Telefonaktiebolaget LM Ericsson (publ) (ERIC) Q4 2013 Earnings Report, Transcript and Summary

Welcome to the Ericsson's analyst and media conference call for their fourth quarter report. To view the visual aids for this call, please log on to www.ericsson.com/press or www.ericsson.com/investors. [Operator Instructions] And as a reminder, a replay will be available 1 hour after today's conference. Our Head of Investor Relations, Peter Nyquist, will now open the call.

Thank you, operator. And hello, everyone, and welcome to our call today. With me today, I have Hans Vestberg, President and CEO of Ericsson; I have Jan Frykhammar, Chief Financial Officer; Johan Wibergh, Head of our Networks segment; Magnus Mandersson, Head of our Global Service segment; and on a link from San Jose, I also have Per Borgklint, Head of Support Solutions; as well as our Head of Communication, Helena Norrman. During the call today, we will be making forward-looking statements. These statements are based on our current expectations and certain planning assumptions which are subject to risks and uncertainties. The actual result may differ materially due to factors mentioned in today's press release and discussed in this conference call. We encourage you to read about these risks and uncertainties in our earnings report, as well as in our annual report. With that said, I would like to kick off this conference call by handing over the word to you, Hans.

Thank you, Peter. Let me start talking about the key developments in the market in 2013. This was the year of mobile broadband. Mobile broadband subscriptions grew to SEK 2.1 billion in the world, which is a growth of 40%. This puts, of course, the focus on both the improved consumer or user experience, as well as seeking performance and quality in the networks, because this is becoming so important and relevant that the networks are catering for all these data services that we are now see coming in the networks. We also see, which -- it's fairly logical, we are in an inflection point in whole industry going from voice-centric sort of networks to data-centric networks, the technology that we all are working with in all the industries and society as a whole. And of course, that is putting also strain on our business models, both of vendors and operators, and that, we have seen in 2013 and will most probably continue into 2014. I mean, we can only look at there, so we are taking all decisions like leaving Hans, et cetera, in order to be strong in the second phase of this technology revolution. But one thing is certain, that mobility, broadband and the cloud will only grow in importance going forward for people and industries and society, and I think we saw that development in 2013. If you then look into ourself, a lot happened during 2013. I'm trying to summarize some of it. It's always difficult, but we picked out a couple of things. Of course, we continue to focus on service and technology leadership. I think our technology leadership, especially in the mobile infrastructure, continue to develop well. Good quality on the products, lot offers [ph] in the world, but also where we define…

Thank you, Hans. So Q4, for me, was a quarter according to plans, and with the exception of Samsung that came on top of it. But if I look on the rest of the business, I think we are executing and delivering on the plan. I present that in Investor Day both back in 2012 and 2013. And notables in the quarter was the strong mobile broadband sales in China and Russia, and -- but they did not offset the decline we had then in North America and in Japan as we have communicated before. The continued structural decline on both GSM in China and CDMA in the U.S. and also at the switch core continues. On the positive side, in the quarter, we had 18 new SSR contracts, including 6 for fixed networks. So if you then add together, since we launched SSR 2 years ago, we had 96 contracts totaling on the SSR, and of those, 26 on the fixed side. So for me, then, this has become a very successful switch from our previous portfolio to this new generation. And we are still up in the early days of breaking in with our IP portfolio on the fixed side. 26 customers is a good start, but much, much more to do there. And on quarter-over-quarter, we had a 30% growth including Samsung. On the full year then, so the organic FX adjusted sales of 5% up. Notable regions, there were Latin America, Europe and the Middle East, while we had a decline as I said earlier, in North America and Northeast Asia. On the portfolio side, I would like to highlight that we had some really strong developments during the end of the year in the new core area, things like IMS and UDC that are key…

Thank you, Johan, and hello, everybody. Let me then first comment shortly on the quarter here then. We -- if we adjust then for the currency, we're up 1 percentage. We did SEK 27.2 billion in the quarter, continue to have a quite heavy negative FX there. We are flattish, small, a small decline then in the currency on Professional Services. Our Network Rollout was declining with 8% in the quarter. Remember, we had a very strong first half. Consequently then on earnings, we have a stronger second half. On -- we did 13% quarter-on-quarter sales increase. If we look into the full year then, which is nice to see, I think we continue to grow our business with 5% adjusted. And we did also grow in Professional Services, not adjusted minus 1%, but adjusted then 3% -- or 4%, and we have good growth in Managed Services. If we look into the significance of the Professional Services, we had record high Managed Services contract signed in 2013. 84 contracts, 52 compared to last year. And in the quarter, we had 25 compared to 15 a year back. These contracts is a little bit smaller in size because we are now getting in -- getting more and more traction on the Managed Service IT, and this contract, by nature, is smaller. North America continues to be our biggest market and has shown us good, good growth in the quarter, as well as the full year. We are also continuing to broaden our portfolio, getting more and more into Managed Service IT, IT transformations on CSI, et cetera, and that has continued to be a very strong services market for us. Notable also is that we continued to have a very solid profitable level on Professional Services. We ended the quarter with 14%. And you can also see that the quarter ended with 8%. This is 2 percentage units better than Q4 2012. So I'm very happy with the profit improvement we have had over the year. All our programs that we are running in services is gaining momentum and then resulting in this solid result. Then Per, I'll hand over to you in San Jose.

Thank you, Magnus, and good morning. So if you look at the figures of Support Solution for Q4, as you can see, we came in with a very strong growth on the net sales to SEK 5.1 billion, including then the Samsung agreement of SEK 1.3 billion. Excluding that, we ended on a figure of SEK 3.8 billion in the quarter. These figures are both including Mediaroom, but also the fact that we, during the year, have made divestments and closed down some of the products line and we're continuing our transformation on the role of business in towards a next gen and investing more and more in modification of large solutions. Furthermore, if you look at the operating income, we had a fantastic quarter with an operating income, excluding Samsung, of 16%, which is a very strong operating income, which is, of course, also characterized by fluctuations we have in our margins coming out of the sales of software that is not evenly distributed over the year, but also as a consequence of our streamlining of our costs and focuses on getting a very clear value proposition into the market. You can see that we have a very strong demand for OSS and BSS solution, and it shows a very strong state of development. We've had a bit of headwind in there and compression during the year, which we, however, see a bit of stabilization. And we also are seeing a fantastic momentum in media and media solutions. Like our media delivery network and its fueled and demanded by both the multi-screen as well as the any content anywhere kind of development that we see in the market. And as a final comment, we are having 2.1 billion subscribers that is managed by our operating and charging business systems globally at the end of the quarter. With that, I think I'll hand over and back to you, Peter Nyquist, who is with Hans Vestberg, who's going to take you on further into the report. Thank you.

Per. Okay. The last segment, we report more than for the first time as a separate segment as we now have that included in Ericsson. There was 2 things here. One, the product [ph] 450 is now commercially released and we're happy with that. We have been, during this transformation, bringing the employees down and dissolving the joint venture. We have had great focus on seeing that this product is coming out, and we think it's a good and great product that can address the high end of the smartphone market. So that's very good. Nothing else to report on modems. We guided already in the beginning of the year of the cost of roughly SEK 500 million in the fourth quarter, and that is what exactly the case. Then we also say that the operating expenses on modems in 2014 is estimated approximately SEK 2.6 billion. Quick regional overview. North America, we had talked about strong first half year is a little bit more cautious or pressure on the top line in the second half, still a very important market. Europe, growing well. Middle East, constantly well developed during the year. Northeast Asia then, we're talking about Japan and China and the structural changes and the currency being down all year, even it came back a little bit. India rebounded both in Networks and of course, Services in fourth quarter after a long time of decline. Latin America grew. And in the other, there, we have the IPR. So that's a quick summary of the world. But again, 5 regions growing of 10 in the fourth quarter. And year -- the full year 2013, 6 regions grow out of 10. By that, I hand back -- or hand over to Mr. Frykhammar, our CFO.

Okay. Thank you, Hans. Hello, everyone. So let me then do this quite fast because I know you have read all the material. So we take sales growth and the FX impact first. I think the only thing I want to highlight in this picture is obviously, the -- that you see the full year numbers here by segment, summarizing the table, 5%, 5%, 0, Networks, Global Services, Support Solutions. And you can also see the quite big amount that we have had as a headwind on top line for the full year number. It's a little bit more than SEK 10 billion. So it's a significant number there if you look at it. Then, of course, if you take the P&L, a lot has been said around the margin already. Strong margin in the quarter, of course, fueled by the Samsung revenue, but also, as Hans said, excluding the Samsung revenue, close to 33%. It is the factors that we have been talking about for the whole year that is now also positively impacting the margin, there is huge effect of the network modernization projects in Europe. And I think it's important that what we write in the reporting, the CEO comments, is that we want to really put this explanation now behind us. We feel that we have, in the fourth quarter -- we don't see that the modernization projects has any material negative impact on margins. So in our language -- and that means that we are not going to continue to explain variations in margins by means of the network modernization projects in Europe. So probably end of a 3-year story there. We include business mix. It's also important to highlight. That's also a gradual thing that we have had throughout the year. Typically, as we…

Thank you, Jan. I will now dwell on the last piece here. You know our focus that the strategy execution on the areas where we are strong, but also establish our leadership in the new areas, and that's -- we are doing resourcing capital allocation for. At the same time, we are doing cost and efficiency gains and we'll continue with that. We are on a transformation for a large company to stay relevant in the second phase of the technology revolution, and we are taking one step in 2013 and kept our balance sheet strong, as well as increasing our profitability. So by that, I hand back for a Q&A.

[Operator Instructions] And now we have the first question from the line of Mark Sue from RBC Capital Markets.

Perhaps I could get a sense of how we see the cycle of spending in North America and how we can overlay what we should see in terms of the beginning of the cycle as it relates to upgrades in Europe with Project Spring and other carriers and what that might be in terms of your spending assumptions for the year, that will be great.

I can start and see if I can get some of my colleagues and would comment as well. When it comes to North America, we can only conclude the trend that we saw in the second half, that was that we saw a little bit lower pace on the big rollout. Remember, the pace was enormous for a while on some large projects. That came down. And we are a little bit more in the capacity phase right now in North America, a little bit less on large rollouts, and that's when we saw in 2013. And usually, the trend is not changing quickly, so -- but I won't --don't want to guide, but clearly, the trends are taking some time to change. So we are -- remember, first half year, very strong on it; second half, we have seen more capacity you can take. Then on the Europe, there's nothing to comment on this type of Spring Project, et cetera. That will be communicated, of course, when they have decided. And so far, there's no official communication on how they will do. We have the same information as the market, what they have communicated. What we feel good about is our position in Europe. Both on services and technology we have strengthened our position the last 48 months and the last 2 years, given the investment we have done. I think the most important for us, both in North America, as well as in Europe, to see that consumer uptake, the usage of the network, the new type of devices, and that's going to be important to follow when it comes for our business.

Should we assume that if you combine the 2, North America and also the case in order to start up [ph] Europe, that we might actually see a lot of activity for Ericsson this year, and then that necessitates some tuning of expenses lower, or will the other regions kind of balance that out?

We always work to balance our company. And the strength of Ericsson is we're already in 180 countries. If you look -- if you just take 1 year ago which market was growing and you take now that is changing, especially on the technology side, as we have cycles of technology, so I think that's the strength. If we need to tune, we will always tune, for sure, and we will constantly work on cost and efficiency. That should be integral part. And if we -- that's the only way to stay relevant and efficient. Maybe Jan wants to comment something.

No, I think, I mean, in general terms, of course, what Hans said around the big coverage projects that's been around, honestly speaking, for 2.5 to 3 years, I mean, different customers, the first initial period, then the customers that are -- we now have in the mix for those coverage projects. I think what is important here is obviously what Hans said, that there is more of capacity, meaning more of quality-driven type of investments, which means that we need to obviously look for the continued race for quality and also how traffic impacts investments. Of course, if you look at the beginning of the year, it might be tougher comparisons, of course, because we have had now, for a couple of quarters, very strong top line in North America, if -- just to look at the Networks number, also in Q4. Then I think -- when you think about North America for us and how we invest, of course, we have the release of the Ericsson Dot System coming later in the year which is a business opportunity. We have, obviously, a lot of the media opportunities related to next-generation 3D and so forth. So it is very much a focus for us to try to win new businesses in new areas in North America. But the reality is that we are in a phase where we are having less of coverage projects, more of capacity, but also new business opportunities. So that's what I would like to leave at this.

And the next question then is from the line of Stuart Jeffrey from Nomura.

I had a question on Networks. Both for Q4 and the full year, you didn't quite get to your 10% margin target. You've guided for an increase in R&D. I didn't really see it. Well, you haven't mentioned any savings in SG&A. So I'm assuming, to get to that operating margin target, much of it has to come from gross margin expansion. I was hoping you might be able to talk through the levers there. I think Johan mentioned, in core, there might be some improvement coming through, and you mentioned circuits which cause a negative drag. So perhaps you could talk about some of the mix dynamics that might be improving gross margins in the course of this year.

Thank you for the question. So I mean, what I communicated back in November 2012 was that my target was to get to 10% operating income in the quarter. And then when we achieved that in Q3 last year, we're happy, and then I said then there needs to be a -- to get back to a more consistent view. And I mean, in our business, we have to typically -- may go a little bit up and down, I mean, and there are some seasonality in the business. And I did not state when and that would continuously be on at least 10% margin of every quarter because I know there's a certain seasonality. So I think that is what you should expect. And in account to get there because we are continuing with our focus on cost efficiency, and that's both related to gross margins, as well on our cost efficiency on the OpEx side, as well as on how we're working commercial excellence and price. And so all these are 3 different leverages to work upon. And we are, as I communicated back in November of last year, we will get that on a continued basis, but don't expect we will do that in every quarter immediately.

And then the next question is from the line of Alexander Peterc from Exane BNP Paribas.

I just like to understand exactly where we are going to go the -- where's it's going to go, the increased R&D expenditure, in IT specifically? Do you need to do more work on the SSR platform or is there any other investments you're looking at there?

That's -- I guess starting [ph] [indiscernible] I think we are working very diligently with sourcing capital allocation to see that we use our resources in the best way. That goes -- everything from R&D to services to our selling expenses, seeing that we're consistent. I think that's what we're doing right now, we are reducing in several areas. At the same time, we are increasing in some areas. IP then, this one area that we're increasing in order to be even best there in the competitive landscape. And maybe you want to know exactly what we're doing. But definitely, the IP is going to get a proportion that is higher than it had before in the totality.

So just to add on there then and as I said, I am encouraged to see the amount of contracts we are getting, but it's important to remember that there is both a time lag from orders on previous revenue taking on these new customers when they step in to new areas. And in fact, it also, I think, we are actually in the early days. So we're also very encouraged by some big customers to us -- coming to us and saying, "Please, Ericsson. Be a disruptor. You see that SDN will completely change how the IP networks are built. We really welcome a new strong player in this marketplace. So please come in, disrupt, change with SDN, et cetera.". So we are increasing investments to live up to those expectations from customers. It goes across different pieces of portfolio. And for competitive reasons, I don't want to be specific on exactly what we are doing. But I think it's, for us, very encouraging to hear that feedback from customers, so -- and I still believe, if you look on this business today, it generates, of course, quite small money in our total P&L, but I think there's a huge upside in the future. And I think -- but I think that we need to work upon them for the coming couple of years here.

The next question is from Ehud Gelblum.

So questions -- there's a lot of questions on how the decline in North America, as it moves from coverage to capacity, impacts you in 2014, and that's integrated into the gross margin progression, especially since it sounds as though China comes on stronger in the second half of the year. Can you just give us a sense on -- as we look at these different pieces, should we be looking at North America continuing to go down through the next year and having an off-balance or balancing off and offsetting impacts on the gross margin as the European modernization is now completely finished? So should we be looking at the gross margin that you looked at in Q4 as being somewhat of the correct run rate as we look into next year? And then as you get into the second half of the year, when China becomes larger, does that put additional pressure on the second half of the year on the gross margin? Or how should we be looking at those 3 different pieces? And then another question on modem. At what point -- how many years will you let it go before you take a look at it and say, "Maybe it's not a profitable business," maybe it's tougher to turn around than you'd thought and look for other strategic options? What is the timeframe that you give it and what are the thresholds that you're looking at to decide at what point to take action?

Thanks. I will just come back to North America again and saying that first of all, the trend that we saw on the second half, of course, that's the trend that we see a little bit less of coverage projects which impacted Networks. Of course, that trend will sort of -- will not go away quickly, so that will need to happen. Remember, also, the first half year last year was very strong on Networks. On the other hand, as Jan just said, Services and the TV and media solution, OSS, BSS, all growing in North America, not offsetting the decline on Networks, but that's the way we're working. And again, the most important for us to understand is the overall demand for mobile broadband innovation, new handsets, et cetera, in North American market. On China, we saw already, in the fourth quarter, an impact on the 4G, so I guess that will sort of go into the first half as well when it comes to 4G rollout in China. Then the pace, et cetera, that's defined by our customers. So it's hard to speculate, but definitely, we already started in 4G in the fourth quarter. So I guess that will be there as a trend as well in the beginning of 2014. On the other hand, as you have rightfully mentioned, we also have a business big change in other markets. All that weighs together when we look at how -- looking into 2014 and how we'll work with it. But we will deliver the work with profitable growth as we have done before, but those are the big parameters. When it comes to modems, I think we already said it, it should be viewed over a couple of years from the integration of it. We just integrated it. We just launched our products. So I guess we believe that this is a great first step. So we are committed to see that, that's going to be a success. And we believe that we have a great product. So it's not in the near or short term where we'll have any strategic changes to that.

Helpful. As a follow-up, can you give us a sense as to what Q4 would have looked like if the Samsung royalties have been appropriately -- or if the Samsung agreement had been done at a time -- 1 year or 2 ago, so that instead of seeing a whole chunk in the fourth quarter, we're taking it out entirely, we would have seen the right amount in the fourth quarter?

The fourth quarter, as you can see there on -- Alex, both in including and excluding the impact of Samsung, and that -- I think it's a very good disclosure for you. I think also on the modernization projects for Europe, I want to say then that the statement that we are making and you see the comments in there in the -- after right-hand column, is what we want you to use. And that is that the major impact in terms of negative margin is now behind us. Then if you go into the Network segment and the Services segment, there is some more detail with that regards because there is still a bit of a lagging effect of Network rollout. But overall -- and we would like, as we said before, that we put this investment in footprint in Europe from a financial impact point of view behind us now when we look forward to more of a new normal logic in Europe, which means capacity and coverage that we have had in many other markets throughout the years, so...

Right. I guess what I was just asking on the Samsung is, we have both with the large SEK 4.2 billion chunk, which represents multiple quarters, or we can take it entirely which represents nothing. But appropriately, there should have been a Q4 contribution of that SEK 4.2 billion, and I'm just wondering what would that -- what that quarterly contribution would have been so that we can use that as a quarterly guide going forward. I don't know if you can give color on that.

And the question -- it's well put as well because you're absolutely right. Of course, we have had this legal dispute. And during that time, we are not taking any revenues and that goes for several years then. And of course, a portion on that came in to Q4. So it should, of course, I mean, distributed differently. We cannot really give you any guidance exactly how much is lost in this case. We are in agreement with Samsung about what we can disclose and not disclose. We are going forward with a multi-year agreement right now on royalties and licenses, and we're going to report that per quarter going forward, part of our IPR licensing revenue.

And the next question is from the line of Tim Long from BMO Capital Markets.

Just wanted to follow-up on China. I think you said in the release, not necessarily on the rollout part, but you talked about the initial sales diluting gross margins a little bit. Could you talk about that? Are you seeing that at -- both for the operators that you're working with? And what do you think the timeframe is for your business in China to take the normal course of a little bit dilutive in the beginning and bringing it up back to normal equipment gross margins?

So Johan here. So I think a couple of things to consider when we model China going forward. I think we have -- the statement in the report is quite clear there on the operators that have- shown some vendor and the one that have started then to deploy 4G. They are in the mix in the fourth quarter. And that's also an impact on the hardware margins. Then if you look into 2014, these contracts are -- as we have said before, they are quite hardware-heavy initially. The Services scope though is not as big as we have had scope-wise in, for instance, North American and European modernization projects. So it's more, if I may say that, more normal network allowed for integration type of services, so it's more of a hardware element initially. And then as traffic starts to grow, we start to see software. So -- and I think we will, as Hans said before, I mean, deployment is ongoing as we speak. And then we'll see about the exact seasonality in the distribution about these contracts. I'm sure we will come back in Q1 and report back on this one. But they are -- for you to remember, it's not as big Services group and they are quite hardware-heavy in the beginning.

And the next question is from Sandeep Deshpande from JPMorgan. Sandeep S. Deshpande - JP Morgan Chase & Co, Research Division: I have a couple of questions. Firstly, Jan, you talk about, in the release, that the negative impact from the modernization projects is mostly over with the fourth quarter number. So I guess, the gross margin in the fourth quarter is some kind of baseline gross margin. But you still have SEK 0.5 billion negative on the Network Rollout. So I mean, how does that -- I mean, so is that not to do with the network modernization? And is that not going to roll off going forward from here? Secondly, I have a question on the SSR routers. You've got a large number of new projects there. Would you say that during the course of 2014, that business will actually contribute to the bottom line because -- and thus, that will help the overall profitability of the Networks business?

Thank you, Sandeep. If I repeat what I had said on the Network modernization. On group level, we see that the majority of these projects from a margin point of view is behind us, and that's according to the plan, that's according to what we have been communicated to all of you since late 2010. Then as I also said, if you look in the detailed segment comments, there is one comment around Networks and another comment around Services. And there is still some spillovers in terms of Network rollout, and that is also visible, as you rightfully said, in the operating income for Network rollout. So -- but I think, if you think about it, from a company viewpoint, it's not -- we see this as a normal issue from the gross margin point of view. Then Hans, SSR.

Yes. On the SSR, I think that you want me to explain it. We all have good traction and a lot of new customers coming on. But then, of course, it's time from the orders to get into sales. So I think we need to be cautious. But we are cautiously optimistic that this is a good inroad. But from making that to -- a large piece of that is significantly impacting Ericsson overall results. We have some way to go. But definitely, that's our plan. Maybe 2014 is not the year. But the inroads and the market share we're gaining are enormously important in 2014. Sandeep S. Deshpande - JP Morgan Chase & Co, Research Division: So Hans, maybe to understand that SSR route a bit, of those 96 contracts that you have, how many are already shipping?

Don't have the exact dates on how many are starting to shipping. But of course, the ones that have started that we reported out of third quarter, many of those were starting to shipping. The ones that we have now added in fourth quarter, they are probably up to be shipped. So I think that's where we are, but I don't have the exact number on the -- at the moment.

[indiscernible] So we can -- when we met at the Investor Day, we talked about the -- obviously, the -- what we call a structural decline in circuit-switched core and the importance of winning new core, and then we said new core is obviously an old packet core and other core opportunities related, for instance, to IMS and with the one mentioned before, UDC, and so forth, and we also state in the fourth. And if you look at -- in the Investor Day packages, this is -- in order to improve margin over time, to be -- to win sales in these new areas is one important element over time. And we also write in the report that business in this new areas is not yet enough to offset the structural decline on the circuit-switched cores. So we use that language for you to try to better understand the dynamics here.

So the last question for today is from the line of Francois Meunier from Morgan Stanley.

Yes. Actually, I would like to see if there is anything you could say about the Samsung litigation actually. Because of course, there are lots of question, maybe there's a lot of things you can't say. But is some form of linearity during the year? Is it like a quarterly payment, is it a semi-annual payment, is it an annual payment? Is it unit based, is it a fixed amount, is it a percentage of sales? Was there any damage in the payments -- your -- in the one of payments you received this quarter? I mean, anything you could tell us, we would take it.

Yes. You preempted basically everything that's been happening in the litigation, so I'm not sure. I think that we have pretty much said what we can say in this type. We have started some multi-year agreements going forward with the royalty licenses. Ericsson is a net receiver, of course. I think that's what we can say at this stage. And of course, very important is, of course, the performance also of the overall market. But I'm not sure if Johan has any more comments to your question, but we have disclosed what we are able to disclose in this agreement.

I think so. Let's stay firm on what the agreements we have with Samsung here and not speculate too much.

Very good. Thank you.

Sorry for that.

Okay. So you can't say anything basically?

I think that's the concluding remarks for me. It very much saying what we had in the beginning. 2013 was a year of continuous transformation of Ericsson, resourcing capital allocation in new areas to succeed in not only the strong areas and core areas of Ericsson, but actually establish ourself in new areas. I think given the market situation, looking backwards, we remain solid on our financial position, also one year where we improved our margins. We always are striving to do better, but I think it's also a stable year and really solidifying our leadership and showing that we are going into new areas. So I think that's my summary of the year and now put that behind us, and we now are full speed ahead in 2014. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect your lines.