Good day, ladies and gentlemen, and welcome to the Onto Innovation Second Quarter Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Michael Sheaffer, Investor Relations. Please go ahead, sir..

Thank you, Kyle. And good afternoon, everyone. Onto Innovation issued its 2022 second quarter financial results this afternoon shortly after the market close. If you haven't received a copy of the release, please refer to the company's website, where a copy of the release is posted.

Joining us on the call today are Michael Plisinski, Chief Executive Officer, and Mark Slicer, Chief Financial Officer. As always, I'd like to remind you that the statements made by the management on this call will contain forward-looking statements within the meaning of the federal securities laws.

Such statements are subject to a range of changes, risks and uncertainties that can cause actual results to vary materially. For more information regarding the risk factors that may impact Onto Innovation's results, I would encourage you to review our earnings release and our SEC filings.

Onto Innovation does not undertake the obligation to update these forward-looking statements in light of new information or future events. Today's discussion of our financial results will be presented on a non-GAAP financial basis, unless otherwise specified.

As a reminder, a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release. I will now go ahead and turn the call over to Mike Plisinski.

Mike?.

Thank you, Mike. And good afternoon and welcome to Onto Innovation second quarter earnings call. We have many exciting highlights to cover today. But before we do, I want to first welcome Mark Slicer to his first earnings call with Onto Innovation.

As many of you are aware, Mark joins us from Boston Scientific where he was senior vice president of global financial operations. In this role, he was responsible for the financial performance of the worldwide manufacturing and distribution network having a production value of approximately $3 billion annually.

Mark's experience driving global supply chain improvements, gross margin expansion and M&A will be an asset to our team as we build the scale to support the growing demand for our connected solutions. In fact, we're on pace for systems revenue to grow 30% this year following 48% growth in 2021.

We believe the strong performance is a result of the compelling value of our connected solutions and a customer success team which has been realigned to support our customers goals.

We see this leading to deeper and earlier collaborations with strategic customers across the value chain, which in turn will help Onto Innovation sustain our strong performance in the years ahead. So let's begin with a look at the growth in the second quarter.

Once again, the Onto Innovation team delivered another record breaking quarter of $256 million of revenue aided by customer acceptance of our JetStep X500 lithography systems.

This is a significant milestone for the JetStep lithography program, which was designed to meet the growing demand for advanced substrates to support heterogeneous packages for high performance compute applications.

In addition to strong volume growth, we see an increase in the number of interconnect layers per panel [indiscernible] future factory output. Considering these factors, we anticipate capacity constraints could continue through 2024.

The acceleration of the multi-year program to meet this demand, compounded by the impacts of COVID, supply chains, rising logistics costs resulted in initial product margins well below our targets.

Through each of these next six quarters, we are systematically improving manufacturing efficiencies, volume supply agreements, leveraging lead times to use more cost effective logistics and increasing the performance and productivity of the platform.

With these efforts, and in spite of elevated supply chain costs, we expect our corporate gross margin for the second half of 2022 to return to recent norms of 54% to 55% for the remainder of the year, and that includes the projected shipment of two Jet subsystems in the third quarter and three in the fourth quarter.

Including contributions from lithography business, our specialty and advanced packaging revenue increased 19% over the prior quarter. Another highlight from this market included the successful launch of our new EB40 module for the Dragonfly G3.

This system provides increased throughput and sensitivity required to monitor yield loss at the edge of wafers for advanced memory and logic devices.

We enhanced this platform further by integrating our TrueADC software, which includes the machine learning classifications required to deliver process insights to our customers, not just defect counts from less sophisticated alternatives.

This same value proposition was recently adopted by a novice edge customer in wafer manufacturing and this differentiation partially contributed to Onto securing more than $100 million of orders extending into 2025 to support the capacity expansion of their silicon for EV applications.

Through the rapid demand for our EB40, a few of our new suppliers struggled to meet their delivery commitments in the quarter. This impacted inspection shipments in the second quarter by roughly $5 million. We expect improvements in the third quarter, but we'll still be constrained until the fourth quarter. Turning now to the advanced nodes market.

Revenue is down slightly over the first quarter, but up 47% year-over-year. Leading this growth was our Atlas OCD platform for measuring critical dimensions of 3D transistors at the nanometer scale. Last month, our Atlas V was honored by industry experts at SEMI Americas and Semiconductor Digest with the Best of West Award at SEMICON West trade show.

This award recognizes innovative new products each year that are significantly advancing semiconductor manufacturing capabilities. Of course, one of the biggest advances in the industry is the transition from FinFET transistors to a higher performance but more complicated nanosheet transistor structure.

Our Atlas 3D metrology has been qualified by several leading logic manufacturers for their critical nanosheet process control steps. We've received orders for both 3 and 2 nanometer nanosheet nodes.

We believe this demonstrates the performance advantage of our patented optical sensors and advanced analytics over X ray and other optical alternatives for volume production. Likewise, the expansion of our metrology technology into the planar films market is proving valuable to customers.

The Iris platform is currently delivering throughputs at twice the speed of alternative systems while maintaining comparable stability. In the second quarter, revenue from Iris grew 49% over last year, and we are on track to meet or exceed our goal of achieving $50 million in revenue from this market segment by the end of the year.

Over the last two years, we've seen revenue from MetaPULSE acoustic metrology double that of preceding years, addressing applications in 3D NAND power and MEM segments. Our new eco-acoustic metrology is positioned to extend that capability to newer industry challenges.

For example, in 3D NAND, as the tier stacks continue to grow, new opaque hard mask materials are being transitioned for critical channel hole formation. Eco-metrology is uniquely positioned to take advantage of these technology inflections and is already entering the market with an order backlog of $20 million.

Now I'll turn the call over to Mark for a review of the financial highlights and our third quarter outlook..

Thanks, Mike. And good afternoon, everyone. First, let me thank Mike and the entire Onto team for an incredible Welcome. I'm excited to be part of Onto Innovation and look forward to contributing to the next phase of profitable and leverage growth ahead of us.

I will start by providing some details on Q2 results, then follow with an outlook for the third quarter.

As Mike mentioned, we had another record quarter, with second quarter revenues of $256.3 million, approximately $8 million above the high end of our previous guidance range supported by the recognition of the X500 lithography systems within the quarter.

Breaking down the revenue by market, advanced nodes revenue of $94.5 million grew 47% year-over-year and represents 37% of revenue. Specialty device and advanced packaging, which benefited from the X500 revenue within the quarter, achieved $117.3 million, grew 28% year-over-year and represents 46% of revenue.

Software and services revenue of $44.5 million, setting another quarterly record, grew 19% year-over-year and represents 17% of revenue. As was mentioned during Q1, once able to recognize the revenue on lithography systems, this will create a headwind on the quarterly gross margins, which were 52%, down from 54% in the first quarter.

In addition, we continue to experience significant disruptions in inflationary cost pressures from our supply chain, which are also impacting gross margins in the quarter. Second quarter operating expenses were $59 million, at the midpoint of our previous guidance.

We did see an increase sequentially by approximately $2 million from the first quarter, primarily from higher compensation costs. However, we continue to drive significant operating expense leverage as, on a year over year comparison, operating expenses as a percent of revenue decreased by 600 basis points.

We also posted strong operating margins at 29%, continuing to demonstrate the leverage in our operating model as our operating margin increased by approximately 300 basis points compared to a year ago. Operating margin is down from Q1, primarily due to the gross margin impact from the lithography systems.

We do expect our operating margin to re-accelerate in Q3. Net income in the second quarter was $64 million or $1.28 per share, $0.02 above the midpoint of our previous guidance. Moving to the balance sheet. We ended the second quarter with cash of $545 million, up $34 million since the start of the year and up $3.1 million since Q1.

During the quarter, we did leverage our overall strong cash position to make further investments in our inventory and our infrastructure to support the growth of the business.

Inventory increased to $281 million in the quarter on higher planned revenue in the second half of 2022 as well as increasing certain safety stock levels as a hedge against ongoing supply chain disruptions.

Accounts receivable increased to $235 million in the quarter, and our day sales outstanding increased to 83 days due to the timing of the revenue within the quarter. We do expect to get back to the normal trend of cash generation in the second half of 2022. Now turning to outlook for Q3.

We currently expect revenue for the third quarter to be between $242 million and $258 million. We expect our gross margins will be between 54% to 55%, driven by sales mix, expanding our supply chain and leveraging our fixed cost structure. For operating expenses, we expect to be between $60 million to $62 million.

For the full-year 2022, assuming no changes to tax legislation, we expect our effective tax rate to be between 13% to 14%. We expect our diluted share count for Q3 to be approximately 50 million shares. Based upon these assumptions, we anticipate our non-GAAP earnings to be between $1.21 per share to $1.42 per share.

And with that, I will turn it back to Mike for additional insights into Q3 and the remainder of 2022. .

Thank you, Mark. We continue to believe revenue in the second half of 2022 will be stronger than the first half. Within the advanced nodes market in the third quarter, we see double digit growth from logic and NAND customers more than offsetting declines in spending from DRAM manufacturers.

The logic spending is primarily for sub 5 nanometer nodes where we see increases in sampling rates and layer share gains, resulting in higher catch rates for Atlas metrology. In 3D NAND, strong Atlas sales are being complemented by growing adoption of our Aspect metrology.

We expect repeat orders and another top five NAND manufacturer to adopt Aspect for production in the quarter. The Aspect metrology system is providing superior precision, stability and robustness for the high aspect ratio channel home metrology relative to competitive solutions using traditional simpler interferometric designs.

We expect this product to be a larger contributor to revenue as manufacturers move high stack 3D NAND into higher volumes of production. We do foresee a decline for our specialty and advanced packaging customers after such a strong second quarter. We expect this to pick up again in the fourth quarter, particularly for packaging and power devices.

Contributing to our view of a stronger second half, bookings outpaced billings in the second quarter, adding to our backlog which is now over $700 million.

Given this unprecedented visibility, we project system sales to advanced node customers to grow over 40% for the year and systems for specialty devices and advanced packaging to grow over 20%, each well ahead of fab equipment spending estimates of 9% to 10% for the industry overall.

Even with this exciting growth, we're still in the early stages of transform our company into a partner of choice for connected solutions across the semiconductor value chain. So, although we're happy with the progress made so far, we see our best and most exciting advances are still to come. And with that, we will open the call for your questions.

Kyle, please open the lines..

[Operator Instructions]. We'll take our first question from Quinn Bolton with Needham & Company..

Congratulation on the nice results, especially on recognizing revenue on the JetStep X500. I wanted to start just with a couple of clarifications, Mike, I think you'd mentioned that there were some production issues for the inspection systems in Q2 and $5 million revenue was affected. And it sounds like some of those constraints continue into Q3.

Can you just kind of give us a sense of what you're seeing for that market, especially with the very strong demand for Dragonfly with EB40?.

That's actually the challenge. Some of our suppliers were unable to meet that strong demand. So, we announced the product, we had – I think it was over 11 or over 10 customers, add up to $75 million in backlog and customers – or let's say, the customers wanted the tools in the first, I don't know, several quarters, first two quarters.

And some of our suppliers – in fact, some fairly smaller, obscure suppliers were unable to meet the demand. We're working with them to increase their capacity and their production capabilities. There was some quality issues where we had to help them work through some rework.

And as we get through that, we'll be able to meet full demand and be right back on track. We are accelerating. So we did ship tools in the second quarter. We will ship more tools in the third quarter, and finally relieve the constraints in the fourth quarter..

Second question on the JetStep lithography systems. I know the initial systems that you recognized in the second quarter here carry pretty low gross margins, just given the long eval costs.

But as you look forward to Q3, Q4, can you give us some sense where those margins go as you begin to recognize sort of tools that did not go through those extended evals?.

As I mentioned, there'll be steady improvements over the next six quarters. And without trying to peel back individual product line gross margins, I did provide commentary that will be back into the 54%, 55% range in the third and fourth quarters. And that will include two JetStep lithography systems in the third quarter and three in the fourth.

And then that will continue to improve throughout 2023..

We take our next question from Craig Ellis with B. Riley Securities..

I'll echo the congratulations on [indiscernible] (18:14) the JetStep X500. Just a significant milestone there, guys. So congratulations. I wanted to start just by following up with a longer term JetStep question. So nice to see the momentum building as we go to the back half with two and three products shipping respectively in 3Q and 4Q.

Can you provide us any color on just the way the linearity could shake out in 2023? And is the backlog simply that $100 million minus what you have shipped in 2Q and plan to ship in the second half or have you added to the prior $100 million backlog?.

You might recall, we were capacity constrained. So we already booked our full capacity for 2023. In fact, we increased capacity for 2023 and then booked that. And that was done early last year. So right now, we're working on 2024 and looking at the demand and increasing capacity to serve 2024 demand.

From a linearity perspective, I don't recall if we're going to be at max capacity in the first quarter, but it would be starting in the first quarter and then leveling off for the next three quarters where we'll start right out at that top level for all four quarters..

Mike, it'd be great just to get some additional color on the commentary around Atlas and the 2 nanometer gig all around and advanced transistor architecture qualifications and just some of the things you're seeing in that part of the market..

We are seeing a lot of movement. A bunch of pull-ins, people trying to accelerate their ability to ramp and then, recently, we had some customers publicly announce delays to their 3 nanometer process.

But from our perspective and what we're seeing, there's still decent demand for the Atlas in order to ramp the pilot production, and eventually volume, for the nanosheet transition. We are seeing different timelines from different logic suppliers. So, one that's announced, they're already running production.

Other, little bit, maybe a year behind, and then a third even further behind than that. Everybody's racing to bring that to production relatively quickly. So, I see a lot of movement and competition in the space.

What's nice for us is that the Atlas is proving to be a very potent tool for them to be able to make the critical measurements for the new nanosheet process steps. And those critical measurements are requiring far more sampling because of the APC control there. So, we're actually taking our data and adjusting the process.

So, providing true APC, automatic process control, in order to meet the yield requirements. So that's also adding to the attach rate..

If I could sneak in just one more before hopping back in the queue. Mike, it sounded like from your commentary that the Aspect strength that you're seeing across a number of manufacturers is indeed quite strong.

And while there's been a lot of concern of late about capital spending in the memory market, it seems like where you're positioned for layer count increases, which are predominantly 128 layer, going up to – I think there have been three different announcements above 230 layer. It seems like that's benefiting the company's position in the marketplace.

Is that right? And can you just give us a little bit more color on what you're seeing in the NAND area?.

Yeah, that's definitely correct. I think it also brings in the Echo product line as well. So we're seeing opportunities for Echo there as well on the hard mask layer. From an overall NAND perspective, this transition to high stack 3D NAND is going to be similar to the transistor transition. It's going to be a big step function.

It's all about bit density. And where historically we just had the Atlas, now we have Atlas, Aspect and Echo product line, providing a more complete solution for process control of – in the case of channel whole development, formation, as well as other features in the 3D NAND, like the hard mask layer.

In addition, we're leveraging our hybrid metrology capabilities to provide – to take the different data streams from these tools and further enhance the information we're providing the customers. So, that becomes very unique.

It's one thing to get measurement capability from three different tools and you can mix and match and maybe replace, but when their combination of data streams provide some unique value, that becomes, let's say, more sticky. .

We take our next question from Brian Chin with Stifel..

A few questions on lithography. Just wondering, Mark, if you could provide what gross margins would have been in 2Q and 3Q excluding litho. Number one. And number two, the 54% to 55% level in second half is a pretty good snapback.

So kind of curious what some of those initial gross margin improvement levers you're seeing in terms of that recovery and also maybe if you're seeing a better mix with Atlas tools, et cetera, also in terms of the other products in second half..

Certainly, on the gross margin, as Mike mentioned, I don't think we're going to get into the specifics of the litho tool. But as we commented on, certainly, we see a return back into that 54% to 55% range. And obviously, baked within that, we do continue to see cost pressures and supply chain pressures, which we made comment on.

So I don't expect that to be any different in Q3 and Q4. So, we'll see some of those headwinds we'll still have to try and offset..

One of the big helpers is sort of the lower revenue contribution, second half relative to 2Q with litho..

Brian, we also will see, as I mentioned, a steady improvement in the gross margin throughout the next six quarters, specifically to the litho. And we've also been working on increasing the value propositions for existing tools, driving throughput, driving other enhancements to help offset some of the supply chain challenges we've seen.

So, I think we're definitely taking several steps to maintain or continue to expand the gross margin, despite the headwinds we face..

I think I'm obliged, again, to ask about memory. Mike, in the construct of your higher second half versus first half – and certainly, your new product expansions play a big role, I think, in that to the year as well as probably even second half.

But what sort of risk are you dialing in in terms of memory? Obviously, it seems a little bit fluid in terms of recent commentary from some of the key spenders in memory, or specifically, one earlier today. So kind of curious, what are you dialing in in terms of maybe a downtick in DRAM. It seems like NAND seems pretty healthy still.

But what are you thinking through second half and maybe even the tease out sort of next year in terms of the fluidity?.

Yeah, for sure. We think we have the announcements baked in to our commentary. I did mention in the prepared remarks that DRAM would be down, but offset by continued strength in NAND and logic, particularly for the advanced nodes.

So barring future surprises, wheels falling off the bus kind of thing, our channel checks our discussions with the customers. We're pretty confident the visibility we have, the fact that the book-to-bill was continued to be higher, over 1, leads us to believe we're still in an environment where the equipment is in high demand.

For us, it's not just the volume.

We're also tied to several technology transitions, not just with the transistors, the nanosheet, or the sub 5 nanometer, but also with certain DRAM transitions, 1A, 1B, they all have different names, but there's some DRAM technology transitions, as well as, of course, the 3D NAND, the high stack 3D NAND we've been talking about.

Flipping to specialty and advanced packaging, you're right. We do see some opportunities with the lithography, with some of the new products, certainly the high demand of the Dragonfly looks to be very solid. And we've talked about pretty strong backlog in the wafer manufacturing space.

So, the very conservative way for manufacturers driving expansions to support the growing demand for EUV wafers and our position for process control solutions and material solutions to serve that market.

So, you take all these different shots on goal and you can add them up and take a factor for some of the negativity and we still see the stronger second half and some of the numbers we talked about for growth – 30% advanced node systems and 20% or more for packaging and specialty. .

We take our next question from Hans Chung with D.A. Davidson..

First, can you provide some color around the specialty and advanced packaging segments? How much of the business sort of have more exposure to the mobile end market? And also, what's the revenue mix between compound semi versus the other piece, and also how much exposure to the silicon carbide?.

That was a lot. I don't think we have all the breakdowns that you're asking for. But just to give you a kind of – to step back and provide some higher level view. For, let's say, a consumer market, I would say that the primary driver there is our OSAT business, and that's factored in. We definitely mentioned a slowdown there.

But on the flip side, part of our packaging business and part of the demand for the Dragonfly has been around packaging for advanced memory and logic devices and the efforts that customers are investing in to improve yields for those devices by driving higher yields, by better process monitoring on the edge where they could see a higher yield loss of die.

So I think that's one part of it. In the specialty, I'd say the bulk of our power business is tied to compound semi. I think silicon carbide is still relatively small there, but to the extent that our customers are investing in the silicon carbide ramp, we certainly have positions.

I don't know, do you ever more detail?.

No..

Sorry, we don't have that so finely broken down..

I guess next question is more medium term. I remember before we come in, in terms of the NAND, they will be 80% of the 3D NAND will be more than 176 layers.

I was just curious, how does that translate to your revenue opportunity in 3D NAND and will that be kind of across the Atlas, Aspect or the acoustic metrology or it's more like more weighted to the Atlas?.

The Atlas is definitely the workhorse. That's well established in process tool record in every NAND manufacturer. So that's for sure. The workhorse or the bulk of the revenue opportunities. But we're further adding to that with the Aspect and the Echo product lines.

And we think that those combinations, especially as we see a ramp into the higher stack 3D NAND, those combinations are going to increase and certainly increase in percentage of our overall revenue there. How much is a little bit unclear because they're still trying to determine how much process monitoring they're going to do with these tools.

Is it going to be in line in every step or is it going to be a sampling rate? And that's what they're working on now as part of ramping up production. For sure, we will see – each of these tools, we're already seeing them being qualified for production. So they will be part of production, the amount. What's in question is the attach rate..

We take our next question from David Duley with Steelhead Securities..

Congratulations on nice results. I guess I was wondering if you could provide us a little bit more details.

How big do you think the size of the Atlas market is at this point? And what sort of market share do you have with that product line in that space?.

These are estimates because it's not broken down by any industry analyst. I would say it's about $400 million to $500 million or so out of an optical metrology market of about $1.2 billion now. So in that, I'd say, we have a pretty good share. I'd say we're probably – I don't know. Certainly, dominant in the high end, the high end OCD applications.

I think some of the more common OCD applications, we might have little less share. But, overall, that's the view. I can't say for sure what the share is. I'd say 50% on the high end or more. And then on the common share, maybe 30%, 40%, something like this because we're a little more expensive for that.

That's where our Iris platform is coming into play, where we're able to offer that upgrade ability, so we can go after cost effectively the lower end of that market and be able to compete and gain share there and then offer the upgradeability to full OCD and full capability of our Atlas.

And then the other penetration points are the planar films, which is the other half of that optical metrology market..

As far as the lithography business goes, you're talking about shipping, I guess, five units in the second half. That sounds similar to the revenue recognition level that you just had in the first half. So, I guess roughly 40-ish million for the calendar year.

Can you help us understand, with you increasing capacity next year, what the revenue potential is if there's no supply constraints?.

I had mentioned we had $100 million in backlog. You've got the $40 million coming out. So that's at least $60 million. And if we can squeeze a little more in, we'll try..

Just as a housekeeping, you mentioned a couple of times system sales in 2022 advanced nodes and then the advanced packaging and specialty, could you just repeat those growth rates for me because somehow or another I missed them?.

Advanced nodes, 47% year-over-year and represents 37% of revenue. Specialty device and advanced packaging, it grew 28% year-over-year and represents 46% of revenue. Software and services grew at 19% year-over-year and represents 17% of revenue. .

I think Mike mentioned what the systems growth was going to be for the calendar year for both segments at one point or another. Not what you just referred within the quarter..

Sorry. I had mentioned that, based on the projections we see, the advanced node systems revenue would be around 40%, over 40%. And based on the projections, the pace we're at, the advanced packaging and specialty systems revenue would be over 20%..

We to take our next question from Mark Miller with The Benchmark Company..

With the recently signed US CHIP bill, Europe has previously authorized funding for internal chip production, and also I believe there's at least seven fabs totaling over $80 billion that are supposed to start coming up next year.

When do these opportunities start hitting your order book?.

I guess as soon as they start ordering equipment. Right now, that's a pretty fluid situation.

So my understanding is the government is going to set up an entire, I won't say bureaucracy, but a body to govern how the funds will be allocated because it's quite a big amount and there's two different groups that are being considered or two different bodies being considered for this.

As that comes out, then the rules will come out for how the money will be distributed. Obviously, there's sensitivities. We saw that in the debates between the various policymakers on the CHIPS Act itself. So from that, then we'll start to see, hopefully, pretty aggressive announcements from our customers and pretty aggressive ramps.

They've got to break ground, they've got to build the fabs, the shelfs, and then start ordering equipment to fill them. So I would say a year. Some have already started. So we're optimistic – TSMC is probably the furthest along. Samsung's coming up and Intel would be behind them. But I wouldn't expect anything in the next six months..

You're building up significant cash.

What are your priorities, again, for cash?.

Priorities are primarily for M&A. We think that's still the best opportunity for shareholder value creation. And then, we've talked about buybacks. We have an authorized buyback out there.

$80 million, $100 million?.

$100 million..

[Operator Instructions]. We take our next question from Eric Grid [ph] with Four Three Advisory [ph]. .

Congratulations on the great quarter and good outlook. And actually, this is just a follow up to the immediately prior question. It looks like you've about $11 of cash on the balance sheet right now and you're trading at maybe 10 times next year's earnings.

Why isn't stock repurchases a higher priority or maybe more balanced in your capital allocation focus relative to acquisitions, given how low risk it may seem and so attractive at these levels?.

Certainly, we continue to consider M&A a first priority. So in that regard, I think from a cash standpoint, making sure we have those funds available is obviously a priority. .

We have formulas. We look at the investments we could make and the buyback and the pipeline we have for M&A and we make decisions based on basically the best returns. And so, that's just a prudent management, I guess. .

Thank you. And it appears there are no further questions at this time. I'd like to turn the call back to Michael Sheaffer for any additional or closing comments. .

Thanks, Kyle. And we'd like to thank everybody for joining us today. A replay of the call is going to be available on our website by 7:30 Eastern time this evening. We'd like to thank you for your continued interest in Onto Innovation. Kyle, please conclude the call. Thank you..

And this concludes today's call. Thank you for your participation. You may now disconnect..