Good day, ladies and gentlemen and welcome to the Fourth Quarter 2018 Universal Electronics Inc. Earnings Conference Call. [Operator Instructions] As a reminder, today’s program is being recorded. And now I would like to introduce your host for today’s program, Kirsten Chapman from LHA Investor Relations. Please go ahead..

Thank you, Jonathan and thank you all for joining us for the Universal Electronics fourth quarter and full year 2018 financial results conference call. By now, you should have received a copy of the press release.

If you have not, please contact LHA Investor Relations at 415-433-3777 or visit the Investor Relations section of the website at www.uei.com/investorrelations. This call is being broadcast live over the internet. A webcast replay will be available for 1 year at uei.com.

Any additional updated material non-public information that might be discussed during this call will be provided on the company’s website where it will be retained for at least 1 year. You may also access that information by listening to the webcast replay. After reading a safe harbor statement, I will turn the call over to management.

During the course of this conference call, management may make projections or other forward-looking statements regarding future events and the future financial performance of the company, including the company’s ability to anticipate the needs and wants of its customers and timely develop and deliver products and technologies that may meet those needs and wants, including the company’s advanced control products, which include continued adoption of our recently announced Nevo Butler, nevo.ai digital assistant, voice remote control and intuitive 2-way home entertainment technologies by existing and new customers; the continued incorporation of our QuickSet technologies, including the QuickSet Cloud, into customers’ products as expected by management; the continued acceptance and growth of the company’s connected home products and technologies, including security and control, temperature controllers and automation and other sensing technologies that are identified in this call; the timing of new product rollout orders from the company’s customers, as anticipated by management; the continued trend of the industry toward providing customers with more advanced technologies; the ability to successfully identify and enter existing and new adjacent markets for our products and technologies; the ability to attract and obtain new customers for our products and technologies; management’s ability to manage its business to achieve its net sales, margins and earnings as guided, including management’s ability to improve costs and efficiencies at acceptable levels through cost containment efforts including moving our administrative operations and manufacturing facilities to lower cost jurisdictions; and due to the effects that changes in law, regulations and policies may have on our business, including the impact of trade regulations pertaining to the importation of our products and the tariffs imposed on them and other factors described in the company’s filings with the U.S.

Securities and Exchange Commission. The actual results the company achieves may differ materially from any forward-looking statements due to such risks and uncertainties. Management wishes to caution you that these statements are just projections and actual results or events may differ materially.

The company undertakes no obligation to revise or update these statements to reflect events or circumstances that may arise after today’s date.

For further detail on risk, management refers you to the press release mentioned at the onset of this call and the documents the company files from time to time with the SEC, including the annual report Form 10-K for the year ended December 31, 2017, and the periodic reports filed thereafter.

These documents contain and identify various factors, which along with the risks identified in this call, could cause actual results to differ materially from those contained in management’s projections or forward-looking statements. In management’s financial remarks, adjusted non-GAAP metrics will be referenced.

Management provides adjusted non-GAAP metrics because it uses them for budget planning purposes, and for making operational and financial decisions and believes that these non-GAAP financial measures provide investors with supplemental information that helps them evaluate UEI’s core operating and financial performance and business trends, consistent with how management evaluates such performance and trends.

Additionally, management believes these measures facilitate comparisons with the core operating and financial results and business trends of competitors and other companies. A full description and reconciliation of these adjusted non-GAAP measures versus GAAP is included in the company’s press release today.

On the call today are Chairman and Chief Executive Officer, Paul Arling, who will deliver an overview; and Chief Financial Officer Bryan Hackworth who will summarize the financials. Paul will then return to provide closing remarks. It is now my pleasure to introduce Paul Arling. Please go ahead, Sir..

Good afternoon and thanks for joining us today. Demand for UEI solutions is strong as our advanced wireless control devices for entertainment and home automation continue to gain traction.

To further our position and support long-term growth, we remain focused on building our differentiating IP portfolio and providing customers with innovative solutions that exceed their end users’ expectations.

Our intuitive 2-way voice-enabled solutions for wireless entertainment and home automation have set a high bar in the marketplace and we are extending our leadership.

For example, at CES in January, we unveiled Nevo Butler, our new smart home hub that leverages nearly all our innovative developments, including QuickSet, nevo.ai and smart home sensors, enabling us to enter adjacent markets and expand our offerings to existing and prospective customers.

While demand for our solutions is high and orders are strong, our supply has been hampered by the punitive tariffs implement by our government this past year.

In response and to mitigate those added costs, we acted quickly to broaden our sources of supply to locations outside China, improve our margins, and put into effect cost-cutting or cost controlling initiatives. However, during the fourth quarter, shipments were delayed and net sales were lower than expected at $169.7 million.

Nonetheless, our improved gross margins and our well-managed expenses resulted in EPS meeting our guidance at $ 0.70. We continue to improve our supply chain and expect to see positive results in the upcoming quarter.

In 2018 we began implementing a series of strategic initiatives to proactively address macro challenges to our business, as well as taking additional measures, all aimed to provide consistent and profitable growth that has long been a hallmark of Universal Electronics.

To tackle the supply side, we are upgrading our manufacturing footprint by moving production for U.S. products from China to our facility in Mexico and to a new manufacturing partner in the Philippines. We expect to complete these transitions this summer and believe we will emerge from this challenge stronger than ever.

These types of moves typically take a couple of years, yet we anticipate accomplishing them in a year or less. Further, to more effectively capture the significant market expansion opportunities in front of us, we are streamlining our corporate structure to increase operational efficiency and free resources for strategic investments.

Now, I would like to tell you a little bit about our exciting show at CES. As noted, we introduced Nevo Butler, our end-to-end voice enabled smart home hub with built-in white labeled digital assistant that unifies entertainment control and home automation experiences, enabling interoperability across fragmented ecosystems.

The remarkable technology platform is designed with nevo.ai at its core to incorporate varying modes of control like security, lighting, energy management and more.

Digital assistants that connect consumers to important services such as safety and security or bring joy through better interaction with entertainment devices will play a key role in delivering the enhanced experiences promised.

Nevo Butler delivers a versatile monitoring and control assistant solution capable of addressing a wide range of devices not supported by existing platforms and brings voice control to a large and existing installed base of devices through our new cloud services.

This platform enables service providers, consumer electronics brands and OEMs to bring voice enabled services to their products and end users, while remaining in control of the data and the consumer relationship.

We launched in collaboration with Microsoft on their Azure cloud platform and are marketing directly to major brands worldwide who want differentiation in control.

Available as kits that address specific channel needs, Nevo Butler can be bundled with a wide range of certified devices, including safety and security sensors and smart thermostat and temperature sensors developed by our teams at Ecolink and RCS.

These kits will be available for introduction later this year and we are working with a number of industry-leading customers who have already expressed interest in this platform. Regarding the home entertainment industry, change is clearly happening and that change creates opportunity for us.

As voice enabled automation is becoming more and more prevalent, our proprietary intuitive 2-way voice enabled home entertainment platforms give service providers a means to make the transition to the future.

These new platforms make initiating and controlling the home entertainment much more intuitive and easier than ever before, enhancing the consumer experience and increasing subscriber retention. Worldwide providers are invested in this shift and are updating their systems.

While this transition continues its inevitable progress, new and existing customers are including significantly more UEI technology in their next-generation systems, lifting demand for our products and services. Likewise, the market momentum continues to expand in home automation.

As previously reported, Daikin, Trane, Toto, Ring, UTC, XFINITY Home and others are leveraging our technology to enable home automation and security. We achieved our 2018 goal of over $130 million in net sales and based on current trends we expect to continue to see strong growth in these home automation products.

I’ll now turn the call over to our CFO, Bryan Hackworth for a review of the financials..

Thank you, Paul. As a reminder, our results for the 2018 fourth quarter as well as the same period in 2017, we will reference adjusted non-GAAP metrics. Fourth quarter net sales were $169.7 million compared to $180.7 million for the fourth quarter of 2017.

Sales fell short of our expectation due to the production transition to our Mexico facility and our manufacturing partner in the Philippines, which resulted in a significant number of orders not being shipped prior to yearend, as scheduled. Business category net sales were $149.8 million compared to $163.8 million in the fourth quarter of 2017.

Consumer category net sales were $19.9 million compared to $16.9 million in the prior year quarter. Gross profit was $46.2 million or 27.2%, compared to 23.6% in the fourth quarter 2017. This improvement was driven by the following.

First, improved manufacturing efficiencies at our factories located in China, with a year under our belt since the transition of production from our Southern China factory to our two remaining China-based factories, we are now producing at normalized levels.

In addition, favorable sales mix contributed to the improvement, as a few of our midsized customers are now launching their advanced entertainment systems, while sales of home automation products continue to grow and some of our larger accounts comprised a small percentage of our total sales.

Operating expenses were relatively flat at $32.5 million, compared to $32.3 million in the fourth quarter of 2017. R&D expense was $5.9 million compared to $5.4 million in the fourth quarter of 2017, reflecting our continued investment in technology, such as Nevo Butler. SG&A was $26.6 million compared to $26.9 million.

Operating income was $13.7 million, up 32% compared to $10.4 million. Our effective tax rate was 21.8% compared to 11.6% in the prior year quarter. Net income was $9.7 million or $0.70 per diluted share compared to $8.7 million or $0.60 per diluted share in the prior year period.

For the full year 2018, net sales were $679.9 million compared to $696.5 million for the full year of 2017. Gross profit was 25.3% compared to 25.6% in 2017. Net income was $33.6 million or $2.39 per diluted share, compared to $41.1 million or $2.81 per diluted share in 2017. Next I’ll review our cash flow and balance sheet at December 31, 2018.

Cash and cash equivalents were $53.2 million, compared to $42 million at September 30, 2018, reflecting strong cash flow from operations and free cash flow in the fourth quarter of $17.5 million and $14.1 million, respectively. Our cash conversion cycle approximated 109 days as of the fourth quarter, compared to 118 days at the end of the year.

With the goal of transitioning approximately 40% of production from China to Mexico which we expect to be completed by this summer, our cash conversation cycle will continue to improve.

As far as overhead is concerned, we are progressing as planned regarding moving our corporate office from California to Arizona and certain functions from Hong Kong to Mainland China. The savings from these moves are expected to enable us to invest in promising new growth areas, such as security and home automation.

This balance of overhead efficiencies along with investment in future products, technologies and markets will allow us to keep our expenses relatively flat while growing net sales in the 5% to 10% range, thus creating a substantial improvement in operating leverage.

Now turning to our guidance for the first quarter of 2019, we expect sales to range between $179 million and $187 million, representing 5% to 10% growth compared to $170.6 million in the first quarter of 2018. EPS is expected to range from $0.70 to $0.80, representing growth of 13% to 29% compared to $0.62 in the first quarter of 2018.

I would now like to turn the call back to Paul..

Thanks, Bryan. Clearly the connected home has arrived. Market growth trends and demand for UEI products are positive. We expect to drive new growth in both smart entertainment and smart home automation by increasing new customers and expanding sales with existing customers.

As we navigate the ever-evolving home control environment, we have committed to adjusting our operations to increase investment and to further our technology lead. We are proactively addressing U.S. tariffs through production relocation. We are streamlining operations to fund investment in ongoing technological breakthroughs.

We are providing advanced intuitive 2-way voice enabled solutions for wireless entertainment and home automation control and are excited to see adoption ramping. And we are continuing UEI’s reputation for creation and delivery of industry-leading solutions to enable our customers to service their users.

Our recently introduced Nevo Butler platform is the latest of many important technological advancements that UEI is pioneering. We believe these actions position us for consistent and profitable growth.

We continue to develop the most innovative solution to today’s home control needs and we are poised to develop the advanced technologies that drive the next phase of the smart home control market. Stay tuned. Operator, we would now like to open up the call for questions..

Certainly. [Operator Instructions] Our first question comes from the line of Steven Frankel from Dougherty. Your question please..

Good afternoon, Paul and Bryan. So let’s start with the missed shipments in Q4.

Can you give us a little more color on how and why that happened and how much of the big snapback in Q1 is just a reflection of catching up with that volume versus underlying demand from new customers ramping?.

Well, Steve, we should schedule a separate call for a half hour to talk about all the reasons. Whenever you transition production, you have a lot of issues to deal with.

I would say probably the bigger ones are just supply chain, getting the supply chain items to the new location, both machinery there setup, able to run at capacity as quickly as we wanted to do this and also the supply chain, the items you need for production.

Most of the issues in getting the production up probably revolve around those two things, getting the lines up and with the right machinery, on time and running at capacity and the supply chain to supply them. These issues are temporal. We will get that worked out.

As I said earlier, this is something that we would probably do in a normal situation where we didn’t have a 25% tariff hanging over us we would probably transition over a couple year period, move one product at a time in a little bit more measured fashion. We are obviously trying to do this in 3 months or 6 months. It’s probably going to take 12.

And we are doing it as quickly as we can, but we hit road bumps along the way. So there are some orders that we weren’t able to ship out in Q4. There in fact maybe some in Q1 that will be difficult to get to. However, we have already reflected that in the guidance that Bryan has provided..

Again, to go back to the second part of my question, then what you are implying is the strength we are seeing in this guidance of call it plus 7% at the midpoint that’s true demand and not catching up [indiscernible] that should have been shipped in Q4?.

That’s correct. Yes, demand is up..

That’s correct, because as Paul said, even though there is some still over from Q4 into Q1, I haircut Q1’s guidance knowing that we’re in a difficult transition..

Okay, and then maybe some color on where we are on these medium customers ramping.

How many new customers are ramping in the first half of the year and kind of what’s the pipeline behind them look like?.

Yes, Steve, I don’t have the exact number. I know of 3 that are relatively big names. Unfortunately, I can’t mention them all because some of them have just introduced and haven’t allowed us to speak of it yet. But I would say there’s 3 household names; 2 outside the U.S. and one here in the U.S.

that have launched a next-generation 2-way IP connected platform since the last time we talked..

Okay, and I know you don’t guide to gross margins, but should we view Q3 as the bottom and as you work through this transition, gross margin should be flat to up from Q4 levels or was there something in Q4 that says, we shouldn’t use that as a baseline?.

I think if you were to take the guidance, I had provided for Q1, the sales, and I think you can assume a pretty accurate operating expense level. I think you’ll be able to back into a relatively accurate gross margin figure. I mean right now we’re having Q4 was strong with the gross margin rate and I’m optimistic about China’s doing very well.

We have a year under our belt and they’re full steam ahead. We had some favorability in Q4 because some of our larger customers comprised a lower percentage of our total sales. So, there’s some pluses and minuses. So, each quarter it can differ. But overall, I’m positive about it.

But I think if you were to do what I said and you could probably back into a pretty accurate gross margin rate for Q1..

And how much pressure will there be on near-term OpEx from these production moves or is that are you cutting enough expenses in other areas that OpEx can be flattish even with those extra expenses?.

Relative flat..

Yes, relative flat. Yes. I wouldn’t expect too much pressure from that. And the move from California to Arizona, we’re at least halfway through. So, we’re progressing well, but I wouldn’t expect too much pressure from that from a move perspective..

Okay, and any update on timing on when you think you might first ship Butler?.

Well, it will be in the back half of the year. We’re working with we have an entire list of customers that have seen it more than once and have shown in some cases very, very high interest, in show case they’re interested.

So, we’ve got a list that we are working with on the platform and it would probably be sometime later this year and some of them may be into ‘20, depending on the implementation that they are looking to do.

Part of it much of it wouldn’t be so dependent on us as it would be how they want to fit this into an advanced system that they are developing, which just like the AV systems, could be up to them how advanced that platform is and how long it’s going to take them to deploy the entire system.

So, it could stretch into next year, but sometime later this year and we’ll obviously give some updates on this as we go along..

And in terms of how you price a product like this, can we assume that Butler will have a higher than average corporate gross margin?.

More than likely, yes. Yes, I can’t speak to specifics. But yes, the answer would be yes. The ASPs on this will be extremely competitive with other solutions in the marketplace, but much higher than your average AV controller for certain..

Okay.

And then what was Comcast as a percentage of revenue in the fourth quarter? And were there any other 10% customers?.

Yes, Comcast was the only 10% customer and they were at 11.7%..

Okay thank you..

Thank you. Our next question comes from the line of Jeff Van Sinderen from B. Riley FBR. Your question please..

Yes, I just had a follow-up on the new gen upgrade program, just to clarify. It sounds like demand was strong in Q4, but it also sounds like the shift in timing was really all or largely from your production change.

I’m just wondering if there was anything also with the MSOs in terms of a timing change that also might have been part of the impact or if it was all just production, just to clarify that. And then are there any other major changes that you’re seeing in terms of deployment schedules that I don’t know.

Maybe give us your best assessment of kind of how deployments are looking to play out this year, any lumpiness that we should think about as we’re modeling the quarters for this year..

Yes, in terms of Q4, the issue was solely supply. So, there was demand for product that we were not able to meet and again as we outlined earlier, both Bryan and I, that demand in Q1 is a little bit greater than our ability to supply, but that’s already embedded in the guidance that he has provided..

Okay, well that’s a relative high-class problem to have, I guess. And then just to clarify, are there still bottlenecks? Is that what you were pretty much saying that in Q1 there are still some bottlenecks? I guess I was just wondering also whether is there anything going on with like the resistors and capacitors.

I know you talked about any kind of how should we think about margins there. I know that was sort of a supply-demand imbalance.

Is there anything else we should think about there?.

No, no. And most of the component supplies have returned to a more normalized level. So that’s not an ongoing issue. The component costing in terms of the pressure on margins is not that’s no longer a major concern..

Okay, good.

And then just a follow-up on Nevo Butler, because it seems like that’s a really promising product for you potentially, just wondering how you think that deployment might go on that or how you think that the first sort of contracts might go, or is it just too early to know?.

Well, it’s too early. I mean clearly there will be some probably commonality in them. They’re voice enabled platforms. Obviously one of our specialties is the pristine AV control with voice.

We can voice enable a platform that is currently planned to be voice enabled or even voice enable items that were prior to this non-voice-enabled, which is a breakthrough in the product, because it can voice enable the non-voice-enabled, if that is even a term, but so more than likely the implementations would have that element in them.

The other kits, it’s not clear which customer will take which one. But obviously they can customize this in any way they wish as far as software and hardware is concerned, as far as safety and security, temperature control, sensors.

And we have actually some interest from other industries, like hospitality for control of AV and temperature control using sensors and other smart technologies. There’s interest there too. So, this platform is a little bit wider than our normal platform. It’s not just AV and it has applications to some other areas. So, we’re exploring those.

It’s early right now, and again, we’ll have more on that as the year progresses..

Okay. And then just one more if I could squeeze it in, I think you talked about expenses maybe being flattish. And I’m just wondering. It sounds like the move from California to Arizona has so far gone well.

Do you think that there’s potential for some of those sorts of fixed expenses to be lower overall in dollars and maybe your SG&A, certain components of your SG&A line actually come down year-over-year? Is that possible?.

Well, right now our goal is, the move from California to Arizona is going yield savings. But what we’re doing is we’re reinvesting. So, when you talk about SG&A, operating expenses, you’ve got the R&D component and you have the SG&A. I think what will happen is R&D has increased over the years and SG&A has come down a bit relatively speaking.

And I think the same will continue. So, what we’re looking to do, as we said by 2020, two years from ‘18, we would expect that the operating expenses to be flat.

But if we could continue to invest and grow sales at a 5% to 10% rate and given potentially richer margin with these investments in technologies, then that should drive significant operating margin expansion..

Got it, okay. Thanks for taking my questions. I will take the rest offline..

Sure..

Thank you. Our next question comes from the line of Saliq Kahn from Imperial Capital. Your question please..

Great thank you. Hi guys. There is a few housecleaning questions on my end initially, then just one follow-up as well afterwards regarding the industry which you guys are seeing.

But if I understand correctly, what you’re saying is that the revenue guidance that you have for Q1; that doesn’t take into account any of the missed Q4 revenues that were being pushed into Q1.

Is that correct?.

Well, technical it does in that some of the orders that we weren’t able to ship right at year end, we will ship, we did ship in Q1. But we’re also expecting to potentially have a situation again this quarter where the amount of demand we have, we will not be able to supply all of it.

So, there may be also you can’t just add or subtract depending on how you look at it what slipped from Q4 into Q1, because we may have more slippage. In fact, that would be embedded in our forecast into Q2. Because our belief is that this transition will take some more time.

We’re projecting midyear this summer we’ll be at a point where every order we’re back to a normalized situation where lead times are met. Customers order. We ship everything that’s on demand. That’s a place we’ve been for 20 years, at least 15.

But the last year has been tough and the last 6 months in particular since the advent of these tariffs, because we’re trying to move essentially 40% of our unit production out of a country to another, so that our customers don’t have to absorb the or we have to absorb the effect of this tariff long term.

So, in doing that, it’s creating a little bit of disruption on the order pattern and the supply chain and we’re fighting through it and the team is doing a great job. But it’s day by day and we’re going to get these orders out. But anyway, back to your question, there were orders that came out of Q4 into Q1.

But our demand for Q1 is actually greater than the sales forecast that we have provided..

Got it, okay. No, that makes sense, and then regarding the destruction, clearly tariff is having an impact not only on you guys, but a lot of other organizations that I cover. So, what it sounds like to me is, what you’re saying is, some of the missed revenue during Q4 is being brought forward into Q1, but there still might be some that go into Q2.

Could you give us an indication of what percentage of the missed revenue may be in Q2 and if you envision that by the end of Q2, both Q1 and Q2 will be able to comprise any of the missed revenue for Q4? I just want to get better clarity on the ebbs and flows on those 2 quarters..

Yes, well I don’t really see it as any missed revenue in a future quarter, because again, we would be producing to demand in those quarters. Right now, we’re not. We did not produce and ship to demand in Q4. So, we have some slip into Q1. But we’re also projecting some slip from Q1 into Q2.

Because we will not be able to ship all of the orders that we have; that we already have or are forecasted to have before the end of this quarter. How much is that? I don’t have the exact number for you, but it is a lot. It’s millions of dollars. This is not $200,000. It’s millions..

Got it. And then Paul, one of the things that I noticed a few weeks ago, I believe it was two weeks ago when you had then the press release regarding the move to Scottsdale from California. So, I recognize that creates a bit of a headwind as well. But the cost reduction opportunity certain is there.

With that cost reduction also comes upfront costs or increased expenses to be able to make that move happen.

Could you give us a better understanding of what those expenses may look like? How do I bake that into my model?.

Yes, I mean there are some duplicative costs when you’re moving, because you’re hiring people and stuff for a short period of time. You’ve got an overlay, an overlap of it. But it’s not it’s not that significant.

And right now, what I’m doing is from a pro forma basis, those additional costs that I have in the example I just provided where you’re hiring say multiple people in Arizona and there’s going to be a 3-month overlap. I’ll pro forma that out, because it’s not that’s a one-time expense that you’re not it’s not a normal operating expense.

It’s just an overlap. So, from a pro forma perspective, it doesn’t affect anything. But it’s not we’re not talking about millions of dollars. It’s not that significant..

IKEA, Walmart, whoever else.

Is there a way for you to be able to better penetrate this marketplace today or tomorrow versus what you had done historically how you can better penetrate the market?.

Well, sure. Yes. It has to do with channel. I mean we’re working with people in really all of the major channels now, the traditional security channel, the do-it-yourself, or the retail channel, the branded channel, which some of the names you just mentioned are in.

We’re doing it through our traditional customer, the subscription broadcaster, as we call them, cable and satellite companies. So, there’s a variety of ways to go at this and we have product lines and solutions for each of them, and in fact have gained traction in each of them. As I mentioned, Ring is a customer of ours and UTC.

So, we have a variety of channels we go through to get the solutions to market. We typically do it through partners. Some of those other companies are branded companies that are competing with each other. But similar to our business historically, we are a provider to them with innovative product that they then put into the marketplace..

Great. Thank you, guys..

Thank you. [Operator Instructions] Our next question comes from the line of Greg Burns from Sidoti & Company. Your question please..

Just a follow-up again on the shipment delays. So relative to your guidance, I think you missed by like $14 million from the midpoint of your guidance.

Can you just quantify how much of that $14 million was the delayed shipments and then your guidance for the first quarter, how much are you assuming what level of shipment delays are you assuming in that guidance? Thanks..

Yes, I don’t think it would quite get to the midpoint if it was $14 million. It was a number less than that. We’re not going to talk about specifics on this. But the number was not $14 million. It was less than that. And in terms of the demand for Q1, we really don’t provide that.

But it’s probably a number equal to the number that would have slipped out of Q4..

Thank you. [Operator Instructions] Alright, and this does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Paul Arling for any further remarks..

Okay. Thank you for joining us today and your continued support of Universal Electronics. We will be attending the Sidoti Spring 2019 investor conference in late March in New York City. We look forward to seeing some or all of you there. Have a wonderful day..

Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day..