管理層發言
Welcome to Avnet's Third Quarter Fiscal Year 2026 Earnings Call. I would now like to turn the floor over to Lisa Mueller, Director of Investor Relations for Avnet. Please go ahead.
Thank you, operator. I'd like to welcome everyone to Avnet's Third Quarter Fiscal Year 2026 earnings conference call. This morning, Avnet released financial results for the third quarter of fiscal year 2026 and the release is available on the Investor Relations section of Avnet's website, along with the slide presentation, which you may access at your convenience. As a reminder, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent Form 10-Q and 10-K and subsequent filings with the SEC. These forward-looking statements speak only as of the date of this presentation, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this presentation. Please note, unless otherwise stated, all results provided will be non-GAAP measures. The full non-GAAP to GAAP reconciliation can be found in the press release issued today as well as in the appendix slides of today's presentation and posted on the Investor Relations website. Today's call will be led by Phil Gallagher, Avnet's CEO; and Ken Jacobson, Avnet's CFO. With that, let me turn the call over to Phil Gallagher. Phil?
Thank you, Lisa, and thank you, everyone, for joining us on our third quarter fiscal year 2026 earnings call. This was an outstanding quarter for Avnet, one that reflects both strong execution by our teams around the world and improving market conditions. Over the past several quarters and really over the past couple of years, our team has been operating in a challenging market environment. Throughout that period, we remained focused on the things we can control: supporting our customers, coordinating closely with our supplier partners, managing inventory and working capital discipline, investing in our people, digital capabilities and distribution centers with a long-term view. This quarter's results and our June quarter guidance demonstrate that focus positioned us well coming into the beginning of the up cycle. We delivered financial results that came in well above our expectations, including record sales in our electronic components business. As data center and AI demand proliferates throughout the market, we also saw broad-based demand across most of our core end markets, which translated into meaningful operating margin and EPS improvement. Before we give more color on the business, I wanted to take a moment to mention we're closely monitoring the current geopolitical environment and remain mindful of the potential broader macroeconomic impact. The conflict in the Middle East had no material impact on our Q3 results outside of some increases in freight expenses due to rising fuel costs. Now turning to our third quarter. We achieved sales of $7.1 billion, driving a 3.5% operating margin in our electronic components business and a 5.2% operating margin in our Farnell business. We also reduced inventory days to 77, below our near-term target of 80 days. Our double-digit year-over-year sales growth was led by another quarter of record revenues in Asia, along with better-than-typical seasonal growth in the Americas and Europe. From a demand perspective, market conditions continue to improve across the majority of the verticals we serve, which include data center, industrial, aerospace and defense, transportation, consumer and networking. The third quarter was led by strong demand in industrial, networking and our data center end markets. Year-over-year, we also saw broad-based improvement across most verticals led by the data center. Over the past 90 days, the lead time environment has shifted. Component lead time trends are increasing across many product categories. We have seen lead time extensions in over 50% of the product categories we track, spanning semiconductors and interconnect, passive and electromechanical, with some stability being reflected in certain categories. While lead time extensions continue in components supporting data center and AI builds, they are now spreading to a broader set of products supporting diverse end market applications. Customers are increasingly recognizing the challenges of a tightening supply environment and are turning to Avnet's proven expertise to help manage their component supply chains. Our backlog is growing and our book-to-bill ratios are well above parity in all regions. In the December quarter, we saw early indicators of certain component price increases. During the March quarter, we have seen price increases across a few suppliers and technologies, most predominantly related to memory. We expect to see additional price increases over the next several months, the majority of which are being driven by increases in the underlying input cost of components. Ken will give more color on the impact of pricing during the quarter in his comments. Now with that, let me turn to highlights of our business. Our Electronic Components business delivered a record sales quarter, driven by growth across all regions and strong execution. Demand-creation activity remained robust. Design wins continue to convert to sales and our interconnect, passive and electromechanical, or IP&E, business outperformed, reflecting the benefits of our technical capabilities and our focus on total-solution selling. In Asia, sales reached another record high of $3.5 billion in a quarter that is usually impacted by the Lunar New Year holiday. This marks our seventh consecutive quarter of year-on-year sales growth in the region, which now represents almost 50% of our total sales. Demand increased across all geographies and verticals we serve, led by the data center, industrial and networking markets. In March, I was able to spend some time in China with our Asia leadership team, including visiting with local customers and suppliers. This trip reinforced my belief in the opportunities for growth we see in the region and that our Asia team is capitalizing on. In EMEA, we're pleased to see a continued rebound in the region with sales growth both sequentially and year-over-year for the second consecutive quarter. EMEA is experiencing growth across a number of verticals, including industrial, networking and early signs of the long-term opportunities we see in aerospace and defense. Overall, I would say market conditions in Europe are improving, although the demand environment is still mixed. We are seeing improvement in our strategic differentiators, including leading indicators in our embedded business, as customers and suppliers are looking for board- and display-level solutions. I was able to spend some time in Germany in late March, meeting with several of our IP&E suppliers and customers at our Avnet Apicus Technical Conference. The outlook and momentum I felt coming out of Europe was more encouraging than even a few quarters ago. In the Americas, sales grew both sequentially and year-over-year, marking our third consecutive quarter of year-on-year growth. Most end markets showed sequential growth, led by networking, while aerospace and defense, networking and industrial were the strongest end markets year-over-year. Our Americas region recently hosted an IP&E Summit, bringing together leaders from our top suppliers to reinforce our focus and commitment to accelerating growth in the IP space. Our IP business had a record quarter, growing 25% year-over-year. We carry a world-class portfolio of IP components and solutions and are benefiting from this multiplier effect: every active semiconductor chip requires surrounding IP components to function — think connectors, capacitors, passives, resistors and sensors, among other technologies. We continue to see success driving conversations with customers about the full solutions we can provide with both our semiconductor and IP&E product offerings. Turning to our other value-added drivers of profitable growth, we continue to benefit from our field application engineers, complemented by our digital design capabilities and tools. Our Demand Creation revenues increased sequentially by 16% and from a design opportunity standpoint, the leading indicators remain positive, which bodes well for future design wins and downstream revenue. Our supply chain services offerings continue to grow and expand with many OEMs that are household names. We are seeing opportunities and wins across many of the same verticals where we are experiencing strong growth in the core business. These include transportation, data center and networking, among others. We believe we have the opportunity and capabilities to be the leading supply chain services and solutions provider in the electronic components industry. Now turning to Farnell. We are seeing steady progress in Farnell's performance and recovery. Sales grew double digits year-over-year for the third consecutive quarter. Gross margins and operating margins expanded in line with expectations and the business remains on track with its return to double-digit operating margins over the next several quarters. Our omnichannel focus is gaining traction as we leverage Avnet's scale and relationships with our supplier partners, and our pronounced capabilities and offerings. This unique combination differentiates Avnet and strengthens our value proposition to suppliers and customers. Farnell's continued investment in its e-commerce platform, customer experience, and inventory proposition positions us well as demand accelerates. Throughout this cycle, we remain committed to investing in the future of Avnet with a focus on the long-term opportunities we see for the demand of electronic components. Our bankability has never been more critical. The proliferation of electronic components continues at a rapid pace with emerging opportunities in drone technologies, robotics and edge AI as just a few examples of future trends. We have made substantial investments in our digital platforms and capabilities, supply chain and distribution center infrastructure and engineering resources. These investments are not just about near-term efficiency; they are about future-proofing our company and ensuring we can support increasingly complex supplier and customer needs as technology and supply chains evolve. At the same time, we have stayed disciplined in managing expenses, optimizing inventory and allocating capital. We have consistently said we will balance reinvestment in the business with returning capital to shareholders, all while prioritizing and maintaining a strong balance sheet, and we have delivered on those commitments. In closing, I'm extremely proud of what our team has accomplished, and I'm excited for the continued recovery in our business. These results reflect not only an improving market environment, but also the resilience, experience and dedication of our team. With the breadth of our supplier partners, our diversified customer base and the strength of the end markets they serve, we are well positioned to deliver sustainable growth and improved returns into the future. We are thrilled by the momentum of the business and are confident in Avnet's ability to execute at a high level. So with that, I'll turn it over to Ken to dive deeper into our third quarter results.
Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet. Our sales for the third quarter were approximately $7.1 billion, above the high end of our guidance range and up 34% year-over-year. On a sequential basis, sales were higher by 13%. Regionally, on a year-over-year basis, sales increased 39% in Asia, 31% in Europe and 27% in the Americas. During the third quarter, sales from Asia were 49% of total sales compared to approximately 47% of sales in the year-ago quarter. From an operating group perspective, Electronic Components had record sales during the quarter as sales increased 35% year-over-year and increased 13% sequentially. In constant currency, Electronic Components sales increased 31% year-over-year. Farnell sales increased 24% year-over-year and 6% sequentially. In constant currency, Farnell sales increased 18% year-over-year. As Phil mentioned, supply dynamics have been driving some price increases, especially in memory. In the third quarter, we saw the impact of these pricing increases in our sales growth. Approximately half of the sequential sales growth and approximately one-quarter of the year-over-year sales growth was attributable to higher memory pricing. For the third quarter, gross profit margin of 10.4% was down 68 basis points year-over-year and slightly lower sequentially. Electronic Components gross profit margin was flattish sequentially and down year-over-year, primarily due to a combination of a higher percentage of sales coming from our Asia region as well as some differences in product and customer mix in the Western regions. We reported higher gross profit dollars as a result of the previously mentioned price increases, although the pass-through of these increases has less of an impact on gross profit margin. As a reminder, when component prices increase, we communicate the changes to our customers and pass through the corresponding increases. From a Farnell perspective, gross profit margins were up 34 basis points year-over-year and were up 49 basis points sequentially, in part due to an expected improvement in product mix with more on-the-board components. Turning to operating expenses, SG&A expenses were $519 million in the quarter, up $83 million year-over-year and $27 million sequentially. The sequential increase in SG&A is primarily from a combination of higher sales volumes, including related incentive compensation expense, as well as foreign currency. Foreign currency negatively impacted SG&A expenses by approximately $3 million sequentially and $22 million year-over-year. Excluding the impact of foreign currency, SG&A increased approximately 5% sequentially and 14% year-over-year. As a percentage of gross profit dollars, SG&A expenses were lower sequentially at 70% compared to 74% last quarter. As our business grows, we expect to continue to maintain our disciplined expense management and drive efficiencies in our business while still making investments in the future. We expect our SG&A expenses as a percentage of gross profit dollars to be in the mid-60s percentage-wise over the next year. For the third quarter, we reported adjusted operating income of $221 million and the total Avnet adjusted operating margin was 3.1%, an increase of nearly 40 basis points from last quarter. This represents the third consecutive quarter of adjusted operating income margin expansion. Adjusted operating income also grew more than 2x sales compared to last quarter. By operating group, Electronic Components operating income was $235 million and EC operating margin was 3.5%. The nearly 40 basis point sequential increase in EC operating margin was led by the business recovery in Europe. This is EC's second consecutive quarter of operating margin expansion and is the highest EC operating margin since the first quarter of fiscal 2025. We continue to gain momentum in EC with the recovery of both Europe and the Americas, and we currently expect our EC operating margin to reach our 4% near-term goal within the next fiscal year. Farnell operating income was $24 million, and their operating income margin was 5.2%, which was up 55 basis points from last quarter, reaching its highest level in three years. This is Farnell's sixth consecutive quarter of operating margin expansion. Similar to our EC business, we see momentum in Farnell and expect to continue driving operating margin expansion with the near-term goal of getting back to double-digit operating margin by the second half of calendar 2027. Turning to expenses below operating income, third quarter interest expense was $63 million, and our adjusted effective income tax rate was 23%, both consistent with expectations. Adjusted diluted earnings per share of $1.48 exceeded the high end of our guidance for the quarter. Adjusted diluted earnings per share grew more than 3x sales compared to last quarter. Turning to the balance sheet and liquidity. During the quarter, working capital increased by $145 million sequentially, primarily due to an increase in accounts receivable driven by the growth in sales. Working capital days decreased 11 days quarter-over-quarter to 76 days. From an inventory perspective, inventory increased by $168 million or 3% sequentially. The increase in inventories was primarily driven by an increase in certain memory products to support supply chain services engagements and from an overall increase in inventory received at the end of the quarter. Inventory net of accounts payable decreased by $115 million compared to last quarter. We ended the quarter with 77 days of inventory, achieving our near-term target of below 80 days earlier than anticipated. Our EC business had 70 days of inventory and our Farnell business had just over 200 days of inventory. As a value-added distributor in the center of the technology supply chain, inventory is a critical enabler for our business. We remain focused on making the necessary inventory investments to position ourselves appropriately to capture the numerous opportunities we see in the markets we serve. We continue to prioritize servicing our customers' and suppliers' inventory needs through an overall pipeline of inventory and through a variety of supply chain programs to meet expected customer demand. Our return on working capital improved over 300 basis points sequentially from both higher operating income and the reduction in working capital days. Continuing to expand our return on working capital is a focus across all of our businesses. We expect to achieve our near-term goal for return on working capital of 16% by the second half of fiscal 2027. In the third quarter, we used $54 million of cash flow from operations to support $800 million of sequential sales growth. We anticipate a use of cash flow from operations in the fourth quarter to continue supporting the sales growth, primarily in the form of accounts receivable. Cash used for capital expenditures was $17 million during the quarter. In line with our stated priorities, we ended the third quarter with a gross leverage of 3.6x, down from 3.9x in the second quarter, with approximately $1.7 billion of available committed borrowing capacity. We believe we are on track to reduce our leverage to our previously stated target of approximately 3x by the end of the calendar year. Returning excess cash to shareholders remains a core priority of our capital allocation program. In the third quarter, we paid our quarterly dividend of $0.35 per share, or $29 million, bringing our year-to-date shareholder return to $224 million, including both our dividend and share repurchases. Once our leverage returns to our target levels, we expect to use a portion of free cash flow to repurchase shares. We have $226 million remaining on our existing share repurchase authorization. Turning to guidance. For the fourth quarter of fiscal 2026, we're guiding sales in the range of $7.3 billion to $7.6 billion and diluted earnings per share in the range of $1.70 to $1.80. Our fourth quarter guidance assumes current market conditions persist and implies a sequential sales increase of approximately 5% at the midpoint. The sales guidance implies sales growth across all electronic components regions. This guidance also assumes similar interest expense compared to the third quarter, an effective tax rate of between 21% and 25% and 83 million shares outstanding on a diluted basis. This was a strong quarter with solid execution and continued recovery in the West. We are proud of our team for continuing to demonstrate the value we bring to our customers and suppliers. There is always opportunity for improvement, and our goal continues to be to ensure that we remain well positioned to meet our current customer needs while taking advantage of the positive market conditions we are seeing today and are expecting in the future. With that, I will turn it over to the operator to open it up for questions.
分析師問答
Operator: Our first question comes from the line of Melissa Fairbanks with Raymond James.
I must have hit star one early enough for a change. Congratulations on a great quarter. Glad to see the continued progress in everything. So I know you mentioned you've seen some pricing increases from some suppliers. Obviously, memory was a very significant piece of that. But is there any way of contemplating how much of your revenue growth outside of memory has been driven by higher ASPs, even if it's just for some of the higher value components, not just the price hikes or like absolute volume growth? Have you quantified volume growth recently?
Melissa, thanks for the comments. On memory, we wanted to be fully transparent because the moves in memory pricing are very public right now. A lot of other supplier price increases are smaller in magnitude and, in many cases, will start to come into play this quarter as contracts roll over. We didn't have a lot of additional percentage calculations ready in terms of ASP-driven growth outside of memory for the quarter, because many of those changes were already in the run rate from the prior quarter. Effectively, the bulk of the incremental pricing impact in the quarter was memory, and that could change in the June quarter as other price changes take hold.
Melissa, I would just add that as we go forward with other price increases, we don't expect those to be anywhere near the magnitude we saw in memory, and it won't be across the board for all product categories.
Okay. Yes. Hard to replicate that level of price increases. Maybe digging in a little bit further, you mentioned that you've had incredibly strong growth across industrial, networking and data center. Are you able to quantify how much those markets contribute to overall components revenue?
Yes. Roughly speaking, industrial has been one of our larger end markets historically and is now roughly in the low-30% range of our business. We've seen it come back pretty strong year-over-year. Networking and data center are also meaningful contributors, but industrial remains a significant portion of our components revenue.
Okay. Perfect. Can I squeeze in one more?
Yes, go ahead.
You mentioned longer lead times are spreading across more of the portfolio. I know IP&E has had some tightness for quite some time and then some of the memory or storage stuff. But just wondering if there are any areas where you're seeing stock outs yet or maybe even double ordering from customers?
On double ordering, our suppliers often see the effect more because they may receive similar orders from the same customers through multiple channels, which can inflate demand signals. We track for inflated forecasts or sudden, large jumps in orders and work to flag those through our analytics. Regarding lead times and stock outs: right now, stock outs are mostly in memory. IP&E lead times have extended somewhat, but not to stock-out levels. Discrete has extended a bit, analog is flat to up a bit, and storage and other categories tied to memory are moving out as well. So the overall picture is more lead-time pressure spreading beyond memory, but we are not seeing widespread stock outs outside of memory at this point.
Okay. Perfect. I appreciate all the detail. I know you have the data. I just had to ask the right questions. Thanks, guys.
Our next question comes from the line of William Stein with True Securities.
Great to see another strong quarter, and I hope you're right that we're sort of in the beginning of this upturn. Phil, you mentioned strength in AI data centers driving demand. Can you remind us what your exposure is to that end market? Is that simply traditional component distribution where the ODMs are using the channel? Or is there some sort of supply chain services associated with that? Any characterization of that exposure or sizing, for example, would be helpful.
Thanks, Will. A couple of quarters ago we estimated our direct exposure to data center builds at somewhere in the 5% to 7% range. That number has likely increased and is probably closer to 10% to 15% now in terms of direct exposure into data centers and hyperscalers. To be clear, that exposure is tied to traditional component supply into data center builds and direct supply chain relationships with hyperscalers and their ODM agents in Taiwan and elsewhere. We are also tracking the indirect impacts — what I call the n-minus-one effect — where suppliers to industrial and other markets see lift because of the broader investment in compute and data center infrastructure. We are expanding our supply chain-as-a-service opportunities as well, but that service revenue is a smaller portion of the number I quoted for direct data center exposure.
One other quick question. I was a little surprised to see components grow faster than Farnell in the quarter. I think based on your comments, it sounds like that's more memory-driven and maybe there's less of that in Farnell. But I would expect that at this point in the cycle when things are just starting to see lead times stretch and prices increase and shortages starting to show, that perhaps Farnell would start to be a more prominent part of the business. Is that how you see it? Anything you can talk about the performance differential between these two given Farnell's leverage on margin?
Part of the reason is Farnell had already been on a multi-quarter recovery with three consecutive quarters of double-digit year-over-year growth, so some of the lift had occurred earlier. Farnell has a different mix — more MRO, test and measurement and other categories — so it does not have the same on-board component and memory concentration as the core Electronic Components business. Farnell's strongest region is typically Europe, where recovery has been improving but is still more mixed versus Asia. So you see some of that difference due to product mix and regional timing. As Europe continues to recover and Farnell continues to improve its on-the-board mix, you should see further margin and revenue benefits.
It mostly does. Maybe just let me tack on a half question. Is this perhaps related to inventory work-down that's still perhaps not fully complete, but will make a difference in Farnell as customers truly deplete so they have to reorder?
I think most of the industry-wide inventory de-risking is behind us. There's still some remaining visibility differences at customers, but for the most part, that cycle of destocking is largely complete. We are seeing revenue per line item increase and other signs that replenishment is underway. There's still work to do, and Farnell continues to execute towards our long-term goals, but we are encouraged by the progress.
Our next question comes from the line of Joe Quatrochi with Wells Fargo.
Maybe a few if I could. I think you said 50% of the sequential increase in revenue this quarter was related to pricing. Any help on how that contributed to the increase in EBIT sequentially?
Joe, how I'd characterize it is when prices increase and we pass those prices through to customers, it doesn't materially change our gross margin percentage, but it does increase gross profit dollars. So that incremental gross profit dollars helped the operating leverage and contributed to the sequential increase in operating income. A lot of the beat versus guidance also came from Asia, which had strong volume and mix, so the price effect was additive to the broader operating leverage but didn't create a large change in gross margin percentage itself.
Right. On the EBIT dollar increase sequentially, fair to say that more than 50% of that improvement was related to pricing?
I would say it was probably around a similar proportion as the sales growth that came from pricing — so meaningful, but not the sole driver. Volume, mix and regional strength in Asia were also important contributors.
And as we think about what's embedded in the guidance, you mentioned earlier you've seen a round of price increases across more of the analog and mixed-signal space that started taking place in April. How should we think about that being contemplated in the roughly 5% sequential growth implied for the June quarter?
We have included what we know about pricing in the guidance, but new price increases that we become aware of throughout the quarter will flow in over time. Importantly, these increases outside of memory are smaller in magnitude and more limited in scope. Memory was a very large, concentrated effect. Other technologies' price increases are generally smaller both in size and timing, so while some of that is in the guidance, it's not expected to replicate the magnitude of the memory-driven moves.
Okay. And then maybe just last on the inventory, can you update us how you feel about your inventory positioning across the broader line card and where you see that going over the coming quarters?
We feel generally good about our inventory position. We are focused on ensuring we have the right inventory to support customer demand and our supply chain services commitments. There's a mix of things in excess and some aged inventory we continue to work through, but overall inventory days have improved and we plan to continue to turn aged items and reinvest when necessary in critical SKUs, particularly in IP&E and other high-demand categories. Farnell is improving its inventory days as well but still has some room to optimize. Overall, we'll balance efficiency with making the inventory investments required to capture demand.
Joe, I'll add that inventory is a critical enabler for our suppliers and customers. We don't want excess aging inventory, but we do want sufficient pipeline inventory as lead times lengthen. We're also seeing improved visibility from customers in some areas, which helps our planning. Notably this year we've added nearly 60,000 SKUs and then another roughly 70,000 SKUs, much of that in the IP&E space and across semiconductors, to better meet customer needs. So we feel good about where we are and will continue to improve both turns and the SKU mix.
Our next question comes from the line of Ruplu Bhattacharya with Bank of America.
So you beat guidance for fiscal Q3, and you're guiding above seasonal for fiscal Q4. Based on the visibility that you have, do you think that you can maintain above-seasonal growth for the second half of calendar 2026?
We typically don't guide that far out, but based on current bookings, backlog and demand indicators, the outlook is positive for continued growth. Summer months can be tougher to predict with seasonal patterns and holidays, but at this point we're not seeing signals that would negate continued above-seasonal growth. We'll continue to manage bookings and supply closely and update guidance as conditions evolve.
Maybe a follow-up to Ken on margins and specifically incremental margins. Revenues leaked quite a bit and you came above the high end of guidance. Were the incremental margins in line with what you expected in the core business? And how should we think about Farnell margins going forward? Initially you had guided 50 to 100 basis points of improvement every quarter. You also referenced a target of double-digit operating margin by the second half of calendar 2027. How should we think about incremental margin on Farnell?
On Farnell, we're tracking well to the plan. The gross margin uptick we saw was consistent with an expected improvement in the on-the-board component mix. Europe has started to recover but remains more mixed versus Asia, so as Europe continues to strengthen, Farnell should see additional uplift. Our guidance implies continued improvement consistent with the 50 to 100 basis points per quarter objective for Farnell. In the quarter, a lot of the beat came from Asia, which helped operating margin expansion; as that trend continues across regions, it will support further margin improvement. We're still a few quarters away from our near-term milestones, but we're making good progress and feel confident in the momentum.
Just to clarify, where do you think Farnell margins can get to by the end of this calendar year? And on memory as a percent of revenue, how big is that in terms of product mix or revenues?
If you assume roughly 50 to 100 basis points of improvement per quarter and consider the quarters remaining in the calendar year, you can approximate how Farnell's operating margin should trend upward — consistent with that quarterly improvement target. From a memory perspective, given current pricing levels and mix, memory represents a larger percentage than historically and is in the low double-digit percentage of revenue for the core business. Farnell's exposure to memory is much smaller.
There are no further questions at this time. I will now turn it back to Phil Gallagher for closing remarks.
Okay. Thank you, and thanks to everyone for attending the call and for your thoughtful questions. We appreciate your interest and engagement. We look forward to speaking to everybody at our upcoming conferences and on our fourth quarter and fiscal year 2026 earnings report in August. Thanks a lot.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.