CTS (NYSE:CTS) Corporation (ticker: CTS) reported their second-quarter 2024 earnings with sales of $130 million, a 10% decline from the previous year, yet in line with expectations. The company completed the acquisition of SyQwest, LLC, a move expected to be accretive in 2025. Despite a downturn in the transportation end market, non-transportation sales rose by 4%. CTS anticipates modest growth in the second half of 2024, projecting sales between $525 million to $540 million and adjusted earnings per share from $2.05 to $2.25, factoring in the SyQwest acquisition.
Key Takeaways
- CTS reported Q2 sales of $130 million, down 10% year-over-year.
- Non-transportation sales increased by 4%, while transportation sales dropped 22%.
- The acquisition of SyQwest, LLC is expected to positively impact earnings in 2025.
- CTS forecasts modest growth for the second half of 2024, with sales ranging from $525 million to $540 million.
- Adjusted earnings per share are projected to be between $2.05 and $2.25, including SyQwest's impact.
Company Outlook
- CTS expects sales for the second half of 2024 to be between $525 million and $540 million.
- Adjusted diluted earnings per share are anticipated to range from $2.05 to $2.25, considering the SyQwest acquisition.
Bearish Highlights
- Transportation sales saw a significant 22% decline from the previous year.
- The company faced cost pressures, particularly in the transportation markets.
- Pricing pressure is expected to continue in the China transportation market.
Bullish Highlights
- Non-transportation sales grew by 4%, showing resilience in other markets.
- The company completed the consolidation of the Juarez facility into the Matamoros site, improving plant efficiency.
- CTS generated $20 million in operating cash flow and maintains a healthy cash balance of $161 million.
Misses
- The book-to-bill ratio was 0.99, indicating a slight imbalance between orders received and billed.
- The SyQwest acquisition is expected to have a small dilutive impact of $0.04 to $0.05 per share in 2024.
Q&A Highlights
- Management discussed the SyQwest acquisition's dilutive impact in 2024 and accretive potential in 2025.
- CTS is actively seeking further acquisitions while integrating SyQwest.
- The Chinese market is expected to remain challenging despite new government incentives for light vehicles.
- Confidence in future growth is driven by automation, connectivity, energy efficiency, and medical innovation.
CTS Corporation remains focused on navigating the current challenges in the transportation market while capitalizing on growth opportunities in the non-transportation sectors. The strategic acquisition of SyQwest, LLC is a testament to the company's commitment to diversifying its portfolio and strengthening its position in the defense market. With a cautious yet optimistic outlook for the remainder of the year, CTS is positioning itself for future profitability and expansion in key technological areas.
InvestingPro Insights
CTS Corporation (ticker: CTS) has shown a mix of resilience and challenges in the face of a dynamic market. The InvestingPro data and tips shed light on the company's financial health and market performance, providing a deeper understanding of its position.
InvestingPro Data indicates a market capitalization of $1.47 billion, with a Price-to-Earnings (P/E) ratio of 28.27, which adjusts to 24.76 when looking at the last twelve months as of Q1 2024. This suggests that investors are expecting earnings growth, which aligns with the company’s forecasted growth in the second half of 2024. Furthermore, the company's revenue for the last twelve months as of Q1 2024 stood at $530.18 million, despite a revenue decline of 9.4% during the same period. This decline reflects the challenges faced in the transportation market, as noted in the article.
An InvestingPro Tip highlights that CTS holds more cash than debt on its balance sheet, which is a positive sign of financial stability and may provide the company with the flexibility to navigate market downturns and invest in growth opportunities, such as the SyQwest acquisition. Additionally, the company has maintained dividend payments for 54 consecutive years, underscoring its commitment to shareholder returns even amidst market fluctuations.
InvestingPro also notes that the stock has taken a significant hit over the last week, with a price total return of -10.87%. While this may cause concern for short-term investors, the company's long-term prospects, including profitability predictions for this year and liquid assets exceeding short-term obligations, suggest a potentially brighter future.
For readers looking to delve deeper into CTS Corporation's financials and market performance, InvestingPro offers additional insights. There are more InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/CTS. To enhance your financial analysis, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
Full transcript - CTS Corp (CTS) Q2 2024:
Operator: Good morning or good afternoon, all. Welcome to the CTS Corporation Second Quarter 2024 Conference Call. My name is Adam, and I will be your operator today. [Operator Instructions] I’ll now hand the floor to CEO, Kieran O'Sullivan to begin. So Kieran, please go ahead when you're ready.
Kieran O'Sullivan: Thanks, Adam. Good morning, and thank you for joining our second quarter 2024 earnings call. We achieved earnings in line with our expectations despite softness in the transportation end market. CTS is focused on future growth through continued diversification of our customer base and end markets. Yesterday, we completed the acquisition of SyQwest, LLC, a leading designer and manufacturer of sonar and underwater acoustic sensing and electronic solutions, primarily for the U.S. naval defense market. SyQwest's products enable the sonar systems that guide and protect our submarines and surface ships. We extend a warm welcome to Bob Tarini and the SyQwest team, and look forward to leveraging our combined capabilities to drive growth in defense. The acquisition is expected to be accretive in 2025. Ashish will take us through the safe harbor statement. Ashish?
Ashish Agrawal: I would like to remind our listeners that this conference call contains forward-looking statements. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additional information regarding these risks and uncertainties is contained in the press release issued today, and more information can be found in the company's SEC filings. To the extent that today's discussion refers to any non-GAAP measures under Regulation G, the required explanations and reconciliations are available with today's earnings press release and supplemental slide presentation, which can be found in the Investors section of the CTS website. I will now turn the discussion back to our CEO, Kieran O'Sullivan.
Kieran O'Sullivan: Thanks, Ashish. We finished the second quarter with sales of $130 million, a decline of 10% from the second quarter of 2023. For the quarter, non-transportation sales were up 4%, and transportation sales were down 22% from the same period last year. Sequentially, non-transportation sales were up 11%, sales to the transportation end market were down 3% versus the first quarter of 2024. Non-transportation sales were 51% of overall company revenue in the second quarter. Our book-to-bill ratio was 0.99 in the second quarter, down from 1.07 in the first quarter of 2024. The book-to-bill ratio reflects some positive improvement in the industrial end market, with both OEM and distribution customers on a year-over-year basis and was flat sequentially. Medical bookings were down on a year-over-year basis and up sequentially. Aerospace and Defense bookings were up on a year-over-year basis and down sequentially due to the timing of orders. Overall, we continue to monitor the order intake carefully, given the challenging global economic environment. While we have seen a sequential improvement in non-transportation sales in the second quarter, the growth rate in the second half of 2024 is expected to be more modest than previously communicated. Second quarter adjusted diluted earnings per share of $0.54 were down 10% year-over-year and up 14% sequentially. Ashish will add further color on our financial performance later in today's call. As I mentioned in my opening comments, we acquired SyQwest, a supplier of robust acoustic sensing solutions for naval surface ships, submarines, autonomous underwater vehicles and torpedoes. The products that SyQwest designs and manufacturers include acoustic payloads, transducers, hydrophones and outboard electronics. Located in Cranston, Rhode Island, SyQwest brings 60 new team members to CTS. This acquisition strengthens our strategy and scale in the defense end market, further advances our diversification strategy and brings an addressable market of approximately $500 million. Our acquisition of SyQwest is estimated to add $10 million to $14 million in revenue in the balance of this year. I'm delighted to welcome Bob Tarini and his capable team to CTS. Non-transportation sales continued to improve, increasing 11% sequentially and up 4% in the second quarter compared to the prior year period. In medical markets, sales were up 6% sequentially and 4% from the same period in 2023. We saw mixed signals with some customers performing well and others showing some softness. Bookings in medical were also up sequentially, and we expect continued momentum in the second half. During the quarter, we had a large win for medical therapeutics, multiple wins for diagnostic ultrasound across all regions and a win for temperature sensing. We added two new customers in the quarter, the first, and an important win for a new lead-free application and drug delivery and the second, a win for a minimally invasive optical application. Aerospace and defense sales were up 33% from the prior year period and up 41% sequentially. We expect good momentum for the rest of 2024, given the backlog of orders. We received multiple orders for hydrophones, sonar buoys, underwater unmanned applications and RF filters. We continue to gain traction on European defense growth, securing an order for a new submarine program. We expect the long-term prospects for the aerospace and defense end market to be solid given our material formulations and the enhanced capabilities with the addition of SyQwest. In the industrial market, overall sales were up 4% sequentially, as we continue to see a gradual recovery in distribution as well as with OEM sales. Sales were down 6% from the prior year period. Bookings were up year-over-year and flat sequentially, which is causing us to temper our growth expectations in the second half of 2024. We were successful with several wins in the quarter for industrial printing, EMC (NYSE:EMC_old) components, temperature sensing, flow metering, RF filters and commercial appliances. We added one new customer in the quarter in test and measurement. While we saw a small sequential improvement in distribution sales and bookings, inventories continue to return to more normal levels and distributor POS remains soft. Looking ahead for the year in non-transportation end markets, we expect an improvement in industrial and distribution end market revenue in the second half of 2024, but now expect more modest levels of growth. For medical markets, while we anticipate some softness with a few customers, we expect to continue growing in the second half. We also expect to make solid progress on the qualification of products for prospective new customers. Sales to the defense customers are expected to remain solid. Longer term, we expect our material formulations and in-house know-how to continue to support our growth in key high-quality end markets in line with our diversification strategy. Additionally, we anticipate the megatrends of automation, connectivity and efficiency as well as growth in minimally invasive medical procedures will provide us momentum as we continue expansion in these markets. Transportation sales were $64.2 million in the second quarter, down approximately 22% from the same period last year and down 3% sequentially. We continue to experience a softer demand environment for commercial vehicle products in 2024. On the light vehicle front, as I mentioned earlier, we continue to navigate the market share dynamics in China, given the competition between local and transplant OEMs. Additionally, we see demand for light vehicles continuing to soften, consistent with most market analysts forecasting reduced build rates. The near-term growth rates for ICE (NYSE:ICE) versus EVs and hybrids are less of a concern for us, given our products are mostly agnostic to the drivetrain technology. In the second quarter, we had wins across various product groups, including accelerator modules with OEMs in North America, Europe and China. We had a sensor win in North America for a chassis ride height application. Across vehicle electrification, we had multiple wins for passive safety applications and a win for current sensing in an off-road application with an existing customer. We continue to see OEMs delay sourcing decisions as they work to correct our powertrain mix given market changes. Our focus on adding new customers is progressing, and we expect further traction later this year. Interest in the eBrake product, offering weight and cost advantages continues across several OEMs. We expect the eBrake and other sensor applications will increase our ability to grow content with a potential SAM of greater than $1 billion. Total booked business was approximately $1.1 billion at the end of the quarter. Turning to our outlook for this year. The North American light vehicle market is expected to be in the 15.5 million to 16 million unit range, with on-hand days of supply now back to more normal levels. European production is forecasted in the 17 million unit range, and showing some softness. China volumes are expected to be in the 28 million unit range. Electric vehicle penetration rates have softened in some regions while hybrid adoption continues to improve. Overall, we anticipate a down market for light vehicle production due to the China market dynamics and other more recent regional build reductions. We expect softness in commercial vehicle related revenue throughout 2024. For non-transportation markets in line with our diversification strategy, we aim to expand the customer base and range of applications in the industrial, medical and aerospace and defense end markets. The green shoots we mentioned last quarter in the form of inventory level corrections and improved bookings continue, but we anticipate a softer rate of recovery than we previously expected. Demand in the defense market is expected to remain solid, and we expect continued growth in medical. With industrial OEMs and distribution, we expect a more modest revenue improvement in the near term as inventory levels normalize and POS improves. In terms of guidance for full year 2024, we expect a more moderate growth rate in the second half, and are adjusting our prior guidance. We now anticipate sales in the range of $525 million to $540 million and adjusted diluted earnings per share in the range of $2.05 to $2.25, included the expected impact from the SyQwest acquisition. Now I'll turn it over to Ashish, who will walk us through the financial results in more detail. Ashish?
Ashish Agrawal: Thank you, Kieran. Second quarter sales were $130 million, while sales were down 10% compared to the second quarter of 2023, we continue to see a modest recovery with sales up 4% sequentially. As Kieran mentioned, we are seeing softness in transportation end market sales. Non-transportation sales improved year-over-year as well as sequentially. Foreign currency changes impacted revenue unfavorably by approximately $0.5 million. Adjusted gross margin in the second quarter was 35.8%, an improvement of 80 basis points from the second quarter of last year despite the drop in revenue. Our teams globally continue to focus on plant efficiency and cost improvements. Sequentially, adjusted gross margin was down 45 basis points, mainly due to some one-time charges. We are still experiencing some cost pressures, especially for certain materials and from labor cost increases. We expect pricing pressure this year, particularly in the transportation markets. We already see pressures in the China transportation market. We remain confident in our ability to drive efficiencies in our supply chain and manufacturing sites to improve our operational performance and profitability. The consolidation of the Juarez facility into our Matamoros site in Mexico has been completed, and the focus now is to improve operating efficiency. During the second quarter of 2024, we benefited from some discrete tax-related items, and as a result, had a tax rate of 17.6%. For 2024, overall, we expect our tax rate to be in the range of 18% to 21%. Earnings per diluted share were $0.48 in the second quarter. Adjusted earnings for the second quarter were $0.54 per diluted share compared to $0.59 per diluted share for the second quarter of last year. Moving to cash generation and the balance sheet. We generated $20 million in operating cash flow in the second quarter of 2024 compared to $23 million in the second quarter of 2023. Our cash balance was $161 million as of June 30, 2024, and the long-term debt balance was $65 million. The SyQwest acquisition was funded with approximately $80 million in cash and the rest with borrowings from our existing credit facility. We remain focused on strong cash generation and continue to support organic growth, strategic acquisitions and returning cash to shareholders. During the quarter, we repurchased 228,000 shares of CTS stock, totaling approximately $11 million. Year-to-date, we have returned $26 million to shareholders through share repurchases and dividends. This concludes our prepared comments. We would like to open the line for questions at this time.
Operator: [Operator Instructions] Our first question comes from Joshua Buchalter from TD (TSX:TD) Cowen. Joshua, your line is open. Please go ahead.
Joshua Buchalter: Hey, guys. Good morning. Thanks for taking my question.
Kieran O'Sullivan: Good morning, Josh.
Joshua Buchalter: I guess for my first [indiscernible], any more details you can give us on expectations for transport into the back half of the year? I know it sounds like you're expecting directionally down, but I'd be curious if you can maybe quantify that a bit more, in particular, so we can get a picture into what your expectations are for the non-transport growth that's going to offset that? Thank you.
Kieran O'Sullivan: Yeah, Josh. I think there's two parts to it. On the commercial vehicle side, we've seen a decrease in revenue there. We talked about the competition in that market. So for the quarter, I think sales were down approximately about $10 million on a run rate basis. And we expect -- that's going to be a challenging market because the analysts and the reports out there are seeing softening in the commercial vehicle market for the balance of 2024 and more flat market in 2025. On the light vehicle side, it's -- we feel good about North America. We feel reasonable about Europe. China remains a challenge, and that's where we're really navigating as carefully as we can to make improvements, but that's probably how I describe it overall.
Joshua Buchalter: Okay. I guess the follow-up on that, if I put in some modest assumptions for transport down sequentially in the back half, you've got sort of the industrial and other markets growing probably double-digit half over half in the second half of 2024. I guess how much of that is like, panel is coming back to normal versus actual demand improvement? Maybe you could help us on the visibility of what's driving the second half improvement? Thank you.
Kieran O'Sullivan: Yeah, Josh. Probably the best way I'd describe the second half is again, challenging on transportation and then more modest growth rates in the non-transportation area. So if we're looking from an organic perspective, from where we finished in the second quarter of a few million in terms of growth rate by quarter.
Joshua Buchalter: Okay. Thanks. I'll squeeze one more in. On gross margins, you called out some onetime cost headwinds in the second quarter, but also pricing pressure. I mean if I zoom out, you're still at 36% gross margin on some modest growth this year or be actually more of a flattish here. It seems like pricing is hanging in okay. Is that sort of the right read? I know you called out some pricing pressure. And how should we think about gross margins in the second half of the year as that onetime cost headwind abate? Thank you, both.
Ashish Agrawal: So Josh, I think your read on pricing is accurate. We are managing through it right now, but we expect the pressures to continue. And our teams are staying focused on managing it appropriately to make sure that we maintain good long-term relations with our customer base, but also navigate through winning business with them and preserving price as much as possible, so that equation is working, okay. As I mentioned, there's a little bit more pressure in China than other regions, but the teams are overall managing okay. In the second half in terms of the gross margin, we do expect some improvements mainly because of the change in mix of the business, and we expect to continue driving improvements in our factory efficiency levels as we work through the completion of the Matamoros and Juarez transition and other improvements that we are driving through the non-transportation plants as well. So expect modest improvements in profitability in the second half of the year.
Joshua Buchalter: Thank you, Ashish. Appreciate it.
Operator: The next question comes from John Franzreb from Sidoti. John, your line is open. Please go ahead.
John Franzreb: Good morning, guys and thanks for taking questions. I'd like to start with the SyQwest acquisition. Could you tell us a little bit about maybe its recent growth profile and its margin profile before you acquired it?
Kieran O'Sullivan: Yeah, John. We're really happy to have Bob Tarini and the team join CTS. SyQwest has one or more products installed in every U.S. surface combatant ship or submarine. And the growth rate is quite robust. We really like it, and the gross margin profile would be above the average for the company.
John Franzreb: Okay. And can you share with us the EBITDA multiple you acquired the company at?
Ashish Agrawal: John, we don't specifically call that out. But when you look at the growth rate of the business, the profitability, the EBITDA multiples make sense to us. And you know we normally don't like to overpay for businesses, so let me leave it at that. But I think we have -- internally, we are very pleased with the acquisition. We look to the growth momentum that the business has and the profitability that the business brings to us as well.
Kieran O'Sullivan: John, just to add to that, it's -- the products just like CTS are highly engineered. It integrates us from components into sensors and systems and transducers. A very capable team, high-quality business, and we really like the momentum they have and we have in the defense markets and how it's going to really advance our diversification, which is a key part of what we're doing as a company as well. So we feel very good about it and the team and capability.
John Franzreb: Okay. And I'll just keep on sticking to SyQwest here. Are they exposed or overexposed to the Virginia, Columbia class or any particular surface platform? Do you have any -- can you share a sense of what they sell into what platform they sell into?
Kieran O'Sullivan: John, as I mentioned, they're on every combatant ship and submarine -- so Ohio, Virginia, there's several of them in there. And obviously, there's products that are being renewed there. One of the things we see is that the Navy, at this point in time, is at a critical point in terms of modernizing their fleet and their combat readiness as well. So we feel good about the slots they're in and the sockets they have.
John Franzreb: Okay. And can you take the sense of products and move them to adjacent applications or are they protected under military restrictions?
Kieran O'Sullivan: Hey, John. Primarily, the growth focus with us here will be in defense. And we talked about the U.S. Navy. But obviously, with the cooperation the U.S. has with other countries internationally, there are opportunities there as well.
John Franzreb: Got it. Okay. That's it for SyQwest then. All right. Moving on to the legacy business. In the industrial side of the market, you talked about slowing. But you didn't -- I didn't hear you call out what parts of the subsets of the industrial market is slowing. If you did, I apologize, but can you talk about that a little bit?
Kieran O'Sullivan: Yeah, John. I mean, sequentially, the business was up 4%, so we see some improvement there. But first of all, I think on industrial printing. And if you look at the building industry at the moment with HVAC and temperature things, things are like flatlining a little bit there in those markets because demand is not up. So that's how I'd best describe it. And with distribution, we've seen some marginal improvement, and we feel like it will improve, but not at the rate we were expecting. So it's a pretty mixed bucket there.
John Franzreb: Got it. And does that change any thoughts about your cash flow generation for the second half of the year relative to the first half with the slowing end markets?
Ashish Agrawal: John, generally, our cash flow generation is stronger in the second half of the year than in the first. At a high level, I would expect that trend to continue, but the expectations of the amount of cash we would generate would moderate based on the reduction in the sales expectation.
John Franzreb: Okay. Thanks, guys. I’ll get back into queue.
Ashish Agrawal: Thanks, John.
Kieran O'Sullivan: Thanks, John.
Operator: The next question comes from Hendi Susanto from Gabelli Funds. Hendi, your line is open. Please go ahead.
Hendi Susanto: Good morning, Kieran and Ashish.
Kieran O'Sullivan: Good morning, Hendi.
Hendi Susanto: Hi. My first question is about SyQwest. Would you be able to indicate whether the transaction will be accretive, neutral or dilutive to EPS?
Kieran O'Sullivan: Yeah. It will be accretive in 2025, Hendi.
Ashish Agrawal: Hendi, we expect a small unfavorable impact in 2024 in the range of $0.04 to $0.05. But then as Kieran mentioned, in 2025, we are expecting it to be accretive.
Hendi Susanto: Okay. And then any indication on how much it will increase your OpEx, Ashish?
Ashish Agrawal: Let us work through that, Hendi. It's private business that was run differently than we would be looking to do the accounting and all that. So what is gross margin, what is operating expenses will take us a little bit of time to get all that sorted out. So I expect to have more clarity in the coming months.
Hendi Susanto: Yeah. And then Kieran, I have a question on, let's say, like more modest expectation for the second half. Does that imply that things that you have pointed in terms of softness, the softness will last through the end of the year or whether certain things may see recovery sometime in the fourth quarter?
Kieran O'Sullivan: Hey, Hendi. So in non-transportation, we feel very good about defense. We feel good about medical. But the tone we're setting here is on the industrial side, it's a more modest growth rate than we had expected earlier in the year. So we'll see some growth, but at a much more modest level.
Hendi Susanto: And then any color on, let's say, your expectation between third quarter and fourth quarter as of now? I know that fourth quarter is still months away.
Kieran O'Sullivan: Yeah. I think, Hendi, if you take the profile where we're coming for with the $130 million in the -- on an organic basis, the $130 million in the second quarter, I think you'll see a small few million improvement in the third and fourth quarter directionally is how I put it.
Hendi Susanto: Okay. Got it. And then I mean with regard to China, is your expectation -- when you said like challenging, like will it be challenging right throughout the year, meaning that any type of improvement, we should be more base in and then expect that to be more in 2025?
Kieran O'Sullivan: I think, Hendi, it's going to remain challenging throughout the rest of this year. I've read recently, and you probably saw it too, that the Chinese government has added new incentives going from, I think, it was RMB7,000 to RMB15,000 for light vehicles under 2 liters. So that will provide some incentive and help for some of the transplant OEMs. But we think it will just kind of level out the softness is there rather than giving us gains.
Hendi Susanto: I see. Okay. And then last question for me, Kieran. Post-SyQwest acquisition, are you still actively looking for potential acquisitions or should we expect that you will focus on integrating this business? And then, therefore, you would be less active on your M&A pipeline?
Kieran O'Sullivan: So Hendi, two parts to that question. Number one, we're really delighted with the SyQwest acquisition, the way it increases our diversification, quality of earnings and the strength it gives us in the defense market. And this team is a very entrepreneurial team. We want to make sure we don’t lose that as part of how we integrate together. So Bob Tarini and the team have got excellent momentum there. And on the flip side, we’re also active in working our pipeline going forward.
Hendi Susanto: Okay. Thank you, Kieran.
Kieran O'Sullivan: We’ve got a good balance sheet, so we want to make sure we’re using it appropriately.
Hendi Susanto: Yeah.
Operator: [Operator Instructions] We have a follow-up from John Franzreb from Sidoti. John, your line is open. Please go ahead.
John Franzreb: Yeah. Just a follow-up on Hendi's question about the dilution in SyQwest. I think you said $0.04 to $0.05 is the expectation in the second half of the year, but accretive in 2025. So can we assume it recaptures that $0.04 to $0.05 or should we be thinking above that the dilution number for next year?
Ashish Agrawal: So John, it will be in addition to that $0.04 to $0.05 loss that we are expecting in 2024.
John Franzreb: Okay. Just wanted to get that. Okay. Thank you, guys.
Kieran O'Sullivan: Sure.
Operator: [Operator Instructions] As we have no further questions, I'll hand the call back to the management team for any concluding remarks.
Kieran O'Sullivan: Thanks, Adam, and thank you all for your time. At CTS, we remain focused on future growth, driven by the megatrends of increased automation, connectivity, energy efficiency and minimally invasive medical innovation. The continued expansion of our customers and pipeline of opportunities underscore our confidence in our future. We're delighted to add the SyQwest team to CTS, and excited about our future growth potential in defense applications. Thank you for joining us today. This concludes our call.
Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.
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