Good day, ladies and gentlemen. Welcome to Fabrinet's Financial Results Conference Call for the Second Quarter of Fiscal 2019. At this time, all participants are in a listen-only mode. Later, we will conduct a question answer session and instructions on how to participate will be given at that time. And as a reminder, today's call is being recorded.

I would now like to turn your call for your host, Garo Toomajanian. .

Thank you, operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss Fabrinet's financial and operating results for the second quarter of fiscal year 2019, which ended on December 28, 2018. With me on the call today are Seamus Grady, Chief Executive Officer; and TS Ng, Chief Financial Officer.

This call is being webcast and a replay will be available on the Investors section of our website located at investor.fabrinet.com. Please refer to our website for important information, including our earnings press release and investor presentation, which include our GAAP to non-GAAP reconciliation.

I would like to remind you that today's discussion will contain forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations.

These statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise them in light of new information or future events, except as required by law.

For a description of the risk factors that may affect our results, please refer to our SEC filings, in particular, the section captioned Risk Factors in our Form 10-Q filed on November 6, 2018. We will begin the call with remarks from Seamus and TS, followed by time for questions. I would now like to turn the call over to Fabrinet's CEO, Seamus Grady.

Seamus?.

Thank you, Garo, and good afternoon, everyone. We posted record revenue and non-GAAP earnings per share in the second quarter. Revenue in the second quarter was above the high-end of our guidance range at $403 million and non-GAAP net income also exceeded our guidance at $0.97 per share.

These results also drove strong cash flows in the second quarter with operating cash flow of nearly $35 million and free cash flow of $30 million. Upside was driven primarily by stronger than expected growth from the telecom markets. Component supply constraints that we experienced in the first quarter eased somewhat in the second quarter.

However, supply for MLCC and certain ASIC parts remain constrained. As such, we continue to see some headwinds to gross margins from our efforts to mitigate these supply constraints in order to meet customer demand and drive revenue.

Looking at our second quarter performance by end-markets, both optical communications and non-optical communications business grew sequentially as well as year-over-year. Optical communications revenue was $306 million or 76% of total revenue and grew 9% from the first quarter.

Within optical, 100 Gig transceivers continued to generate strong revenue with additional growth from non-speed rated products such as amplifiers and ROADMs. Growth in optical communications was led by telecom products which at $207 million or 68% of optical revenue grew 16% from Q1 to an all-time record.

Datacom products were 32% of optical revenue at $99 million, a decrease of a few percentage points from Q1, primarily due to the transition of current products to the next-generation designs.

By technology, silicon photonics-based optical communications revenue was $80 million, a slight decline from Q1, again primarily due to product design transitions. During the quarter, we started to see revenue from QSFP56 as two customers started migrating from QSFP28 to faster data rates QSFP56 transceivers.

Variance of the QSFP28 and now the QSFP56 transceivers which can be both silicon photonics and non-silicon photonics-based continue to perform well with revenue up 21% from Q1 at $55 million. By data rates, as I mentioned, 100 Gig programs continue to dominate optical communications production at 52% of optical revenue or $158 million.

Products rated at speeds of 400 Gig and above represented more than 6% of optical communications revenue with virtually all of this revenue from telecom applications. Looking at non-optical communications, revenue was $98 million, up 1% from Q1. We continue to see momentum in the industrial laser markets with revenue up 2% sequentially to $50 million.

Automotive revenue increased 4% to $23 million with traditional automotive remaining stable and new automotive applications up a little. Sensor revenue was flat at $4 million in the second quarter and other non-optical communications revenue was also stable sequentially at $21 million.

Both new business and existing programs contributed to our top-line growth in the second quarter with new business up 7% sequentially to $147 million or 36% of total revenue.

We continue to generate strong interest from new and existing customers and while a little over 60% of our new building in Chonburi is spoken for or occupied, we have ample capacity to handle near-term demand.

TS will provide more color on our guidance but we are optimistic that Q3 will represent a record third quarter for us in terms of both revenue and profitability.

In summary, we are pleased with our record performance in the second quarter and remain enthusiastic about our longer-term prospects as a trusted manufacturing partner for our customers’ most demanding and complex products. Now let me turn the call over to TS to discuss the details of our second quarter performance and our outlook.

TS?.

Thank you, Seamus, and good afternoon, everyone. I will provide you with more details on our performance by end-markets and our financial results for Q2 as well as our guidance for Q3 of fiscal year 2019. Total revenue in the second quarter of fiscal year 2019 was $403.1 million.

Note that our adoptions of ASC 606 this fiscal year contributed approximately $3 million to our second quarter revenue. This means that we exceeded the high-end of our revenue guidance of $380 million to $388 million under ASC 605 by $12 million.

Non-GAAP net income was $0.97 per share and was also above our guidance range despite a $0.01 per share foreign exchange headwind in the quarter. ASC 606 impact on net income was immaterial. Looking at the second quarter in more detail, our growth was driven primarily by the telecom market within optical communications.

Optical communication represented 76% of revenue with non-optical communications representing 24% of revenue. Now turning to the details of our P&L, a reconciliation on GAAP to non-GAAP measures is included in our earnings press release and investor presentation, which you can find on our website.

Non-GAAP gross margin in the second quarter was 11.6%, an improvement from the first quarter, but a still a little bit low from our target range as we continue to see supply constraints for certain components having a negative impact on overall gross margins.

We continue to anticipate reaching our target range of 12% to 12.5% on a quarterly basis this fiscal year. Non-GAAP operating expense was $9.4 million in the second quarter, down from the first quarter but up from a year ago.

As a result, non-GAAP operating income was $37.5 million, an increase from the first quarter and a year ago, and non-GAAP operating margin was 9.3% compared to 8.5% in the first quarter. Taxes in the quarter was $0.7 million, and our normalized effective tax rate was 5.9%.

We continue to anticipate an effective tax rate of 6% to 7% for the fiscal year. Non-GAAP net income was a record $36.5 million in the second quarter or $0.97 per diluted share, up from $0.92 in the Q1 and $0.72 a year ago.

On a GAAP basis, which includes share-based compensation expenses and amortization of debt issuance costs, net income for the second quarter was $31.5 million or $0.84 per diluted share, also a record performance.

Turning to the balance sheet and cash flow statements, at the end of the second quarter, cash and investments were $382.5 million, an increase of $30.1 million from the first quarter. Operating cash flow in the quarter was $34.7 million and with CapEx of $4.3 million free cash flow was $30.4 million in the second quarter.

We did not repurchased any share during the second quarter. Management will continue to evaluate the buyback programs based on the stock market conditions and our cash position each quarter. As such, as of the end of the quarter, $17.6 million remain in our repurchase authorization.

I would now like to turn to our guidance for the third quarter of fiscal year 2019. While we are now reporting under ASC 606, this guidance is based on ASC 605, and we will provide a reconciliation with our third quarter results.

After reporting record revenue and net income in the second quarter, we anticipated continued year-over-year growth, but a small sequential decrease in total revenue in the third quarter with continued sequential growth in telecom, offset by a small decline in Datacom and a small seasonal decline from non-optical communications.

Despite this sequential decline in total revenue, we remain very optimistic and confident in our market position as reflected in anticipated year-over-year growth. For the third quarter of fiscal year 2019, we anticipate revenue to be in the range of $384 million to $392 million.

From an earnings perspective, we anticipate non-GAAP net income per share in the third quarter to be in the range of $0.86 to $0.90 and GAAP net income per share of $0.71 to $0.75 based on approximately 37.6 million fully diluted shares outstanding. In summary, we are pleased with our record performance in the second quarter.

Our strong market position make us optimistic in our business momentum. Operator, we would now like to open the call for questions..

[Operator Instructions] And our first question will come from Alex Henderson with Needham and Company. Your line is now open. .

Hi, thanks. A couple of quick questions just on the modeling data. The first one is the tax line came in well below forecasted, looks like a better $0.04 positive to the numbers relative to what we had been modeling at 6.2.

Should we be expecting, since you are guiding to 6% to 7% for the year, that we make that up in that – in fact, for the full year on an annual basis, we are in the 6% to 7% or are you saying that in the back half you expect 6% to 7% on a quarterly basis?.

Hey, Alex, this is TS. Good afternoon. I think, for the particular quarter, we thought a little below $700k tax expense. Moving forward in the second half, I would still go back to 6%, 6% to 7%. .

So, it’s 6% to 7% on a quarterly basis, not on a full year basis then?.

That’s correct..

Good. Okay, that helps.

And then, the other one was, I was a little surprised that the decline of $400,000 or so in the sales and marketing line and what normally is a seasonally stronger quarter, can you give us some rightsizing on that? Should we be thinking that that comes back up towards the 10, 10.5 range or will it stay down here at this lower level?.

No, we have a couple adjustments in the last quarter of Q2. Moving forward, I still look at around $11 million per quarter. .

$11 million per quarter on the sales and marketing line?.

Yes, that’s correct Alex.

That’s non-GAAP?.

It is non-GAAP, yes. .

Right. Okay..

And flat ASC 606 cost..

Right.

Can you just tell me what you said, you said that capacity has improved, what you said some chips were still tight, what supplies are you still struggling with?.

Alex, this is Seamus. So, primarily, MLCC and also certain ASIC devices. Overall, we did see an improvement in the quarter, but we still have some tightness on a couple of categories or MLCCs and ASICs being the two name them..

So it sounds like you are expecting to get back to the 12 plus – 12 or better range over the year, but given –that you didn’t say that about the March quarter that we should be below that 12% hurdle in the March quarter?.

I think we – I mean, we did improved from I think we were at the 11.2%, the prior quarter at the 11.6% in Q2, I think we continue to see some improvement and we’ve said we can get back to the 12% before the end of the year.

Now whether we get back there in Q3 or in Q4, we still have that component, I would say light headwind on the components there, but we think we can get back there certainly in this fiscal year whether it’s Q3 or Q4, it remains to be seen..

Okay, one last question and I’ll cede the floor. I hate forecasting 4x, but since December 31st has been a spike in the exchange rates back to February levels that 4x move, I know you hedge it on operationally, but it does show up in the 4x exchange line.

What are we assuming for the March quarter in that line? Are we assuming $2 million, $3 million hit in that line or are you assuming zero in that line?.

Alex, for our guidance, we assume zero and the reason is that, for this quarter it is already fully hedged. I have basically all the all the baht I need for this quarter, March quarter.

Now, moving to June quarter, I have partially hedged and obviously, like the baht, a U turn right now is appreciating right now and again we are dollar cost average down to buy for June and September quarter. So you are probably assuming the baht be at this level THB31.3 this morning.

In September quarter, you might see some headwind on the gross margin again. But again we don’t know yet because it stays at THB31.3 today, tomorrow it may back up to THB33. So, we are watching it very, very closely. .

If I assume the exchange rate stays at this current level all the way through 2019, would that be a headwind against your gross margins in the June, September, December quarters?.

We will be in the June – excuse me, September, more so in September and December quarters assuming it stay at THB31.3. .

Okay, but we have to assume a flatter currency unless harder for our currency than your numbers. I appreciate the content. Thank you. .

Thank you, Alex..

Thank you, Alex..

Thank you. And our next question will come from the line of Troy Jensen with Piper Jaffray. Your line is now open. .

Hey, gentlemen, congrats on the great results. .

Thanks, Troy..

Hey, so, first how about on the silicon photonics? You said it was down slightly there.

I think you mentioned some product transitions, if anything else you can kind of provide on details on what happened?.

I think if you look at on a longer-term in our silicon photonics as a technology segment, it’s doing very well. Last quarter, we see some design transition mostly from one customer. The rest of the customers in the group are doing well..

Okay, how about – I know you don’t like to talk about customers, but Cisco is acquiring Luxtera and I'm pretty sure Luxtera is one of your customers in this category.

So, could you maybe just help us size the opportunity there? Have you had any discussions with Cisco and their intents on wrapping up silicon photonics?.

So, yes, Cisco is a customer that nothing that we have noted yet and as far as we know the deal that acquisition hasn’t closed yet. And, all I would say it’s historically we have benefited from those types of consolidations. So I think for us, it’s too early to say yet what the impact might be. .

All right, perfect.

And then, Seamus, I know you are saying, end of last year that you kind of had multiple conversations with customers about the China tariffs and then, I know it would be kind of a further out opportunity, but just love to get an update there assuming these conversations get more serious?.

Yes, so, I think we continue to have conversations with – and discussions with several customers, but they remain with the discussions at this point, like I said, it’s still primarily at the discussion stage nothing concrete to report there yet. It takes a long time and as I can tell you, increasing it.

Troy, it takes a long time from on the initial discussion until the terms intervene business that can be the six to nine month process best case and then you have the qualification timeline on top of that..

Yes, okay. I totally, understand. Keep up the good work gentlemen..

Thank you, Troy..

Thank you, Troy..

Thank you. [Operator Instructions] And our next question will come from the line of John Marchetti with Stifel. Your line is now open. .

Thanks very much. Good afternoon. I just wanted to spend a minute, if I could, Seamus on the Datacom business. Obviously, it’s kind of been bouncing around here a little bit weaker in the December quarter, you are talking about it being weak again in March.

Just curious if you can sort of give us some color in terms of what you are seeing either from a demand or a pricing front? Just trying to get a sense of maybe how that business are your expectations for that business as we kind of climb through 2019?.

Yes, so, I can tell, you are right, John. The demand for Datacom components strictly transceivers remains strong.

The markets has been experiencing some fairly intense price pressure and we’ve been doing our best, our products with our customers to work with the customers to reduce cost for these components make our customers competitive in the marketplace.

So I think the volume, the demand remains strong, but there is some fairly significant pricing pressure coming from the end-markets. While just an impact on revenue, like it did this past quarter, we typically share in the cost savings that we are able to generate with our customers, so we are able to preserve our margins.

So, that – and again, the decline there in Datacom is not isolated to one particular customer, it’s across the board. But the demand is strong in terms of volume with the price pressure is pretty intense.

In addition, we don’t expect the revenue there to go up on a straight line and we point out that we expect revenue from all the product lines to be flat to up on a year-over-year basis which still indicate continued positive trend. .

And I just following up on that the move to QSFP56 and some of the things that you mentioned, even in silicon photonics, would you expect those areas to be growth areas as you go through the year? And then, some of the other – obviously the pricing and some of the drop-off in 28 occurs, I am just trying to think about this from a trends perspective..

Yes, I think that’s a fair assumption. The transition to QSFP56, it’s two customers and it’s on products that are 400 Gig and above.

So, the volume growth that comes with that then, again, it won’t be in a straight line, especially when a customer transitions maybe from a QSFP28 100 Gig product for example, to a QSFP56 400 Gig product with that additional bandwidth that you have there it takes a little bit of time for the volume to catch up.

But it’s a high quality problem that we like to have because it means we are working on the most current generation and next-generation products. But like to say, with that does come the fact that sometimes they do grow in a straight line, we are happy to live with that..

Right, right.

And then, if I can just get one last one on maybe on the telecom side, obviously some, I think you had strength in that business, in discussions with your customers, is there any concern at all that with all the noise about what may or may not happen with Huawei in China and things like that that there is a chance here that we actually have some overordering going on for customers serving that China market.

And that if things ultimately smooth out, that there is a chance that we have a pullback on that demand front just because of some early sort of overordering in anticipation of an action that may or may not occur.

Just curious in your conversations with customers how they are viewing sort of that China market right now?.

Yes, that’s not something we’ve discussed with our customers, John, honestly, it’s – of course, there is always a chance that some of the customers and companies in the supply chain somewhere on the way are overordering as they would necessarily tell us that if they were – we don’t have any visibility into that I'm afraid, John, and it's just not something that we discuss with our customers..

Okay, thanks very much..

Thank you, John..

Thank you. And our next question will come from the line of Alex Henderson with Needham and Company. Your line is now open. .

That’s so surprising. So, I wanted to ask a couple of questions relative to the merger between Oclaro and Lumentum.

How do you think that that impacts you? Do you suspect any change in production location that would favor you? Or any cutbacks in product line that might hurt you and if those cutbacks occur, would other companies that are you are currently serving benefit? How does that all shake out relative to your positioning?.

I think it’s really very early to say, it’s too early to say, I think at this stage. Again, we’ve been building products historically for both companies and now for Lumentum that is our number one customer and historically have been in 2017 – in our last fiscal year we had 17% customer, now they are roughly 23% customer.

But it’s really too early to say, Alex what the impact might be in terms of any product shake outs, I guess from our perspective, we need to be optimistic in the sense that there is very little product overlap in what we make and what we have made historically for both companies. .

And then, Alex, this is TS. We will learn more tomorrow from the Lumentum earnings call, which I intend to dial in to..

Well, the good news is that call will happen before the morning call. So, before the morning open. The second question I wanted to talk a little bit about is, have you changed, - seen any change in the rate of adoption of the capacity at the new plant? And I mean, 60% is pretty good, but it seems like that’s starting to level out a little bit.

Has there been some slowdown of footprint to commitments?.

No, I wouldn’t say so.

I think maybe the way to think about it, Alex is, our existing customers, the majority of existing customers are at the Pinehurst facility and they prefer to keep all the manufacturing at Pinehurst and then that facility is essentially closed and then from time-to-time, customers may free up additional space in Pinehurst as they move – as the product comes to end of life and our line gets moved out and the new lined moves in.

So we still have to grow, in other words, obviously, we want to sell Chonburi as fast as we can, but there isn't necessarily direct correlation between the pace at which we increase our occupancy in Chonburi and the pace at which we have to improve the overall revenue of the company.

We are above, slightly above 60% right now in terms of occupied and spoken for and I would say, versus our own internal targets, we believe we are very much on track as regards to getting full in Chonburi..

Well, as I understand that that’s actually nicely ahead of where your original targets were.

When do you think you might have to make a decision on actually starting the plant for the next build?.

I think we've always kind of said was to get to 70% utilization. We are probably, maybe towards the end of the summer, I think we are probably looking at starting to make some decisions on probably want to do with our next building in Chonburi, it’s relatively straightforward for us. We own the land there.

We have the details, specifications for the building. So we know exactly what we have built. So we are aiming to move pretty quickly, but probably towards the end of the summer I think would be fair.

TS, what do you think?.

Yes, we are probably….

Okay.

And, have you guys made any progress in finding a full-time CFO to replace, TS’s retiring position?.

We have a very much a full-time CFO, TS is fully engaged. We are continuing to look. We are not seen any particular party. We continue to – continue with the search, there is lot of very good candidates, but we haven’t found anybody at this stage that we are ready to talk about in terms of a permanent replacement. We’ll continue to search..

But we will be happy to keep TS as long as he wants to stay, but my guess is that….

Absolutely..

That’s not long in his agenda at this point.

Just going back to the optical side for a second, could you talk a little bit about where you are relative to the production facilities closures at Sanmina and moving some of those productions to Thailand that your customers been involved with? Is that now grandfathered into the numbers? Or is there still more to come from that?.

So, that’s not a – we don’t have any direct involvement in that close ons. So we are not really fully up to speed in what’s going on there. Obviously, it’s a conversation, let’s say between our customer and Sanmina. We have benefited some loss, but the exact status of that and what’s finished in terms of transferring, we don’t have a good handle on it.

.

Any thoughts on how that plant will – the Lumentum plant that is going to be down the streets from you? Is it going to be integrated into your facilities in how the back and forth between those two locations? I assume that those are going to be tightly wound..

Our facility and Lumentum's facility?.

Yes. .

Yes, very much so. Yes, I mean, the – some of the – if you like, some of the components and the products that we source today come from Lumentum’s facility. So our two operations are very tightly coupled and works very close with the other. .

And one last question if I could.

The Israeli thought process progress, lack of progress, where are you on Israel?.

So, we continue to work on all three aspects of our efforts in Israel. The three aspects being further developing relationships with our existing customers there, exploring relationships with new customers and then establishing our own facility either through a Greenfield or acquisition and we continue to make progress in all three.

But in terms of bringing up our own facility, it is quite slow going I would say, because we are being very careful about making sure we have the right facility in the right location and the right values and capabilities. But we continue to see Israel as a great location to do business and a place we are committed to bringing up an NPI facility.

But nothing specific to announce at this time, Alex..

Okay. One more question if I could, TS, could you give me a little bit more granularity on what caused that decline in the sales G&A line? And why it bounces back so much? I mean, that’s a pretty big delta between the three quarters..

Sure. Alex, when we approach the year end, typically we adjust the bonus accrual for management and so, we kind of expect whether we are going to meet the targets or not. So if we are not meeting the target, so we will reverse some of the accrual.

So that is one thing and then, we have certain IP systems which we get some credit on the vendor, so, again that will affect the number. So, when we pull it I expect, you go back to the normalized SG&A which is about 11 million so. .

I am sorry, did you say, your bonus accrual did not hit company targets even though beat consensus?.

Yes, for example, we have – the management has certain revenues and gross margins as a target and then as we approach the year end now, we only have two quarters behind us. We will forecast we are going to meet the goal, whether we are going to have a payout. So, we only have a payout we will adjust accordingly.

Just in last year, management did not get any payout. So, if you look at last year, fourth quarter, June quarter , we had a major write-back on the accrual and that’s how we do the accounting..

Surprisingly you would have disappointment relative to your bonus targets when you beat the high-end of the guidance spend is that because of expectations?.

I will tell you what, our Board is pretty hard, guidance is one thing, you cannot go with another thing..

Okay. Well, that’s interesting. Thank you very much for that context. .

Thank you, Alex. .

Thanks, Alex..

Thank you. And our next question will come from the line of Dave King with B. Riley FBR. Your line is now open. .

Thank you. Good afternoon.

First, on the laser segment, what was the percentage of revenue? And how should we think about that segment going forward for the next couple of quarters with all the macro uncertainties and all that?.

Okay, this is TS. I think the laser, we say about 13% of $15 million, right, $15 million divided by 400, yes it’s about 13%. .

And then, going forward, Dave, this is Seamus, I would say, laser, in just the laser market for us, is a key target segment. We think it’s a very large market in terms of the potential, and quite underserviced I would say, in terms of the degree to which that market outsources today.

So, we think, it’s kind of in the low to mid-single-digits in terms of how much that market outsources today versus optical communications. About half of that’s – half of the manufacturing, let’s say in the optical communications market is outsourced. And optical communications is a $10 billion marketplace globally.

Industrial laser is about $15 billion marketplace and the degree to which it outsources, it’s very small, 6% or 7%. So we see it is having very big potential for future growth..

Sure..

In terms of the technology, it’s very complementary to the capabilities we have in the optical communication side. .

So you talked about, like some customers are gaining market share, I guess, some customers are coming to you guys, is that still the dynamic here? I mean, so we should be expecting the sort of sequential growth from December to March to June? Is that how we should think about it or just can you provide more color on how we should think about fiscal second half?.

I think, Dave, on a quarter-to-quarter basis, there is definitely some variations, right. In the longer-term, medium-term, we see that segment is growing, simply because we are just into that early innings.

The market is so big and obviously you heard some of the weaknesses in certain pockets but there were semiconductor-related laser is rich right now. But again, our customers have been participating in every segment, okay, depending on what other segments, the TSO 13 is continuing doing well, Micromachining is doing well.

So a lot depending on the customers especially to starting in which field, right, so suffice it say to say that most our customers are growing maybe as at one to some decline in the demand. So we are quite optimistic about the success..

Got it. And I was wondering, I believe the strength that you are seeing in telco, you guess the ROADM is definitely one the drivers. So wondering if you can kind of take this segment out if possible..

Telecom, if you listen to some of our customers' earnings call, they say they sold out. They sold out on the amplifier, ROADMs and they are adding capacity. So some of these are, obviously, cascade down to our demand, our backlog from them. So, again, if you just listen to our customers who are specializing in telecom most of those have it.

So, we have 16% sequential growth and 43% year-over-year growth for that quarter. So, we continue to look out for the telecom to provide the driver for the growth..

Got it. Okay, and then, maybe lastly on II-VI and Finisar.

Can you just remind us, first of all, are they both mid-single-digit type of customer and any overlap between those two?.

As of today, they both are single-digit, yes, single-digit percent of our total revenues. .

And not mature enough..

Not mature enough. Yes, because, for Finisar, we always say that really do the PCB that we have the module with us and then II-VI for the lines for Oclaro many years ago and then to EDFA and then a palm laser. So, yes, there is really no overlap in it. .

Got it. All right. Thank you very much. .

Thank you, Dave..

Thank you, Dave. .

Thank you. And I am showing no further questions. So now, it is my pleasure to hand the conference back over to Mr. Seamus Grady, Chief Executive Officer for closing comments or remarks..

Thank you for joining our call today. We are excited that we delivered strong results and a positive outlook as we continue to position the company for continued growth and diversification over the longer term. And we look forward to speaking with you again soon. Thank you, and goodbye..

Ladies and gentlemen, thank you for your participation on today’s conference. This does conclude our program. You may all disconnect. Everybody have a wonderful day..