Good day and welcome to the Zscaler's Second Quarter 2020 Earnings Conference Call. Please note, today's conference is being recorded. At this time, I would like to turn the conference over to Bill Choi. Please go ahead, sir.

Good afternoon and welcome to the Zscaler Fiscal Second Quarter 2020 Earnings Conference Call. On the call with me today are Jay Chaudhry, Chairman and CEO; and Remo Canessa, CFO. By now, everyone should have access to our earnings announcement, which can be found on our website in the Investor Relations section. In addition, a supplemental financial schedule is available for download at ir.zscaler.com. Please note unless otherwise noted, all numbers we talk about today other than revenue will be on an adjusted non-GAAP basis. You will find the reconciliation of GAAP to the non-GAAP financial measures in our earnings release. For historical periods, the GAAP to the non-GAAP reconciliations can be found in the supplemental financial information referenced a moment ago. Let me remind you that we'll be making forward-looking statements during today's discussion, including but not limited to the Company's anticipated future revenue, calculated billings, operating performance, Gross margin, operating expenses, operating income, net income, free cash flow, dollar based net retention rate, remaining performance obligations, income taxes and earnings per share. These statements and other comments are not guarantees of future performance, but rather are subject to risks and uncertainties, some of which are beyond our control. Our actual results may differ significantly from those projected or suggested in any forward-looking statements. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. For a more complete discussion of the risks and uncertainties that could impact our future operating results and financial condition, please see our filings with the Securities and Exchange Commission, as well as in today's earnings release. I would like to inform you that we will be participating in several upcoming investor conferences. Management will be at the Morgan Stanley TMT Conference in San Francisco on March 4, The SunTrust Technology Internet & Services Conference in New York City on March 11 and Credit Suisse Investor Relations One-on-One Conference in New York City on March 12. Now I will turn the call over to Jay.

Thank you, Bill, and thank you everyone for joining us. We delivered solid Q2 results while making tremendous progress in important areas of our business, particularly with our go-to-market initiatives. In Q2, our revenue grew 36% and billings grew 18% year-over-year, which had a difficult comparison due to a non-recurring private cloud sale to a large public sector customer last year. Adjusting for this, revenue grew 41% and billings grew 30%. During the quarter, we significantly expanded our sales leadership team, refined our territory coverage, revamped our channel program and tooled our sales management systems. It is remarkable how much progress we made on our go-to-market initiatives in a short period of time. Considering these significant undertakings, I am very pleased with our results. We are seeing good momentum in our business and we are increasing our outlook for revenue and billings for the full fiscal year 2020. On profitability, we delivered 11% non-GAAP operating margins and our free cash flow was negative $2 million. Excluding the $15 million one-time cash payment to settle all cemented lawsuits, free cash flow would have been positive $13 million while we delivered strong profitability in the quarter. We are focused on making strategic investments to position Zscaler well for the long term. What excites me the most is seeing our customers leverage a cloud native integrated security platform to accelerate the digital transformation journey. We are empowering them to transform their network and security to fully realize the benefits of cloud and mobility. Let me highlight a few wins in Q2 that showed the many use cases of our platform and what we believe are our sustainable competitive advantages. I will start with a new logo win of a national public transportation provider in Europe that needed to modernize its infrastructure and better…

Thank you, Jay. Revenue for the quarter was $101.3 million, up 8% sequentially and 36% year-over-year. Recall that last year Q2 '19 revenue was aided by $2.3 million in nonrecurring revenue from a large public sector customer deploying our platform as a private cloud. Excluding this revenue from last year, revenue grew 41% year-over-year. From a geographic perspective, for the quarter, Americas represented 51% of revenue, EMEA was 40% and the APJ was 9%. Turning to calculated billings which we define as the change in deferred revenue for the quarter plus total revenue recognized in that quarter. Billings grew 18% year-over-year to $135.4 million against a difficult comparison. Recall, we had a large upfront billing of $11 million in Q2 of 2019. From the large public sector customer excluding this deal, our billings grew 30% year-over-year. As a reminder, our contract terms are typically one to three years and we primarily invoice our customers one year in advance. Remaining performance obligations or RPO which represents our total committed non-cancelable future revenue was $609 million on January 31, up 32% from one year ago. The current RPO is 56% of the total RPO. Our strong customer retention and ability upsell have resulted in a consistently high dollar based net retention rate, which is 116% for the quarter. This compares to 118% a year ago and 120% last quarter. As we have highlighted, this metric will vary quarter to quarter. Our increased success selling bigger deals starting immediately with our Transformation Bundle and faster upsells within a year while good for our business can reduce our dollar based net retention rate which is calculated on a year-over-year ARR basis. Considering these factors, we feel that 116% is very strong. Total gross margin was 82%, up 1 percentage point sequentially and up 2…

Thank you, Remo. In closing, let me state four key points that make me excited. One, architecture matters for a cloud security platform that must sit in line to inspect all traffic for policy enforcement. We believe we're the best architecture with over 10 years of operational experience to run a massive cloud, which is an enormous barrier to entry. Two, with multiple tailwinds such as Office 365, SaaS adoption, SD WAN and app migration to public clouds, we believe the market is coming to us. Three, we are in early innings of the cloud journey. We're disrupting a $20 billion TAM with ZI and ZPA. With recently announced Zscaler B2B and ZDX we believe we will expand our addressable market significantly. Four, with expanded go-to-market leadership in place, we are building a sales machine that can deliver world-class execution and sustainable long-term growth. We thank you for your interest in Zscaler and look forward to reporting our progress in the future. Operator, you may now open the call for questions.

[Operator Instructions] We'll take our first question from Brad Zelnick from Credit Suisse.

So, Jay, you spoke to this throughout your prepared remarks a bit, but I'd love if you can expand on it perhaps a bit more. In context of the business decelerating and the re-acceleration required to achieve your full-year guidance. What's driving your confidence at this point? And specifically, how should we think about the visibility you have into the back half of the year.

As we have said before, we brought Dali on board, we knew we needed to do a number of things to further scale our business to a larger level. And some of the main things we have already addressed are enablement our sales teams. We had a small enablement team, we've grown it. We have proper training programs, refined the sales process to make it scalable. We've put a number of systems in place that give visibility to not only headquarters, but also front line leaders and we have significantly expanded the sales leadership in the field and created an extra layer that's needed for scaling. So a lot of those things are behind us and done and we brought the entire sales organization together in 2 places for a mid-year SKO, sales kickoff Americas and EMEA to really bring it all together. So those are the things that are accomplished. Now, the second question is about confidence. Obviously, we look for what some of the impacts are, what's giving us confidence to give you the projection that we've done for the second half. There are couple of main things that fall in that area. Number one is we are able to measure our sales engagement, engagement with our customers, engagement of new business. And the tools we've put in place and the leadership we're driving, we are seeing a far better engagement than we used to have. And the second, even more important is pipeline generation because that's a good indicator. The volume of pipeline and the quality of pipeline is all going up. So looking at the pipelines, looking at the engagements, that's what's reflected in our visibility and confidence for the second half of the business.

Thanks very much, Jay, and, Remo, if I can just follow up with a quick one for you. From a billings duration perspective, and I appreciate the adjustment on the year-ago comp for the large deal that you've called out both then and now. So thank you for that. But is there anything as we think about the average contract length. The mix of duration in this quarter, perhaps sequentially or even year-on-year if we exclude that large deal that we should take into account as we appraise your results that we're looking at tonight? Thanks.

Yes, thank you, Brad. When even with the deal that we had, the duration came down substantially year-over-year. When you take that large deal out, the duration did decrease slightly. I would say that the average duration is right around 12 months and it hasn't really changed that much on a year-over-year or a quarter-over-quarter basis.

We'll take our next question from Daniel Bartus with Bank of America.

First, for Jay, I wanted to ask about the SD WAN partners as I'm sure some see you guys as a bit of a competitive threat, as well as a partner. So, have there been any changes in the market where SD WAN vendors have gotten more aggressive in pushing their own security offerings? And then for Remo as a quick follow-up, pretty notable beat on operating margins. So, can you discuss if you guys are behind on hiring and to hit the lower second half operating margins should we attribute this all to higher go-to-market spending pretty much? Thanks.

First of all, regarding the SD WAN landscape, I'll share with you based on my field engagements. I'm out there meeting lots and lots of customers. They're largely free vendor as we see it. Most of the enterprise deals it's VMware Velocloud, it's Cisco Viptela and Silver Peak. In all those deals, we are the preferred security choice. They don't try to build security in the branch box, so to speak. Yes, there are a couple vendors who are trying to build security in the box. If you look at Gartner's SASE paper and if you talk to security experts in general, they don't believe security can be built in a branch box, security needs to be done at the cloud. So perhaps there is some opportunity for some of these vendors in the mid-market where security is not viewed as very critical, but when you come to securities heavy companies, which is generally larger enterprises, we don't really see a change in it. In fact we have seen better engagement with some of the larger partners like VMware and Silver Peak.

And related to the questions you had for me. The beat on margin in the quarter was related to the beat on revenue, a higher gross margin and also lower operating expenses and primarily related to head count. On a go-forward basis for the second half, we do expect to step up our go-to-market investments. One of the things we called out or a couple of things to call out was the two SKOs we had in February, and also the two user conferences we're going to have in June. In addition, our expectation and one of the comments we made was that we'd be at a 60% RSM head count growth year-over-year. We expect to be there. So our plan and expectation is to be at 60% RSM head count growth year-over-year.

We'll take our next question from Alex Henderson with Needham & Company.

So I was hoping you could talk a little bit about the slope of the new sales hire and the timing of which those people will get up and running as they go through the training process and the like. Obviously you are accelerating your hires targeting 60% increase in staffing, don't think that you're at that rate at this point. So, is it going to accelerate into the back half, and if that's the case should we not see the acceleration of the contribution with the lag of what, three months, six months? Help us think it through.

I'll start and Remo you can add more color to it. As a part of our plan, one of the things we needed to do in this company was to expand our sales leadership at the front line. So that's the first priority we did to expand because we knew that if we hired the right leaders in the field, they can actually hire a number of - a good number of sales reps. So we accelerated sales leadership hiring and actually are ahead of what I thought it would be. Knowing that the priority, so yes, today we are behind on the sales plan where we wanted to be, but knowing that the leaders are in place, knowing that they have been trained on actually hiring and training, we are pretty confident that we will get to our 60% hiring numbers. So that was one part of the question. And a lot of enablement we are doing in the systems we are putting in place is to make sure there's better visibility and more effective engagement with the customers for a better ramp up. So things are being done to provide faster ramp and have better productivity over time. Remo, you want to add to it?

Yes, Alex, it's a great question. When what Dali did in the first half, and as Jay mentioned, he significantly increased the leadership in the sales organization and we put an additional level layered related with RVPs, Regional Vice Presidents. When you look at the number of RVPs, area VPs and GOVPs in place, it's in the 80% range and that's in my opinion, quite remarkable to be at that point.

So 80% of our expanded target.

80% of our expanded target exactly. So the highest probability that you have to hire the right RSMs is to have that leadership in place. So, the concentration in the first half, in particular in Q2, was to get that leadership level in place in the Company. That's what gives me confidence also related to when I look at the quality of people that we're bringing on board, it is a very high quality group of leaders, as well as RSMs. When I look at also the Q2, we had the highest gross hires for RSMs in Q2 over the last two years. Now, our attrition was high also. We called that out on a prior call saying that we expect attrition to be higher in Q2, which it was. We feel that's behind us, and on a go-forward basis we feel attrition is going to decrease and we expect to step up the RSM hires as we go forward. And as I mentioned before, we're very confident and it's our plan to increase at 6% year-over-year.

I'll add one more point. As we are hiring these new reps, we're seeing that in the first quarter they're having better sales engagements, because we are measuring those engagements and some of the enablement and some of the tools we have put in place is helping us. So I feel very, very happy about it.

If I could do a follow-up question. So obviously you're confident enough to accelerate your spending and hiring. Have you seen any change in the competitive landscape that would impede the progress of this investment or offset or dilute the benefit as we look out? Any change in pricing condition, any change in competitor capabilities?

Haven't really seen much impact on the competition side. In fact, our churn is down year-over-year. Our discount is pretty sable. Our average ARR of customers with greater than 3,000 users, which we track is approaching 400-K. And as you know, we help customers drive transformation. We drive agility, zero trust access, and once they understand what we do we rarely lose. So I don't worry about competition, I do want to stay focused on our sales execution. I think as we improve it, we're going to see better and better results.

We'll take our next question from Gray Powell with BTIG.

Maybe a question on your net retention rates. So how should we think about net retention going forward. And I mean on the one side, you have a lot more customers landing with the Transformational Bundle but on the other side, you're launching a lot of new products. So just how should we think about that?

It's a good question. We've talked about with more transformation, part of our ZIA - part of our business customers buy for the entire user base. And so as more transformation that puts pressure on the net retention rate, even though it's good for the Company, this does put pressure. In addition, if customers buy within the year, because the way we calculate net retention rate is the ARR for that sort of customers a year ago versus what that customers have in ARR currently. So as customers buy within the year, that also puts pressure. Also basically the mix between new and upsell. In the quarter, we saw in the mid-range of what we've seen in prior quarters. It's 60% or 50% new in the quarter is basically in the mid-range of that. Prior quarter our net retention rate was 120% and we called out that that was basically 50% new. So it's going to vary and we've talked about, it's a metric you should look at, but it's not one that we put a whole lot of importance to.

We'll take our next question from Patrick Colville with Arete Research.

Can I just a clarification on your point just then on the net retention rate. So, were you saying that this quarter there was 50% revenue contribution of new customers and last quarter it was 40%? Is that - was that right?

It was in the mid-range. So it was - in the mid - around 55% was new customers in the quarter and last quarter was 50%.

So, slightly higher contribution this quarter from new customers.

That's correct.

And then can I talk just the competitively about the dynamics with NetScope. Is that someone that do you see as competitive, and if not, where is Zscaler stronger?

We have seen some of the press releases they've done but we hardly see them in the gateway area where they seem to be trying to go. They are in the CASB side of it. We've seen them on the CASB side of it. But with our strong integrated platform where we are offering a full CASB that consolidates, that integrates in line and out of band, we are in a very strong position. So we don't really see them out there in the market, especially in the market area, where we compete in.

We'll take our next question from Andrew Nowinski with DA Davidson.

Maybe just to start with a quick clarification. I know you said you had some attrition in the quarter which was in line with your expectations. So I'm just wondering why you decided to step on the gas on hiring now versus maybe the start of the fiscal year?

From - it's really we've stepped on the gas hiring. So as I mentioned, we have the hires - highest RSM hiring over the last two years last quarter. However, having said that, related to getting this management layer in place, the highest probably success that you have in hiring the right RSMs if you have the right leaders in place. So as we go forward with this leadership on board over a relatively short period, we expect to increase RSM hires as we go forward.

Or if I may add, yes, we have the largest hire for sales rep In Q2. We expect higher number of hiring in Q3 and Q4 because we have a strong field sales leadership in place.

And then maybe shifting gears, Broadcom Symantec has made some announcements. They seem to be only focusing on their largest customers. I'm just wondering if you have seen any increase in displacements of Symantec Blue Coat. Thanks.

So we have seen a lot of additional interest from large enterprises. As you know, Blue Coat has been in enterprise market. They used to have a big presence, the presence was largely in the appliance space. So yes, a lot of interest and it is helping us. It's a good opportunity for us and we plan to take full advantage of it.

Our next question comes from Brian Essex with Goldman Sachs.

Jay, I was wondering maybe if you could talk a little bit about ZDX and Z B2B. How the progress is, is I guess going on the development front there. And it sounds like maybe the GA date pushed out a quarter. Anything to be concerned about there or maybe an update on the progress with the development of those two products?

Yes, so first of all the GA date of those two products, hasn't really pushed out. We have just told before that we will be doing beta testing and will be ready in the Q4 timeframe. So we are actually pretty much on plan. What we have done, what we can report to you is the field engagement or the customer engagement of those two products. As you know, they not just product features their product lines per se. So, early beta engagement for B2B are very good, that's the new market actually. If you think about who leads Z's B2B market, nobody really does it, with the ZPA based architecture and zero trust it's an ideal opportunity for us. So we've seen tremendous interest from our customer base that's going to be starting. But there'll be some demand creation because people don't even know that this kind of thing exists out there. When it comes to ZDX zero - I'm sorry Zscaler digital experience, there is tons of interest and demand from the customers because none of the tools that are designed for user experience in the old world work in the new world. We got some very good beta customers going on and in Q4 we plan to start selling both of those products. So we - with a fairly good sell cycle in large enterprises, we don't expect a whole lot of contribution in Q4, but we expect it to help us in fiscal '21 and beyond.

Maybe just a follow-up on the launches of those products. Is there any analogy that you can point to maybe learning what - maybe what you learn with the launch of ZPA and now that Dali is on board, how you're prepared to manage contribution from those product cycles as we head into 2021?

I think if you look at ZPA, it was the first major product line introduction, right. In ZIA we had many modules we launched. Module to me is a firewall, it's not a product line. Module to me is a cloud sandbox. So, we have done quite well. We are pleased with how ZPA has come from nothing to a pretty significant contributing factor. For these products, we do have an incubation program. So rather than putting an overlay full sales team in place, we got an incubation team that's actually working with the early stage customers to learn the sales process and buyers and all those things so we could do proper training and the like for customers. So we have some good plans in place. We are comfortable and also we alluded to the fact that our sales process is meant for portfolio selling complex sales. So I think we'll be able to handle these product lines in our proper sales process.

We'll take our next question comes from Walter Pritchard with Citi.

The first question just around the 60% growth in RSMs as you exit the year, how should we think about productivity assumptions and so forth? Given that volume or rep growth would seem like you're setting up for billions of revenue to accelerate as you get that capacity on board, we just want to make sure we're not missing anything in terms of other assumptions that may go into that.

No, I think you're right on. Basically with the added RSMs coming on board, again, that adds to our capacity. So it takes about - they're on full quota after 12 months. Not - doesn't mean all of our RSMs are at 100% capacity, but that's when they're full quota. So we do expect basically to be positive impact that in fiscal '21, you're not going to see it that much in fiscal '20 or even very early fiscal '21. But as these RSMs get on board we expect to see increased productivity because of the quality of the people we're bringing on board, because of the enablement that we're doing, because of the leadership, the increased products that we have, the market coming to us, we do expect to increase the sales productivity as they get ramped.

And then just as it relates to the expense of those people and what happens before they get productive. What can you tell us about the margin impact? Is it fully - do we fully see that as we exit this year or do you see that take on more of a burden as you go into next year? Just curious directionally given that large increase in head count.

Yes, I think you're going to see the bulk of the margin impact this year, then you're going to see better margins we go forward in fiscal '21.

We'll take our next question from Daniel Ives with Wedbush Securities.

Can you just maybe talk on some of the larger deals in terms of what Dali bring - in terms of the process, maybe today cultivating some of those deals versus where we were maybe six to nine months ago? And then maybe you could give an example, Jay, obviously you're involved in a lot of those.

So just to clarify, the deals that we have been closing versus how we are closing? I just want to clarify.

Yes, just the larger deals and just the process that Dali brings to the organization versus where you were before he came.

Right. I think the biggest thing we've done if you look at the sales process, we figured out the sales process several years ago that it can be pushed through VARs. It has to be transformational C level involvement and the like. So the reason we have seen this growth in the past several years is because we have been doing the right process. What we did not have is a proper discipline and structure and enablement to take it a large scale level. I had two people in my sales enablement team and I was waiting for new CRO to come and to put that in place, now we've got over 15 people in place in the sales development. So while we knew the process and the right thing and we have further refined it, we have further enhanced it to make it repeatable, but the biggest thing we have done spent time to really make sure our people are enabled properly. That's one biggest thing, which also includes a proper inspection, proper qualifiers, we use something called [indiscernible]. So there is some better selling methodology behind it, proper questions, proper qualifications, and the like, and along with that the tools we have put in place, which gives us visibility. We are measuring many things from engagement level, architectural workshop levels. So they are giving us far better visibility in the quality of the pipeline, which helps us do better forecasting. So those aren't the things that are needed to scale our business and that's what we have been doing and very pleased with the progress and that's what Dali has brought to the table.

We'll take next question from Fatima Boolani with UBS.

Jay, question for you. A number of times you've mentioned that pipeline quality has seen significant improvement in terms of both volume and quality, and I'm wondering if you can elaborate on what you mean by quality? Is it the size of the customer? Is at the size of the engagement? Is it the size of the displacement? Would really appreciate some more color on that. And I have a follow-up for Remo.

Yes, the biggest part of quality we look at is - has been inspect. We are looking for certain attributes. For example, being able to understand all the stakeholders that are involved, being able to make sure engagements are happening. So there are several steps involved that help us give more confidence in the pipeline. For example, having a proper architectural workshops on the networking side and security side is an important piece of it. So being able to do all those things and inspect all those things and get visibility, it gives you better understanding of the quality. So you need both. We need the growth, we need the quality and we are getting better visibility now. That's what I alluded to. Did I make sense?

And, Remo, for you, as I looked at the geographical performance, Americas certainly outperformed. And I recall that EMEA had some leadership transitions within the region and also looking at APJ as the sequential downtick in that theater but hoping to have you walk us through some of the dynamics, the ex-US this quarter. And that's it for me. Thank you.

Great, thank you, Fatima. EMEA grew 39% year-over-year and the leadership changes that we made in EMEA from my perspective have been outstanding. The growth that we're seeing in EMEA, the traction, it's really from my perspective a great thing to see. APJ grew 56% year-over-year. So APJ has done well. I'll comment on Americas. Americas grew 32% year-over-year, but when you adjusted for the non-recurring one-time revenue last year, Americas grew 40% year-over-year.

We'll take our next question from Melissa Franchi with Morgan Stanley.

I wanted to follow up on the discussion on SD-WAN for you, Jay. So we've seen success with Fortinet selling integrated SD-WAN security appliance in the branch locations. Can you guys both co-exist in the branch and be successful or are you becoming increasingly competitive?

You know we have done a few deals. We are fortunate SD-WAN device is at least sending traffic to us. So typically when there is a large enterprise that's security savvy, that's what we engage with. We don't see a whole lot of SD Van guys doing security, that's why the example I gave you. But there may be some low end systems where the customer is okay with the good enough security that's built in the SD WAN. But in our enterprise space, we are rarely seeing somebody that says I'm okay with the SD-WAN security. So we end up existing with SD-WAN. So I look at SD WANs as our partners and friends and I - as I commented earlier, in the enterprise space. Three vendors are taking a big lion's share Cisco, VMware and Silver Peak. And if you look at the magic quadrant leadership from Gartner, VMware and Silver Peak are in Gartner's magic quadrant. So I look at them as a complementary friendship. There's always some overlap from time to time, but we work closely with them.

And then I have a follow-up for Remo. I'm wondering if you could comment on whether you saw any changes in the sales cycles? On one hand, it sounds like you continue to sell more transformational deals, which I think would probably take a little bit longer to close, but on the other hand you've made some changes to sales enablement and refining the sales process. And so how did that shake out in terms of sales cycles this quarter?

Yes, good question. Over time, we expect to see shortening of sales cycles, but currently I'd say they are about the same. It's three to six months for smaller accounts, larger accounts six to 12 months. So really not much change.

We'll take our last question from Yun Kim with Rosenblatt Securities.

So going back to Dan's earlier question on large deals. Any specific trends that you're seeing that point to improvement in large deals execution? For instance, for large deals see sales cycle improving or closure rate improving. Just trying to better understand what metrics that you were seeing that cut points to improvement in large deal execution. And real quick, also in terms of sales hiring, are you comfortable with the number of sales folks that you have and the talent that you have today around those large deal opportunities or is this an area that you also need to ramp? Thanks.

Right. So I'll take that question. So large deals, we dominate the large deals we do very well. Actually one of those things I noticed, in fact you may have noticed, as you saw, as you heard the script, there are a number of deals where ZPA and ZIA is being bought at - in large deals like that. The story - the part of evangelism we had to do early on is becoming less, our leadership is becoming clearly stronger and stronger and the more customers with CIOs and CSOs are moving from one company to the other company and they're calling us. So I believe our execution in large deals is getting good. The other thing that's going to help on our execution in large deals is large deals have complex sales cycle. There are lots of stakeholders and our enablement process is actually helping us do a better job. So I feel more confident in our ability to handle larger deals now. Your related question on reps for large versus small. I think we are hiring across the board, we have quite a few very good sales reps who are handling these large deals. We call them major account managers. But we are trying to add more because there is a big market opportunity and we need to properly cover it.

Thank you. This concludes today's question-and-answer session. At this time, I would like to turn the call over to Jay Chaudhry for closing remarks.

Thank you. Thank you for your continued interest in Zscaler. Hope to see you at the upcoming conferences. Goodbye.

Great, thank you.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.