily suspend this evaluation program and reconfigure the tool in support of another VERTEX project, employing our DiamondClad technology in the wearable space, which has a possibility to move more quickly to installation and production.

Also in our VERTEX initiatives, COVID-19 delays have slowed the rollout of our Diamond Dog screen protectors as we discussed last quarter. Today, these delays are mostly behind us, and our initial 3,000 unit build has been moved into Amazon inventory.

We are now preparing to execute our second production run in Q3, which is to include products for Samsung as well as Apple phones. Our social media advertising campaigns have begun as well as influencer reviews and media awareness activity.

As a reminder, Diamond Dog is a branded consumer product selling for $29.99, utilizing our DiamondClad coating on a retail cellphone screen protector. We believe this performance surpasses the best screen protectors on the market today and at a lower cost.

The primary objective behind this direct-to-consumer project is to create industry and customer awareness of our DiamondClad coatings capability to accelerate DiamondClad demo activity and to drive demand for VERTEX Marathon systems. The overall takeaway on the VERTEX is that we have been delayed by COVID.

However, we are encouraged with our progress, remain strongly committed to the program and continue to believe this business holds substantial growth potential for our TFE business. Our expectations for the ENERGi system in solar ion implant, which also have been impacted by COVID delays, are consistent since last quarter.

We continue to have confidence in the future potential of this product line and discussions regarding a multi-tool order similar in scale to the 2019 deployment in support of a multi-gigawatt capacity expansion in China continue.

With the shutdowns and quarantines experienced in China to date, similar to our VERTEX evaluation activity, this expansion project in China is delayed by approximately six months.

Nonetheless, our customer continues to communicate that the capacity expansion will go forward and they've initiated the facility expansion project, and we remain optimistic that ENERGi will return as a revenue growth driver for us next year.

We estimate the purchase order timing to be late this year with deliveries expected to begin in the first half of 2021. For the MATRIX PVD system for advanced packaging, just as we're seeing delays in China, the MATRIX evaluation system located in Europe is also being affected by global travel restrictions and quarantines.

The tool continues to make progress in its evaluation and qualification, albeit at a slower pace than originally planned. This tool’s revenue remains in our 2021 plan.

While COVID has negatively impacted our Thin-film Equipment growth initiatives, on the flip side so far, it has had a relatively positive impact on our hard drive – on hard drive media growth.

Strong demand for nearline drives driven by the work-from-home and distance learning transitions have resulted in strong year-over-year growth in media units to date in 2020. In Q1, we saw record shipments of nearline drives. And at this point, midway through the year, data center spending is holding up better than some had predicted.

After Q1 media units came in nearly 20 million higher than expectations, on June 18, we participated in a webinar with Trend Focus to discuss the potential upside in our HDD business that could materialize as a result of secular improvements of the growth rate for nearline drives.

The webinar is available for replay on our website's investor page, and I invite you to listen to it. As a reference, over a year now, we've presented our view that the number of 200 Lean systems needed by our customers in the 2019 to 2023 period would be about the same as for the prior five years or 17 tools.

Six of these tools have shipped in 2019 and 2020. So the expectation is another 11 tools, plus or minus, will ship into 2021 to 2023 timeframe. In the webinar, we referenced that the average number of disks per drive or tie ratio jumped 18% in Q1 to 3.3 disks per drive exceeding all prior records.

The longer-term secular drivers for data center spending are improving, which could also result in future upside to nearline drive growth and in turn media unit growth. The most recent long-term forecast for media, which were published in February before any impact of COVID-19 were factored in, model an 8% annual growth rate for media units.

Also during the webinar, we calculated the upside in 200 Leans needed for each 1% increase in the media growth rate. Applying our historical market share estimates of about 65%, this figure is around 1.5 Leans required per year for every 1% increase in media demand.

So if media unit growth would have increased from the 8% to the 10% to 12% range, that additional 3 percentage points of growth could end up doubling the industry's needs for 200 Leans over the next few years. Of course, this is a hypothetical calculation at this time and subject to a number of caveats.

Our industry manufacturing capacity is currently underutilized and we believe the industry is seeing COVID-related constraints that are limiting hard drive manufacturer output today.

While the growth rate for HDD media has shown improvements so far this year, our customers will likely need to see sustained levels of nearline demand prior to placing new orders to expand installed capacity.

With those caveats stated, however, given the upside potential for media growth in a post-COVID era, there also exists the associated upside potential for our HDD media equipment business over the next few years.

Adding to our confidence in a strengthening longer-term forecast for our HDD business and taking into account our current application case understanding, it is our expectation that we will participate in a significant way in support of all media capacity expansions that address the growth in nearline drives with our industry leading 200 Lean system.

Meanwhile, in the shorter-term, our forecast is consistent with the expectation of a modestly down year in our hard drive business, due to fewer system shipments as compared to 2019.

And just as before, we believe the strong growth in Photonics will offset any declines in 2020, which brings me to an update on our Photonics business, which continues to deliver strong growth and profitability. The team did an outstanding job delivering record revenue in the challenging operating environment that was Q2.

Meanwhile, growth expectations for this business in 2020 have further strengthened since our April call. These expectations are based on the U.S.

Army's continued prioritization and progress of the IVAS program, the ramp to full rate production level of cameras for the F-35 Joint Strike Fighter program as well as multiple other development contracts proceeding according to plan. The IVAS program continues at breakneck speed.

We have delivered our first CMOS-based cameras to the program prime, Microsoft and system integration and optimization efforts have begun.

Per plan, we expect our first CMOS sensors to be fully integrated into the IVAS system and begin initial qualifications in December and undergo field evaluations at soldier touchpoint 4 in the first quarter of 2021.

Despite a delay in touchpoint 3, the overall program scheduled to equip the first fighting units with IVAS systems in the fourth quarter of 2021 remains on track. Our direct engagement with both Microsoft and night vision labs on the IVAS program has been continuous as we work through initial delivery integration and longer-term program planning.

Two weeks ago, we had our first joint field testing event at Fort Hunter Liggett to characterize our CMOS sensor, our soon-to-be-delivered IVAS CMOS with game demonstrator ISIE 19 imaging system.

With regard to our ongoing technology advancement, last quarter we completed the first ISIE 19-based camera systems as well as the initial field trials and final fine-tuning activity. The first evaluation units have shipped to the labs for characterization and also in support of the next generation F-35 helmet development program.

The ISIE 19 sensor, our highest performing night vision sensor today will support the majority of our development programs going forward.

In addition to the aforementioned IVAS and next-gen F-35 programs, the ISIE 19 will be used in the DELTA-I binocular goggle we're currently developing and the EVA program or advanced visual acuity, which we expect to be on contract for in Q3. All of these programs and development contract awards have built a strong foundation for our future growth.

We have multi-year visibility for our manufacturing operations, continued validation of our digital night vision technology, and we are pleased to report that our already significant year-over-year revenue growth forecast for Photonics in 2020 has further strengthened from the 20% to 25% range in April to at least 25% today.

Now to sum up our overall outlook as of today, specifically as it compares to our last earnings call. As you may remember in April, we took a conservative approach and assumed some of the revenues we previously forecast for 2020 would move into 2021.

Given the number of uncertainties related to the pandemic, we also decided it would not be prudent to provide official guidance. We did, however, provide confidence in our optimism in key areas, namely our growth story in Photonics and the relative stability of our HDD forecast.

We also were confident that we would protect the strength of our balance sheet and even in a downside scenario were all Photonics – all non-Photonics and non-hard drive revenue events delay to 2021, our net usage of cash would be no more than $5 million.

Since April, we've become more optimistic, not only that we can achieve these expectations, but can perform even better. Photonics is ramping IVAS deliveries at the higher end of expectations and our hard drive business forecast remains solid. Our operational execution is strong, delivering improved margins with prudent expense controls.

As a result, at this point in time, even in the after mentioned downside scenario, we believe that we can achieve breakeven to slight profitability for the full-year, and instead of limiting our net usage of cash, we are optimistic that we can actually grow our cash balance year-over-year.

We've already added $2 million of cash to the balance sheet this year, and we believe most of the risks driving cash usage in the second half have been mitigated at this point. The only caveat here is that given the ongoing pandemic situation, any suspension of our operations could significantly alter our outlook today.

And as we have seen, the situation remains unpredictable. In addition, while the TFE business timing continues to be lumpy quarter-to-quarter, and in this downside scenario, at this point, we see the first half and the second half of the year as relatively balanced for both of our businesses.

While our plan to achieve profitability in 2020 is achievable based solely on revenues from our Photonics and hard drive business, any revenue event around our TFE growth initiatives is upside to the plan.

Our improved profitability forecast also increases our optimism for a net increase in our cash balance year-over-year, and our track record gives us confidence in our ability to closely manage expenses to limit non-strategic operating and capital expenditures and to preserve and enhance the strength of our balance sheet.

All of this enables us to continue driving our strategic growth initiatives through this turbulent year. We stand on a strong financial foundation with no debt, a growing cash position and proven acumen navigating through challenges to maintain the strength. As we look further ahead, we fully expect to return to revenue growth in 2021.

These are unprecedented and challenging times, but we have the ways and the means to get through it. We continue to look at the facts in real time, day-by-day and react and adapt accordingly.

Today, as on our last call, I can confidently say that the Intevac team is not only doing the best we can do under these circumstances, I believe we are doing the best that can be done. Now I'll turn the call over to Jim to discuss the details of our recent financial results.

Jim?.

Thank you, Wendell. Consolidated second quarter revenues totaled $28.8 million. Thin-film Equipment revenue totaled $16.6 million and included two 200 Lean systems along with upgrades, spares and service. Photonics revenue of $12.2 million, included $6.1 million of product revenues and $6.1 million of contract, research and development revenues.

Q2 consolidated gross margin was $11.4 million or 39.6% as a result of favorable revenue volumes and mix from both businesses. Q2 operating expenses were $9.3 million unchanged from Q1, primarily due to a more focused emphasis on selected programs in R&D. This resulted in a net profit of $1.5 million or $0.06 per share.

Our backlog was $69 million at quarter end and consisted of $54.4 million of Photonics backlog and $14.6 million of non-systems HDD backlog in our Thin-film Equipment business.

We ended the quarter with cash and investments including restricted cash of $44.8 million, equivalent to approximately $1.89 per share based on 23.6 million shares at quarter end. Cash flow generated by operations was $2.4 million during the quarter.

Q2 capital expenditures were $692,000, and depreciation and amortization were $939,000 for the quarter. The company continues to manage cash very closely to maintain a minimum balance of approximately $40 million with increasing optimism that we can actually grow our cash balance year-over-year.

With the majority of COVID-related supply chain and operational constraints understood and manageable for the most part, we are returning to our practice to providing guidance for the forthcoming quarter. We are projecting Q3 revenues to be between $21 million to $22 million. At this revenue level, we expect gross margin to be between 40% and 41%.

Q3 operating expenses are expected to be around $9.5 million. We expect interest income of about $100,000 and GAAP income tax expense of about $300,000 in the quarter. As I mentioned previously, our cash taxes will be lower. For Q3, we are projecting a net loss in the range of $0.02 to $0.04 per share, assuming approximately 24 million shares.

This completes the formal part of our presentation. Operator, we are ready for questions..

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] And our first question is from Craig Ellis from B. Riley FBR. Please proceed with your question..

Yes. Thanks for taking the question, and guys, congratulations on a profitable quarter and cash balance growth. Jim, I wanted to start off just by clarifying some of the financials inside of the second quarter results. I know you didn't provide explicit guidance, but I think most people didn't expect the 200 Leans to ship.

So that clearly was a positive. But can you help us understand some of the dynamics in the other segments, for example, upgrades, spares and services, how did that perform? And – go ahead..

No, no, go ahead. Finish your question, Craig..

No. I was just going to say then I'll follow-up with one, so..

Yes, the upgrades and spares were very consistent with the first quarter, just under $8 million in the hard drive business. And you can see in Photonics, Photonics revenue grew. It was just under $11 million in Q1, and it was just over $12 million in Q2.

And as we said at our last earnings call, literally the night before we were having the earnings call, Singapore was told they needed to shutdown. And so the operations worked previously to get that turned around.

And we've said at the last call that the 200 Leans could go in the quarter or one could slip out to Q3, and we were able to get both of those into this quarter..

That's helpful. Thank you. And clearly good fulfillment by the team. And then as it relates to the third quarter guidance, so thanks for returning to providing that. The question is about the composition of guidance.

So the Photonics business has been – while there was growth in the most recent quarter, it's been fairly steady between its two main components. And yet given the absence of 200 Leans in backlog, I would expect that, that part of thin-film would decline materially.

So is there something else in thin-film that's increasing significantly quarter-on-quarter, spares and services? Or how do we think about the gives and takes as we look at the two main segments and their sub-segments?.

So I think the first thing is you can consider the Photonics Q3 to be similar in terms of revenue that to where it was in Q2..

Got it..

And then you're absolutely correct. Absent of the two 200 Leans, I think we may see a few hundred thousand, maybe even up to $0.5 million to $1 million more in upgrades and spares, but no 200 Leans in the third quarter for the hard – the Thin-film Equipment business.

So similar Photonics and slightly more in hard drive, but without the two 200 Leans that were present in Q2..

Got it. And then I'll just take my final question to Wendell before I get back in the queue. Wendell, it was helpful to get all the color around some of the things that are going on with different programs, whether it be VERTEX or solar or Advanced Packaging.

And admittedly, we've got unprecedented cross currents in the current environment that make it hard to forecast.

But do you have a sense for when projects with VERTEX or solar or AP will start to move into backlog and when we can start to expect that thin-film component of backlog to move up from $14 million currently towards levels that we've sometimes seen over the last two to three years? Thank you..

Yes. I would say, from a timing perspective, if you look at the bullet points from the script, we don't expect the solar implanters to go into backlog until the fourth quarter this year. And that's just project related. The buildings are not going to be ready for the tools.

When we look at the Advanced Packaging program, that had an expiration on the eval that I believe, Jim, correct me if I'm wrong, was January..

That’s right, January..

January 2021. But there was an – also a program that they had in place that they were going to upgrade that for a manufacturing prior to that. So we would have seen that turn as revenue once we did the upgrade. But that's all been stretched out. We have our own problems getting over there. All the other suppliers have the same problems.

We're doing a lot of remote stuff there. Our service guys wear cameras on their helmets, and we're working with them that way virtually. But it's definitely stretching out, and I don't see that one until 2021. I think that was in the 2021 plan I mentioned.

VERTEX is a little bit different because we are quite a ways down the road with the tool that's out there that we just extended, depending on what the next steps are with the evaluation I talked about today.

So they did – they froze that design, they did it in nine separate colors, which took quite a bit of time because those are all optical films to make those colors. They're not painted or inkjet or anything like that. And depending how the evaluations go here near-term, that could move. So that one is definitely a possibility inside of 2020.

And depending on what volumes look like, that could also rotate to an order for the Marathon tool. So we just have to stay with that program. But we were encouraged that we were asked to extend that and keep those programs moving. There's been a lot of work done on them..

That’s helpful. Jim, if I could just come back to you for a follow-up. So it looks like we're seeing some real strength in upgrades, spares and services within thin-film in the third quarter.

Is there any risk that, that is a pull-in from the fourth quarter? Or you just – do you sense that there's a higher level of demand that we're likely to see through the back half of the year, given some of the very strong dynamics that we've seen in the data center market crisis to date? Thank you, guys..

Okay. So what Wendell said in the prepared remarks was we expect a similar – now we expect a similar second half to the first half for the total company.

And we're not guiding Q4, but I would expect stronger upgrades in Q4 and just slightly down in Photonics as we complete one of our programs that's been ongoing for 1.5 years or so, but stronger Q4 than Q3, just to get us to a similar.

If you just did the math, you can kind of subtract our guidance of 21.5, add the first two quarters subtracted from first half, second half being balanced, and you can kind of come into the fourth quarter. And in the fourth quarter, I would expect stronger upgrades than we've seen in each of the last three quarters..

Good for you. Thanks, Jim. Thanks, Wendell..

All right..

Okay. Thanks..

And our next question is from Mark Miller from The Benchmark Company. Please proceed with your question..

Thank you for the question. Congrats on the stronger expected results.

In terms of the upgrades, getting back to that – has there been any change in the media in terms of the hard disk media in terms of the process that might require additional chambers? Is that part of your thinking about the upgrades in later this year?.

Yes. That's a lot of that activity is, we call it the process modules, where they're actually adding additional steps to the media recipes. So we service that need by putting on additional modules.

And that's one of the things that makes our tool unique versus our competitors that we can continue to add modules on over time where the other platform runs out of space..

So would this be a conversion for all the tools in the field, which would be quite substantial?.

It depends on which customer it is. And we've been doing these upgrades for some time as far as putting the actual module on. So there's more upgrade work that gets done, say, with like a HAMR upgrade. So you need the module, but you need some other components as well.

So I wouldn't look at it as every tool out there is going to have a process module that we're going to book and turn from this moment on. We've done some of that work already..

So is this being driven because Western Digital is starting to ship its EAMR drives? Is this being driven by the ramp in shipments of the EAMR and HAMR for – similarly for sites in Seagate?.

I think it's a mixed bag. Certainly, HAMR is something that we've been working on. That's up to the drive guys to talk about when their launches are.

But we certainly have been doing, what I would say is, upgrades to competitive tools that is allowing them to get that next aerial density as well as then of course, running on our machines at the Apache factory..

In terms of complete systems for the Leans, there's kind of some confusion right now. Micron in the data center has been very strong and data center storage growth and Micron at the end of June said they expected the data center remained healthy rest of this year.

But Intel last week said that they thought this – the last quarter was peak for them in terms of data center storage expansion and somewhat slower.

What do you think about in terms of phasing possible orders for Lean? Would it be later this year? Is that looking more into 2021, any ideas there?.

Well, one of the things I put in the script is that I think we're going to – the hard drive guys are going to need to see some sustained level of nearline shipments and not being kind of up and down before they launch additional orders. That's still my view right now.

However, if you look at the way that the first quarter came in, the media units, the second quarter looks like it's a bit down. But then if you look at it year-over-year, first half, we're still up. So I think the jury is out right now for Q3 to see how it – that plays out. I think everybody's talking about Q4 being a bit stronger..

Do you have any concerns about political risk with possible change in administration in terms of some of your Photonics programs? Or are they pretty much locked in?.

Not at this time. I mean I don't – can't predict what's going to go on in Washington, that's for sure. But from our discussions, in particular around the IVAS program, there's been a little bit of squawking in the news about IVAS.

But that – they're looking for, what I would say is more information and program visibility as we get out into the out years. As far as the development program, it's solid right now. There's nobody trying to take money away from that.

So we'll see how it plays out, but there's nothing on my radar screen that says if there's a regime change in Washington, it's going to be a massive cut to the programs we're working on..

Thank you..

All right. Thank you, Mark..

Thanks Mark..

And there are no further questions at this time. I will now turn the call back over to Mr. Blonigan..

Thanks. Before I sign off, I'd like to thank the dedicated employees of Intevac all around the world for their tremendous efforts and dedication in 2020 to date. I also want to thank our customers for their continued business and appreciated partnerships. And finally, I'd like to thank our stockholders for their continued support of Intevac.

I thank all of you for joining us today, and we look forward to updating you again during our Q3 call in October..

This concludes today's teleconference. You may now disconnect..