IPG Photonics Corporation (NASDAQ:IPGP) Q3 2023 Earnings Call Transcript

IPG Photonics Corporation (NASDAQ:IPGP) Q3 2023 Earnings Call Transcript October 31, 2023

IPG Photonics Corporation beats earnings expectations. Reported EPS is $1.16, expectations were $1.02.

Operator: Good morning, and welcome to IPG Photonics Third Quarter 2023 Conference Call. Today’s call is being recorded and webcast. At this time, I’d like to turn the call over to your host, Eugene Fedotoff, IPG Senior Director, Investor Relations, for introductions. Please go ahead with your conference.

Eugene Fedotoff: Thank you, Rob, and good morning, everyone. With me today is IPG Photonics’ CEO, Dr. Eugene Scherbakov; and Senior Vice President and CFO, Tim Mammen. Let me remind you that statements made during the course of this call that discuss management’s or the company’s intentions, expectations or predictions of the future are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those projected in such forward-looking statements. These risks and uncertainties are detailed in IPG Photonics’ Form 10-K for the period ended December 31, 2022, and our reports on file with the Securities and Exchange Commission.

Copies of these filings may be obtained by visiting the Investors section of the IPG’s website or the SEC’s website. Any forward-looking statements made on this call are the company’s expectations or predictions as of today, October 31, 2023. And the company assumes no obligation to publicly release any updates or revisions to any such statements. For additional details on our reported results, please refer to earnings press release, earnings call presentation and the financial data workbook posted on the Investor Relations website. We will also post these prepared remarks on the website following the completion of this call. With that, I’ll now turn the call over to Eugene Scherbakov.

Eugene Scherbakov: Good morning, everyone. Our third quarter revenue was negatively impacted by a softer demand in industrial markets and a further decline in sales in China. Lower demand from industrial customers and reduced the amount of e-mobility applications drove revenue declines in cutting, welding and marking applications. We also continued to see strong competition in addition to soft demand in the flat sheet cutting market in China. But even with lower revenue, we are pleased with our operating performance this quarter and delivered gross margin improvement and earnings per share at the high end of our guidance. While the uncertainty in macroeconomic conditions continue to wait on capital equipment spending, customer in Europe, North America and Japan are increasingly uses a high-power laser for cutting.

We believe that laser adoption in these geographies is significantly behind China and this market remains less competitive with IPG holding a strong market positions. We’re also seeing the adoption of laser building technology in automotive and general industrial markets across many geographies. Laser welding provides high-speed precision and accuracy as well as low heat input and ability to join the similar materials. Our real-time welding measurement system is a great complementary technology for adjustable mode beam in the lasers and IPG welding [indiscernible] that provides a fast and reliable welding solutions for a broad range of applications across many different industries. Emerging growth product sales accounted for 42% of total revenue in the third quarter.

We saw a decline in AMB and high power pulsed laser related to lower demand on e-mobility applications due to decree investment EV battery capacity in China. We said in the past that the EV battery investment is likely to fluctuate quarter-to-quarter. Our production expansion projects can be very large in size and provide some lumpiness in our e-mobility services. As a result, some quarter, even years may be better than others. However, we expect EV investment cycle to continue, provides a great opportunity for IPG in the next 3 to 5 years. Adoption of electric vehicles still grows in China, Europe and North America, and battery manufacturers will need to build additional capacity to support higher EV sales. Also, Energy storage is growing and may potentially require even more batteries to support the transition to a sustainable energy in the future.

Our handheld welder sales continued to grow, driven by a rollout in Europe and LightWELD sales up in 4x the speed of traditional MIG and TIG welders and does not require extensive training. We are seeing as the high interest in the welding community and held 5 simultaneous live demonstrations of the device at the FABTECH show this year to satisfy this interest. We’re also still early on adoption curve and continue to promote LightWELD in welding market in U.S. and other geographies. We are also seeing a significant increase in demand for our lasers and 3D printing applications. Industry reports suggest that technology is being tested for manufacturing of consumer electronic devices. Growth in metal 3D printing technology has been shown that many had anticipated.

But it seems like there is a new catalyst that can potentially drive further adoption. 3D printing is using high-quality laser to melt metal powder to create parts and [indiscernible] a strong position in this market, providing the lasers with higher stability beam characteristics. We are recently introduced a new AM laser design, especially for additive manufacturing. This was [indiscernible] adjustable mode and can move from single mode to structure to multi-mode output or to 6x higher build up rates. Finally, sales in our medical business improved as expected after the inventory reduction by large customer in the prior quarter. Growth in medical continues to be driven by adoption of our laser system and consumable fibers which you are considering the gold standard in [indiscernible] applications.

We are also seeing strong growth in esthetic applications, which is a much larger market and our fiber laser technology is significantly more advanced compared to the traditional lasers used in medical and esthetic applications. And our goal is to gain market share by replacing this older technologies. We are working on multiple new opportunities to broaden our medical portfolio and to further grow the business so it becomes more meaningful contributor to IPG sales. In summary, I remain optimistic about the growth driven for our products and continued diversification of IPG revenue in the long term. We have introduced a new product for our laser cleaning and drying applications this year and promote our high-efficiency eco-lasers that help reduce the environment impact for our customers.

I would like to thank our employers for the strong contribution in the quarter. And I will now turn the call over to Tim to discuss financial highlights.

Timothy Mammen: Thank you, Eugene, and good morning, everyone. My comments generally will follow the earnings call presentation, which is available on our Investor Relations website. I will start with the financial review on Slide 4. Revenue in the third quarter was $301 million, a decline of 14% year-over-year. Foreign currency headwinds reduced revenue growth by approximately 2%. Revenue from materials processing applications decreased 15% year-over-year, while revenue from other applications was nearly flat. GAAP gross margin was 44.1%, an increase of 100 basis points year-over-year, which was driven by lower inventory provisions and reduced shipping costs and tariffs as well as an improvement in absorption of manufacturing costs as a percentage of sales.

On a sequential basis, gross margin continued to improve on lower revenue as we focused on reducing costs, managing inventory and improving manufacturing efficiency. Despite the headwinds to our revenue from a challenging operating environment, and reduced capital equipment spending worldwide, I am pleased with the resilience of our financial model and the company’s ability to improve margins and to continue to generate ample cash flow from operations to support current and future investments. FX headwinds also had a negative impact in the quarter. If exchange rates relative to the U.S. dollar had been the same as 1 year ago, we would have expected revenue to be $6 million higher and gross profit to be $4 million higher. GAAP operating income was $56 million, and operating margin was 18.5%.

Net income was $55 million or $1.16 per diluted share. The effective tax rate in the quarter was 19% and benefited from certain discrete items. Foreign currency transaction gains related to remeasuring foreign currency assets and liabilities to period-end exchange rates had a small positive impact on operating income of $400,000 or $0.01 per share. I’d like to remind you that last year’s results benefited from $22 million or $0.32 per diluted share gain on the sale of the telecom transmission business. Excluding the currency transaction gain, asset impairments and recovery of a restructuring charge related to our Russian operations as well as the gain on the sale of telecom business last year, operating expenses were nearly unchanged year-over-year.

Sequentially, operating expenses increased primarily in research and development and sales and marketing as we invested in resources to drive future growth while still controlling expenses. Moving to Slide 5. Sales of high-power CW lasers decreased 22% and represented approximately 40% of total revenue. Sales of ultra-high power lasers above 6 kilowatts represented 46% of total high-power CW laser sales. The decline in revenue was primarily due to lower demand in flat sheet cutting applications in China and Europe. We continue to see customers outside of China adopting laser technology, but demand has been impacted by the economic uncertainty with OEMs delaying purchasing and reducing inventories. Pulsed laser sales decreased 25% year-over-year due to lower sales in marking and solar cell applications.

System sales increased 4% year-over-year, with growth in LightWELD offsetting a decline in non-laser systems. Medium power laser sales increased 1%, driven by increased demand in welding and higher sales in 3D printing applications. QCW laser sales were down 4% year-over-year, and other product sales decreased due to lower revenue in advanced and telecom applications. Looking at our performance by region on Slide 6. Revenue in North America decreased 13%. We saw a strong growth in welding and cleaning applications as well as higher parts and service sales. However, this growth was more than offset by lower sales in cutting, medical, advanced and telecom allocations. In Europe, sales increased 3% and the region continued to perform well given weak — the weak macroeconomic environment.

Revenue growth was driven by welding and semiconductor applications. Revenue declined in cutting, marking and cleaning applications, which were impacted by lower industrial demand and destocking by some OEM customers. Revenue in China decreased 28% year-over-year as demand declined across most industrial applications, including cutting, welding and marking. Additionally, revenue was negatively impacted by competition in the flat sheet cutting market and lower demand in e-mobility applications due to a decline in new battery products — projects and delayed capacity expansions. Moving to a summary of our balance sheet and cash flow on Slide 7. We ended the quarter with cash, cash equivalents and short-term investments of $1.1 billion and no debt.

Our inventories continue to decrease sequentially, and we target further reductions in inventories in the fourth quarter. Cash provided by operations was $86 million and capital expenditures were $26 million during the quarter. We sold 2 buildings in the quarter, realizing $29 million in proceeds, which means net capital expenditures are just under $55 million year-to-date, well below the same period last year. While maintaining a strong balance sheet, we have been returning a significant amount of capital to shareholders through opportunistic share repurchases. We spent $46 million on share repurchases in the third quarter and approximately $160 million this year. Moving to our outlook on Slide 9. Third quarter book-to-bill was below 1 with macroeconomic uncertainty resulting in a project delays and reduced orders in all major manufacturing regions.

Leading manufacturing indicators in Europe are trending to the lowest level since the 2008 recession. While economic indicators in China are mixed, we believe the Chinese cutting market is down 20% to 30%, and the timing of an overall recovery in demand remains uncertain despite some government stimulus. Competition from Chinese manufacturers remains stiff. Additionally, project delays related to battery capacity expansion in China provide further uncertainty to the outlook. Although we have limited visibility into orders beyond fourth quarter, we continue to believe the battery investment in China should restart in 2024 as electric vehicle sales continue to increase. Investments in battery capacity outside of China is in the early stages and should increase in the next several years as well.

We also expect some benefits from government spending and onshoring activities to benefit industrial activity in the U.S. For the fourth quarter of 2023, we expect revenue of $270 million to $300 million. The fourth quarter gross margin estimate is between 41% and 43%. We deliver — we anticipate delivering earnings per diluted share in the range of $0.80 to $1.10 with approximately 47 million diluted common shares outstanding. As discussed in the safe harbor passage of today’s earnings press release, our guidance is based upon current market conditions and expectations assumes exchange rates referenced in our earnings press release and is subject to risks outlined in the safe harbor and the company’s reports with the SEC. With that, we’ll be happy to take your questions.

Operator: [Operator Instructions]. Our first question comes from Ruben Roy with Stifel.

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Q&A Session

Ruben Roy: Dr. Scherbakov, I wanted to start on China. And Tim just mentioned that at this point, it sounds like there’s a lot less visibility. I wanted to make sure I was understanding that commentary right because Tim said that potentially battery investment should restart in 2024. I think 90 days ago, the tone of your call and your commentary was a little more positive in terms of when you thought we would get a catch-up on some investment for batteries in China. And it sounds like that’s probably weekend from 90 days ago and there’s a lot less certainty. So maybe if you could just walk us through how you’re thinking about that maybe for the first half of 2024 to start, that would be helpful.

Eugene Scherbakov: Thank you for your questions. But during these 90 days, I have visibility to visit China and discuss with our potential and existing customers for many applications. And of course, our main question is about the e-mobility applications. And total opinions are definitely now battery manufacturing production is saturated, temporary, it’s clear. And forecast, of course, it’s not 100% forecast, but forecast [indiscernible] account that it will be also a little bit lower in the first half of the year, next year and will increase in the second half. Of course, it will strongly depend on the environment conditions, what kind of the political situations and so on. But in total, definitely it’s not so optimistic about the activity for EV applications in China.

Ruben Roy: Okay. Well, that’s helpful. And then, Tim, I think you mentioned the cutting market was down 20% to 30% in aggregate. I think your cutting exposure in China is a lot lower than that. Just wanted to make sure I had that right. And if you can give us actual — an actual number, that would be helpful.

Timothy Mammen: So we talk about 20% to 30% is the overall decline in the total Chinese cutting market, right? And I think that’s shown in some of the numbers that have been reported by other Chinese public companies who had a weak Q3. Our China flat sheet cutting sales are still well below 10% of our total consolidated sales. This quarter, having seen that relatively stable in Q1 and Q2, it was a little bit down in Q3. But really, the weaker performance in China on a year-over-year basis, it’s still showing up on the cutting side. But really, some of the EV demand has softened as reflected in our original guidance and didn’t really strengthen during the quarter at all. So totally, I’d say that kind of covers it.

Ruben Roy: Yes, absolutely. And if I could sneak in a last question here. It’s great to see the gross margin holding up in lieu of the lower revenue run rate and even with the guidance. And some of the inputs there, Tim, that you talked about, didn’t have too much to do, I don’t think yet with getting some of the factory utilizations on the new factories and the expanded factory in Germany up. Maybe you could just walk us through maybe medium-term gross margin thinking from here as revenues potentially start to recover next year?

Timothy Mammen: Yes. I think — I mean I’ve used a little bit of a weaker gross margin in terms of my guidance number I put 41% to 43%. That’s primarily because we’re still trying to get inventory down in Q4. So your total absorption may be a little bit lighter in addition to that. I’d be a little bit more conservative on inventory provisions coming into the end of the quarter, but not meaningfully so right that top of that range is 1 and a bit percent below Q3. I think Q3, though is evidence that the trajectory and ability to get back above 45% and into that 45% to 50% range is coming closer. And particularly, if you see a recovery in revenue from the levels they’re at. So we’ve actually achieved 2 quarters of sequential improvement on gross margin, interestingly on lower revenue each time.

So we are seeing some of the yield and total volume of product produced in Poland, for example, has increased over the third quarter that costs have started to come down. It’s still not quite at the target price we want them to be of a fiber block, but they’re certainly making a meaningful contribution. So that would be some of the improvement. Italy has done very well in getting their total manufacturing and their cost to an initial level that we wanted them to do so. But there’s other work going on at the moment on product cost initiatives to take significant cost out of some of the higher power lasers in the next 6 months or so, new generations of diodes. But other stuff, the mix in terms of — it was weaker in terms of total revenue, but some of the mix rate related to the medical applications welding being a good share of total revenue, we had a strong quarter in Korea and Japan where pricing is a lot more resilient that can help with margins as well.

So there’s a lot of things that go in there. But I think what this really shows is that you can get back into that higher than 45% gross margin that we haven’t walked away from you.

Operator: Our next question comes from James Ricchiuti with Needham & Company.

James Ricchiuti: Had to — I would like to follow up a little bit more about what you’re seeing in the 3D printing space. It’s an area you guys have been talking about more positively over the past year. And I’m wondering is the demand you’re seeing, is this mainly coming from the hardware vendors in China? And are these primarily for consumer electronics applications, at least that’s what we seem to be hearing about more?

Timothy Mammen: There is — Jim, there’s good demand coming out of the hardware vendors in China. The European additive had been fairly good through the first couple of quarters, I think it was sort of flattish in Q3. Nobody has any visibility into any of the consumer electronic stuff at the moment. So a lot of the stuff in China is still aerospace. Dr. Scherbakov on his visit actually saw a very large system with — I think you said 50 lasers…

Eugene Scherbakov: 50 lasers simultaneously users is growing very large part of metal.

Timothy Mammen: So we don’t have any visibility into the consumer electronics potential demand. I don’t think anybody has yet.

James Ricchiuti: And a while back, Tim, I have to try to find it somewhere in my notes, but you guys did size the 3D printing business. And I’m wondering, where are you in relation to where it was at the peak a few years ago when you were seeing quite a bit of activity at least encouraging activity early on?

Eugene Scherbakov: Definitely some years ago, it was the [indiscernible] activity in the 3D printing or additive manufacturing. But at this time, it was definitely was overestimated in this market. And then it was, of course, went down. And now I think it’s a much more realistic estimation of such kind of a technology for our future industrial laser applications. And from this point of view, of course, IPG has a very strong position, why? Because for such kind of application customers have to use a very stable laser. Very stable means for some parts, they have to use laser more than 1 month on the continuous operations. And it must be absolutely stable, not only this power but also beam distribution. This is why because our product is a very [indiscernible].

Up to now, we have a very strong position also for the Chinese market. And especially when we introduce a new AM laser with adjustable mode, adjustable power and much more stable. And in this case, our customer has opportunity to increase productivity of such kind of technology, but it’s very important, very important. This is why they’re using up to 50 simultaneous working laser. And they couldn’t improve — they couldn’t — only increase power. It’s not possible. They’re using — as usually, they’re using 500, 700 watts, the maximum power [indiscernible] because if you only increase power to 1 kilowatt you can evaporate this metal. It’s not optimal solution. Only optimal solution to use simultaneous in parallel many lasers mainly stable by quality lasers for this application.

James Ricchiuti: And final question and maybe, Tim, if I could just clarify on the book-to-bill, was that similar in all your major regions? Or was it — did it vary a bit in certain regions being a little bit weaker? Obviously, a little stronger. And then the follow-up is just on the emerging business. Excluding e-mobility, are you seeing the sustainability in the medical, which picked up? And clearly on 3D printing you’re getting some momentum. And just in general, how we should think about emerging going forward?

Timothy Mammen: Yes. I mean I think book-to-bill qualitatively was probably — I’m not to saying it’s massively weaker, but it was — Europe has got some challenges around it. The cutting business is performing actually very well at the beginning of the year. That’s certainly softened even though Europe through Q3 in terms of revenue is quite reasonable. I’d say their bookings have slowed down. China has been a struggle. I’m not sure whether I believe that their PMIs have been at 50%. Some of the more positive stuff was in — again, in Japan, Korea actually had very good bookings. Some of that was actually a very large order for some medical esthetic product. North America, I’d say, it’s not got a huge amount of traction behind it, but it’s is probably a bit stronger than Europe is at the moment in terms of as expected, right, the North American economy continues to outperform Europe.

Yes. So qualitatively, that would be my feedback on that. On some of the emerging growth products, I think you highlighted a couple of things like the medical has rebounded. As we said it would do, LightWELD in total was up, so that was positive, particularly with some of the rollout on a more global basis. And we continue to work on new versions of LightWELD and actually looking to expand the distribution network that we’ve got for that product. Take cost out of the product as well, and [indiscernible] to it. Some of the — actually, some of the semiconductor advanced applications also performed well. Some of that revenues in Europe. Within high-power pulsed, some of the EV stuff was weaker, but cleaning was actually stronger. Cleaning grew quite well there.

So even the emerging growth products didn’t perform particularly well. They’re still above 40% of revenue. And there was still some nice product lines within that, that performed pretty well. I think I got them all that were positive.

Operator: [Operator Instructions]. Our next question comes from Michael Feniger with Bank of America.

Michael Feniger: Tim, the inventory side, you made some nice improvement. You took out sequentially. And I think you talked about you’re really focusing in the fourth quarter on that. Do you think you’ll step takes them out early 2024 if we stay at this demand level? Or do you think you’ll be able to get most of that done by the fourth quarter? Curious how you’re kind of thinking about that?

Timothy Mammen: No. I mean, it’s just going to take — continue to take several quarters to get it down to the level that we’d like to see it at, right? We’re still in terms of days running at a high level given the level of activity. So it’s — we’re going to continue working on it in Q4. It’s going to take several quarters, though, to continue to bring that down to the level we want it to be at. Some of that will come from — there’s a lot of purchase components in inventory related to electronic parts and those purchases have certainly started to slow down. They were commitments made when that supply chain was extremely tight. And as you run down that inventory, it’s not as though that’s an internally produced part. So running down the electronic components that are purchased from a third party as you consume them wouldn’t lead to like an immediate impact on absorption as you get that under control because it’s a third-party purchase rather than internally produced component.

But yes, inventory is going to — it’s a work in progress. several quarters to continue to do it. I’m pleased with the way we’ve so far managed to at least stabilize it and kind of moving in the right direction.

Michael Feniger: Makes sense, Tim. And just — I know there’s a lot of focus on the EV build-out capacity in China. Just curious on the U.S. side, how exposed you are to there already? Just because there are some headlines you’re seeing, I’m sure you’ve seen, Tim, about Ford pushing out around $12 billion of CapEx right now. GM with a plant, Tesla, there seems like there’s a little bit of a pause going on right now based on some EV demand in the U.S. It could also just be with strikes that were happening there. So just curious what you’re seeing there? How critical that is to you now? And if you’re seeing that more of a pause rather than anything more indicative going forward?

Timothy Mammen: Our view is that there is a bit of a pause, right? You’ve seen several announcements that have come even in the last couple of weeks. But if the transition towards electric vehicles is going to continue and reach a much more meaningful level, the total investments will have to pick up. I mean our view is that if they’re starting to have to start looking at capacity for ’25 and ’26, the second half of next year, should see some improvement on that. Our exposure in North America on some quarters, it can be quite high. You’ve got projects where we’ve delivered a significant amount of welding and other equipment for EV. There’s some revenue for EV in North America in Q4 guidance. But it’s not — I mean, our business in North America isn’t totally dependent upon EV but it clearly was a meaningful driver for us, and we do need a rebound in that EV investment to happen. And hopefully, that will happen in ’24 with a view to capacity that’s needed in ’25, ’26.

Eugene Scherbakov: And for America, EV applications for us is interesting because it’s not only — requirements are not only for lasers or some components. We also start to supply to our customers a complete system. For example, for cleaning applications, one of the biggest EV manufacturers are start to use our cleaning applications was a new product, already and in pipeline stage, some additional orders for this. For us, it’s very important to demonstrate our new technologies.

Timothy Mammen: Sorry, Mike, the other thing is that we are expanding the application. So the drying — the first meaningful amount of drying revenue will come in Q4. The overall feedback from the market on that is very — not just for EV, by the way, across the whole bunch of different applications where that laser can be used on drying, whether it’s for coatings or even some — even more esoteric areas. So that and then we’re looking at some other cutting applications within battery as well that are more specialized. So the application set is continuing to expand, and customers are working with us on different applications as well.

Michael Feniger: That’s helpful color. I guess maybe following up on that, Tim, with expanding the application set. It seems like you guys are making progress on the gross margin given some of the changes in production. I’m curious though, if you got a big picture, if you think maybe taking the margin range down, would that unlock more growth in some ways since that was kind of a lever, at least on the pricing side, historically? Just curious how you kind of think about that, would that reinvigorate or [indiscernible] to drive higher growth if you made that type of shift?

Timothy Mammen: I think the overall pricing of lasers and integrated beam delivery systems drives a huge amount of productivity benefit for the end customers, right? A lot of these — even on the EV side, when you combine it with LDD and even non-EV applications, the welding is really driving significant returns on investment. We highlighted, for example, on LightWELD compared to MIG or TIG it’s 4x faster. So I don’t think the issue on the pricing is that you’re going to try and compete with the Chinese it’s not like a 10% price reduction. It’s magnitude greater than that and the cost of lasers overall has come down very dramatically over the last 3 to 4 years. So we don’t think this isn’t really a pricing issue, the value proposition of the technology overall continues to be very significant.

Having said that, we are looking at taking a lot of cost out of some of the higher power lasers, and we will be able to be a bit more aggressive around pricing whilst actually increasing margin if we achieve those cost decreases over the next couple of quarters as well.

Eugene Scherbakov: Of course, we are — for this cost initiatives — cost reduction initiatives, it’s very important. But also very important that we will start to introduce a new technological platform for the standard — I mean, not standard, but new lasers for welding and cutting applications. It will be a significant cost reduction in manufacturing of such kind of lasers and really introduce the next 2, 3 quarters to the market.

Operator: Our next question comes from Mark Miller with The Benchmark Company.

Mark Miller: Just wondering what drove the sequential improvement in other sales?

Timothy Mammen: Rebounds in the medical business and then some of the other advanced applications around semiconductor are quite strong. Those would probably be the 2 main drivers, Mark.

Mark Miller: Okay. Emerging products, green lasers continue to do well there. And what else is doing well in terms of products?

Timothy Mammen: Sorry, in which products?

Mark Miller: Emerging products. Green lasers are still strong there?

Timothy Mammen: Actually, green was a little bit weaker this quarter, but we’re working on a whole bunch of new projects for green. So hopefully see a recovery. And the strong performance on emerging was again the medical, some of the advanced applications, LightWELD performed well, within high-power pulsed cleaning did very well. Welding in general, was strong even though it was a bit weaker quarter on welding.

Operator: We’ve reached the end of the question-and-answer session. I’d now like to turn the call back over to Eugene Fedotoff for closing comments.

Eugene Fedotoff: Thank you for joining us this morning and for your continued interest in IPG. We will be participating in a number of investor events this quarter. And looking forward to speaking with you again soon. Have a great day, everyone.

Operator: This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.