F5, Inc. (FFIV) Q3 2013 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the F5 Networks' Third Quarter Financial Results Conference Call. [Operator Instructions] Also, today's call is being recorded. If anyone has any objections, please disconnect at this time. I'd now like to turn the call over to Mr. John Eldridge, Director of Investor Relations. Sir, you may begin.

Thanks, Sharon. Welcome, everyone, to our conference call for the third quarter of fiscal 2013. Speakers on today's call are John McAdam, President and Chief Executive Officer; Andy Reinland, Chief Financial Officer. Other members of the executive team are also with us to answer questions following their prepared comments. If you have questions following today's call, please direct them to me at (206) 272-6571. If you don't have a copy of today's press release, it's available on our website at f5.com. In addition, you can access an archived version of today's live webcast in the Investor Relations Events Calendar page of our website through October 23, from 4:30 p.m. today until midnight, Pacific Time, July 25. You can also listen to a telephone replay at (888) 568-0863 or (203) 369-3930. During today's call, our discussion will contain forward-looking statements, which include words such as believe, anticipate, expect and target. These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from those expressed or implied by these statements. Factors that may affect our results are summarized in our quarterly release and described in detail in our SEC filings. Before we begin, I want to remind you that F5 has no duty to update any information presented in this call. Now I'll turn the call over to Andy Reinland

Thank you, John. Results for the third quarter of fiscal 2013 came in above our expectations. Revenue for the quarter was $370.3 million, up 6% sequentially and 5% year-over-year, and above our guided range of $355 million to $365 million. GAAP EPS was $0.86 per share, above our guidance of $0.80 to $0.83 per share. Non-GAAP EPS was $1.12 per share, also above our guidance of $1.06 to $1.09 per share. For the third quarter of fiscal 2013, product revenue of $196.7 million represented 53% of total revenue, up 6% sequentially and down 5% from Q3 last year. Service revenue of $173.6 million grew 5% from the prior quarter and 19% year-over-year, and accounted for 47% of revenue. Book-to-bill for the quarter was greater than 1. Revenue from our Application Delivery Networking business was $366.8 million, and revenue from our ARX file virtualization business was $3.5 million. By region, the Americas represented 58% of total revenue, up 6% versus Q3 2012. EMEA contributed 21%, a 4% increase year-over-year; APAC accounted for 15% of revenue, up 7% from a year ago; and Japan was 6% of revenue, down 7% from Q3 2012. During Q3, the financial vertical accounted for 22% of total sales; telco was 21%; technology, 16%; U.S. federal government was 4% of sales, with total government accounting for 13%. Three of our distributors each contributed more than 10% of revenue in Q3. Ingram Micro accounted for 15.6%, Avnet accounted for 13.9% and Westcon accounted for 11.2%. GAAP gross margin in Q3 was 82.5%. Our non-GAAP gross margin was 83.5%. GAAP operating expenses of $201.3 million were within our guided range. Non-GAAP operating expenses were $176.3 million, also within our guided range. Our GAAP operating margin in Q3 was 28.1%. Non-GAAP operating margin was 35.9%. Our GAAP effective tax rate…

Thanks, Andy, and good afternoon, everyone. I was very pleased with our Q3 performance. In particular, we delivered solid sequential growth of 6% over Q2, with even higher sequential growth in overall sales bookings. The star of the quarter was the Americas region, which had very strong results, exceeding our internal forecast. In our previous quarterly call, we mentioned that the slowdown in orders we experienced late in the second quarter was most pronounced in the Americas region. I was especially pleased that our business in the Americas bounced back very quickly in Q3. Our Asia Pacific region achieved its internal forecast, and our EMEA region missed its internal forecast, but not by a significant amount. Our Services business had another stellar quarter, exceeding revenue targets, as well as posting a solid increase in deferred revenue. We saw a number of very encouraging trends in the quarter. Sales of the new products we have been introducing over the last 2 quarters continued to be very strong. In particular, we saw solid orders for the new entry-level BIG-IP 2000 Series platforms, which we introduced in Q2. This trend was similar to the strong traction we saw with the BIG-IP 4000 Series when it was introduced in Q1, and we continue to see this sales momentum accelerate through Q2 and Q3. These results bode well for our newest BIG-IP platforms, the midrange BIG-IP 5000 and 7000 series. Both these products were released at the end of Q3 and are available for shipping in the coming quarter. We also announced a number of exciting new solutions last quarter and our latest TMOS release called Corona. These solutions make it easier for organizations to scale to the cloud, extend software-defined networking deployments, and add intelligence and programmability, via iCall, to IT environments. With a…

[Operator Instructions] Our first question comes from Jess Lubert of Wells Fargo.

A couple of questions here. First, can you quantify how much of the business that slipped last quarter closed this quarter? And then perhaps from a broader point of view, can you talk a little bit about what you're hearing from both your enterprise and carrier customers with respect to their willingness to move forward with some of the larger million-dollar deals, where you had previously seen some weakness?

Yes. In terms of -- it's hard to really quantify in terms of percentage our actual numbers, but there's no doubt that we -- I think I said in the last quarter's call, Jess, that we had a strong start to the quarter, and I'm sure some of that was linked to the -- to some of the slippage in Q2, which obviously was pretty pronounced. I especially referred to some telco wins at the beginning of the quarter. Having said that, we saw that strength continue throughout the quarter, and the following 2 months were also very strong. So it's not like we saw a strong start slowing down. We didn't see that. We saw the opposite. There's no doubt that enterprise spending, in particular -- in North America I should say in particular, definitely picked up from Q2. And obviously, telco did as well worldwide.

And then, John, if I look at your federal business, it seemed like that remained a little bit challenged in the period. Can you talk a little bit about how you're thinking about federal here and to what extent you are expecting some typical fiscal year-end behavior from the federal government?

No, absolutely, and there's no question that there's -- with what's going on in federal is well publicized, that you do need to be cautious. And the first 3 quarters of this year, we have seen bookings actually down year-over-year, not significantly, but down. Moving into the final quarter, having said that, we absolutely expect to see sequential growth, but I think we've taken a fairly cautious approach in terms of using -- taking that into account in our guidance.

And last question for me, but product growth appeared to perform much better in the quarter and what -- with most of the new products now in the market, I guess the question is, at the high end of your guidance, would you expect your product growth to be positive in Q4? Or do you think this may take another quarter?

We're not going to take a specific answer to that. It's clearly, by a mile, our #1 priority. I think we have a lot of good opportunities to get the product growth accelerating here with the product refresh, which is a big deal and is now completely out there in the market, the ACE opportunity, security, LTE rollouts. So clearly, that's our main focus.

And, John, before I let you go, I didn't hear the answer on the million-dollar deals. Did you see any improvement?

Oh, sorry. I didn't answer it, which is why. We saw a pretty similar -- the million-dollar deals pretty similar to the previous quarter. I mean, if there's any good news in this, it's that the comparisons now are effectively okay. But we did see it pretty similar to the previous quarters that we've seen. We did see, from accounts in general, an uptick in sales. So maybe not all million-dollar deals, but from some of our larger accounts, we saw them starting to spend more.

Our next question comes from Ben Reitzes of Barclays.

Wanted to talk to you about the guidance. Did you hold back at all in your guidance for maybe some of the deals that slipped into -- in terms of the sequential growth rate? Or do you feel like you're being conservative with regard to the sequential growth rate you guided for on the top line? And what I mean is, is if some stuff was pushed into the quarter from the last quarter, did you hold back on your guidance at all? And how can we gauge your conservatism given the environment?

I mean, we took -- I believe we've taken a reasonably conservative approach in terms of the -- one of the key factors we look at is the close rate. And from a close rate perspective, we've taken a mix of the previous 2 quarters. That includes obviously the tough quarter of Q2. So I think it's been reasonably conservative. But I think that's absolutely appropriate, to be cautious given what we saw in Q2.

And how did you feel about the competitive environment as we went throughout the quarter? If I looked right, the Citrix numbers looked pretty strong in networking. And did you notice anything different? Did it ease? And are you still not really seeing them other than in the desktop virtualization market, et cetera? Was there anything there?

No. That's a really good question. We -- well, first of all, we're definitely seeing strength of the new products we're introducing, and I'm absolutely convinced we'll see strength for the 5000 and 7000 are now available as well. So we're seeing strength there. And I think that momentum will continue because that product refresh we did wasn't just a simple box refresh. That's all about -- we introduced architecture, we introduced new modules. We introduced VLAN architecture. We introduced vCMP. And so this is a big product refresh. I think it's going to help with competitive advantage. But to be specific, absolutely, by a mile, Citrix is our #1 competitor, but we -- look, we had a -- we did a lengthy quarterly business review with our North American sales management on Monday. We had them all here in Seattle. The competitive win rate is as strong as it's ever been. It's very, very strong, as I mentioned, in the ACE replacement space. Our security business is strong. I think our competitive position is great. On the VDI side, we just -- where we get a chance, we have a good win rate. But clearly, especially with Citrix-only VDI solutions, I'm sure there's a lot of deals we just don't see there.

Our next question comes from Sanjiv Wadhwani of Stifel. Sanjiv R. Wadhwani - Stifel, Nicolaus & Co., Inc., Research Division: Just a couple of questions. John, last quarter, I think with the AFM modules, I think they were out for just 1 month. You had mentioned 50 deals in the last sort of month of the quarter. Any updates on that metric as far as the AFM modules are concerned? And then on the virtual appliances, you obviously spent some time talking about that. But just broadly, how should we sort of think about -- as it relates to your ADC sales going forward, as we see the shift happening on the virtual side, it will probably take some time. But just trying to get a gauge as how we should be thinking about your broader ADC sales within that context?

San, this is Manny. Just thought I'd answer both questions here. So first of all, on the AFM module, we saw -- as you know, we announced the module last quarter, and it was out in the market for approximately 4 to 6 weeks. We saw huge growth on that module this quarter. We're very, very pleased with the momentum it's picking up inside the market, and we continue to see, across all verticals and across all theaters, good traction on that module. So we're excited. It's early, but progress has been phenomenal so far. And that's both in enterprise and service provider use cases, so we're pretty well rounded there. And then real quick on the virtual, just to give you some insight, you're absolutely correct. I mean, there's a lot of talk in the industry about it all moving to potentially virtual solutions. What we're seeing from the customer base is that really, it's a hybrid solution set. There's a need for virtual solutions, and there's a need for physical hardware solutions, and it has to do really with placing the network and the architecture you're looking to deploy. What we've been doing on the virtual solution side is that we've been increasing our performance capability, as John pointed out, and we have solutions from 200 meg, all the way up to 5 gig, highest throughput in the industry, across all of our modules, across all of the industry hypervisors. And as we look forward in the coming quarters, you'll continue to see us improve on that performance, both going upstream, higher throughput, and downstream to lower throughput. So our intent is to have all of our modules across all physical, as well as all virtual appliances in the industry, giving you the flexibility from an architecture point of view. And we're actually seeing that also in the IDC most recent data that was just published in Q1, where we saw a great, great traction also there from a market share perspective. Sanjiv R. Wadhwani - Stifel, Nicolaus & Co., Inc., Research Division: Got it, that's helpful. And just one quick follow-up on the AFM stuff. Any metrics that you care to share, like this -- kind of last quarter, I know it was out for only 4 to 6 weeks, but any metrics that you might be able to share?

This is John again. I'll take the negative side of it. No, we're not going to be specific on that, and we haven't been in any other modules. We gave some numbers on the very first quarter release of the product, but the growth was quite significant, still a small percentage of our business, but we'd expect it to continue to grow.

Our next question comes from George Notter of Jefferies.

I just wanted to expand on the question around the virtual solutions. So, can you help us understand how the economics work for F5? If you look at an analogous product, hardware vis-a-vis software, what's the delta in terms of ASPs? What's the delta in terms of gross profit dollars? I mean, anything you could kind of help us with there, that would be great.

So you're asking just on a deal structure, what it could mean revenue-wise and margin-wise comparatively with hardware?

Yes, and that's exactly right. So if I trade a hardware appliance sale for a virtual sale, how does that economic impact play out through your numbers?

So what we've seen so far, and this speaks to what Manny was saying, is that when we do sell software, via ADCs, a lot of times, the revenue difference is made up in multiple versions of the software version. So we haven't seen a big difference. We have seen stronger gross margin because a big component of that is software. But at least to date, as we've looked at it, it's been fairly neutral.

And we've seen a lot of hybrid sales as well, where you've got a combination of systems and software-only solutions. Remember, we keep pressing this point because it's a big differentiator. We can basically manage software and systems identically and integrated and/or standalone, and that's pretty flexible for the customer. But there's no 1-for-1 on this. It's a combination of architecture approaches. In terms of is there going to be a long-term trend? Maybe. But wow, it will be very, very long-term in nature.

And let me just add. This is Manny, one more comment just to add here. I alluded to the architecture trade-offs. Usually, when you see a hardware sale, what you're quite often seeing is a consolidation inside that device of multiple applications or services sitting behind that device. And sometimes, when you see virtuals, what you're seeing is virtual per application. So it's more of a scale out, horizontal scale. So to the point of, is there a revenue shift or -- obviously, Andy talked to the margin. But is there a revenue shift? No. It's just a different architecture, where you have less consolidation, you have more single tenancy with the app -- with the virtualized addition provided for that application.

Our next question comes from Troy Jensen of Piper Jaffray.

A quick question for Andy here. So gross margins, down slightly here. I don't want to nitpick here. But historically, you guys have been able to expand your margins with revenue growth. So I'm just curious if you can explain why we've seen a downtick in gross margins the past 2 quarters? And is it pricing or is it mix?

Yes, that's -- actually, if you go back to Q1, we were really at an all-time high, and that was driven by software, and we talked about that then. But you're right, over the last 2 quarters, what we've seen, as we've brought out these new platforms, getting our depot stocked, just the product transition, we've seen what we believe are short-term increasing costs around that, and we see that reflected in the gross margin results. As you heard from our guidance, we expect that to come back in this coming quarter a bit.

And just the other point, it's not quite connected to the question, but obviously, you saw our operating margins increased this quarter, driven by revenue, and we'll give more data about that in October in terms of how we see it for the year and moving forward. But I'm just going to take this opportunity, when you're looking at the year coming, that we will see seasonality in the December quarter. We've seen it before. I just want to put that stake in the ground while the discussion on margin reminds me to.

Yes, okay. Perfect. And then how about, Andy, just one more here on service revenues. Historically, that's grown 30% year-over-year, very healthy clip. Now it's sub-20%. So I'm just curious what your thoughts are for services growth going forward?

Yes. That's going to go back to John's comment that our #1 priority is product revenue growth. And so I think what we've seen over time is that service revenue growth is going to slow if our product growth doesn't take off again. So they are linked. It's just over a more elongated period. So I'm hoping we're going to start to see that shallowing out, and we'll talk more on the next call about what we think next year will look like. But definitely tied to product revenue growth. That's got to be the priority.

Our next question comes from Paul Silverstein of Cowen.

John and Andy, I trust by virtue of your guidance that the answer is self-evident, but last quarter, you commented about the start of the new quarter, so similar question to you now in terms of the start of your fiscal fourth quarter. Again, I trust per the guidance that it's been a strong start. And then I've got 1 or 2 other quick questions.

Yes, I knew I would get asked this. The only reason I -- we never normally give an update on the month, certainly at the day of the call. We had a pretty big miss in Q2, and that's why we decided to do it. And so I'm not going to do that. Having said that, absolutely, we take into account the first 3 weeks and, more importantly, the quarterly reviews that we have when we give our guidance. So that is baked into that, yes.

John, I understand, and I suspected that was the case, but I still wanted to ask. A couple of other quick items. One, I know it's very early, but the carriers have made a lot of noise about network function virtualization. I know you addressed it in your prepared remarks, but is there any insight you could share with us at this point as to how you play in an NFV world? And also, I know it's still small, but you mentioned it's growing. Can you -- are you -- is virtual anywhere close to 5% to 10% of total revenue at this point? Is that something you'd care to comment on?

Yes. We're not going to be specific. It's a small number, still virtual. We've talked virtual. We're talking about -- we're not talking about our total modules, software modules, which obviously is added on to that. But the virtual number still is reasonably small, although we've seen some fairly big deals happening and it is linked to the architecture. In November, at the Analyst Day, and we'll talk about it again in October, we're going to go through this in a lot of detail. I think people will be impressed at where we are in terms of what we think our strengths are in this type of environment and what our roadmap looks like and what our product portfolio competitiveness is like. So we'll talk more about that as we move forward. But, Manny, do you want to just comment right now?

Yes, I could comment on network function virtualization. I mean, we're well positioned because, as we pointed out before, we support all of our modules across all major hypervisors, and network function virtualization is really just the service providers looking at moving from hardware devices into virtual devices, meaning devices sitting on hypervisors on a cost [ph] platform. So we've been taking our solutions into the marketplace. We're working with various service providers. We're part of the ETSI standard and working in that working group to make sure they continue to shape that. So it's early days, but you'll see that beginning to develop in the service provider arena because they, themselves, like in data centers, want to take advantage of software where applicable. So we think we're well positioned, and it'll shape up in the next 18 months, I think, industry-wide.

And meanwhile, in between, when we talk to service providers about our strategy of consolidation, where we talk about being able to do policy enforcement management, DPI, Carrier-Grade NAT, traffic steering, a whole range of areas where they have separate boxes right now to do these functions, if we can do them within the same chassis or within the same appliance, they'll love that strategy. So I think Manny's 18 months is probably spot on. But meanwhile, the consolidation approach we have is very attractive to them.

Last one from me. Andy, average deal size. Can you comment on that?

Yes. Our average order size has settled out really at about 100,000, and that's been consistent for the last 3 quarters.

Our next question comes from Erik Suppiger of JMP.

Yes, a couple of things. First off, Japan seems to be slow still. Can you discuss the competitive dynamics in Japan?

Yes. I think we've said this in the past. I mean, we're -- I think we actually gained market share in the -- I can't remember which quarter it was, but a recently published quarter, which is obviously a reasonable sign. But there's no question that A10 have done well there, obviously with one particular very, very large telco that is an obvious one, in particular. They had some Carrier-Grade NAT capability that we have caught up with, and we've got every intention of staying feature-rich there. So I think moving forward, we're in good shape. The biggest issue that we've seen in Japan actually is, we definitely saw an increase in business after the tsunami hit. I think there's no question about that now, as data centers were built, et cetera. And so when you look at the year-over-year, we've had a pretty tough comparison. That actually finishes moving forward, next quarter. So, yes, I think you'll start to see a better year-over-year-type result coming from that geography.

Okay. And then on the hiring, it sounds like you've accelerated some of your hiring. I think in the past, you've targeted about 100 additions, and you said 150. Is that just an anomaly for Q4? Or are you getting more aggressive on the hiring front?

I think you're going to see us more aggressive with the way things are shaping up here. I mean, frankly, if we can beat the 150 number, we'll absolutely go for it and try and do that. It's across the company, we're going to do that. If things go the way we expect, what you'll see is with fairly aggressive hiring numbers next year as well.

Is that biased toward sales now that you have the new products? Or where are those resources going?

Well, product development is really critical. We've got -- again, we'll talk about this architecture that we have with our integrated architecture, our BIG-IQ, the areas we're doing there. So product development is very high. Service is always high for us because of customer satisfaction. Consultancy is very big for us as well. That has some margin implications, but that's life, and it definitely drives product revenue. And of course, sales as well.

Our next question comes from Scott Thompson of FBR. Scott Thompson - FBR Capital Markets & Co., Research Division: Just wanted to ask a question about deferred revenues. As you guys move into a virtual-type platform, should we expect deferred revenues to start to ramp? I noticed they were up a bit the last couple of quarters. Let's talk about that. And then second question on service provider. You made some comments about security starting to get some traction there. Can you give us some more specifics? Is that U.S.-based, or is it elsewhere?

Yes. So I'll take the first part of the question on the deferred revenue. Actually, we have very little product in our deferred revenue, at least now. It's mainly annual maintenance contracts. As we evolve our models going forward, we may change to something where we build up deferred revenue. But as of now, we don't have anything of note in there.

Yes. And then this is Manny, just to comment on the security and the service provider arena. We're seeing traction in all theaters. We're working with tier 1 operators in all 3 theaters right now. The general problem that they're struggling with is actually keeping up with the growing demand for bandwidth on the mobile networks, specifically with the movement to 4G, and protecting everything from a DDoS all the way to an application vulnerability. So we're well suited for that. As a matter fact, I think you saw the article that might have come out earlier this week from Network World, which talks a little bit about our performance, and that was a mid-range box. It's not even the high end of the market. So we're working with these operators. It's early, but it's quite often more than just security, to the point that John made before. While we're sitting in that footprint, they're not only looking at firewall capabilities, but they're looking at Carrier-Grade NAT capabilities, potentially policy enforcement capabilities. So it's a whole new re-architecture that some of the providers are looking at, and others are just looking at how to scale security needs.

Our next question comes from Subu Subrahmanyan of Juda Group.

I had 2 questions. First, on the telco side, just looking back at last quarter, the lumpiness and the bounce-back. Was it just, you think, timing of deals? Or is there any change in kind of buyer behavior as they're looking at new architectures? And how do you expect that trend going to the next few quarters? And my other question was on new product contribution for the new appliances. How long do you think we'll see the ramp before customers convert over from your traditional appliances to the newer appliances?

Yes. So on the service provider deals, no, timing of deals, no major change there. I mean, clearly, there was a number of companies talked about telco being slow in the first half, and it seems to have definitely picked up, and that's what we saw. And it was global in nature as well. So nothing -- no significant change there. The only change we have seen in telco is -- in terms of change, is we've definitely got a growing and growing pipeline. I mentioned this in my introduction, pipeline of LTE Diameter opportunities. That's definitely a positive change for us. And then in terms of the -- I think I heard the question correctly, the new appliances that we brought out -- what we're seeing is that we introduced the product and the first few quarter of shipments, we see a fairly strong momentum happening, and we saw that with everything so far. And we're hopefully going to see the same with the 2 new ones, the 5000 and the 7000. So they have become a dominant product sale pretty quickly, actually.

If I could clarify, John, you made a comment on seasonality for December. Was that in context of revenue or gross margin that made that...

Well, that was in context of revenue, specifically. And obviously, by definition, that affects operating margin.

Our next question comes from Ehud Gelblum of Morgan Stanley.

This is actually Stan Kovler for Ehud. I just wanted to lead off with a question about the fed. It seems like that came back fairly nicely this quarter. Is that something that we should expect to continue to improve going forward? And I also just wanted to ask, in terms of the outlook, what you think going forward about the sequential growth next quarter. Do you think that the product revenue -- should we expect that to come back to the 2012 run rate on product revenue on a quarterly basis? Does it sound right to you?

Yes. On the last question, we're not going to answer that. I mean, it's our #1 priority, and we think we've got a whole lot of things in place that, if we execute properly, we can make things happen. But no, we're not going to be specific about timing, et cetera. I think we have a lot of good growth drivers, I've gone through a number of times here. So on the fed, our fed business actually, I think, was -- it was 4%, which is on the low side of our fed business in the quarter. So I don't know, when you say bounce back quite well, I'm not -- I don't quite understand that. As I did say in the previous question, we do expect it to be up sequentially, but I think we've been reasonably cautious, given the visibility.

Got it. And just from a big-picture standpoint, how do some of the products fit into new business wins, the cloud providers? And what's going on with the tech vertical in general? Are you getting some of that momentum back?

The question is how did our products fit into the...

The cloud providers.

The cloud providers? Quite well. As we mentioned before, we support all the virtual additions. If you're a cloud provider and you want to deploy your software in those environments, we do that today. We work very well with Amazon, we work very well with Rackspace and others that are out there. So from that point of view, we're seeing good traction, good momentum, and we're looking to continue to accelerate that this year. So there's no issue whatsoever there.

Got it. And on -- just last question on the headcount additions, as a follow-up. Is that regional based? Or, on the product development side, that's mainly focused on just U.S. and continuing to develop new products? As a corollary to that, we saw that one of your biggest competitors made a pretty large security acquisition yesterday. And so just curious how you feel about product development and security in general? Is it something that you're going to continue to address internally? Or do you feel like there might be some other technologies out there or other companies that may be of interest to you, to add into the portfolio?

Yes. On the hiring, first of all -- I mean, it's global in nature, and especially when you look at the sales and service organization. We have a pretty global product development organization as well, but they are the 3 main priorities that we'll be focusing on. So, yes, probably in product development, it'll be more U.S.-based, because that's where the majority of the people are. But generally, it's a global approach that we have. Regarding security, it's a -- we think security is probably our biggest growth driver. I mean, product refresh is bread and butter, and that's spread across everywhere. But security is probably the biggest. We have a very significant development focus on security. We're always looking in the industry. That's what we've done for years and years. Now if we see something that we think can get to market faster than we can develop, we're not shy about making it happen. But that's just business as usual as far as we're concerned.

Thank you all for joining us. We look forward to seeing many of you out in the conference circuit over the next quarter and look forward to catching up with you again on -- at the end of October. Thank you.

This concludes today's conference. Thank you for your participation. You may now disconnect.