Trading Update

Dec 11, 2020

Earnings release

Hello, and welcome to the Rolls Royce Trading Update Call. Throughout the call, all participants will be in a listen only mode and afterwards, there will be a question and answer session. And just to remind you, this conference call is being recorded. I'll now hand you over to Isabel Green, Head of Investor Relations. Please go ahead with your meeting. Thank you, and good morning, everyone. With me on the call today are Warren East, CEO and Stephen Daintiff, CFO. We expect the call to last for around half an hour, including the prepared remarks, which will take 10 to 15 minutes. Before I hand over to Warren, I'm required to remind you that on the call, we may make forward looking statements and actual results could differ as per Page 4 on our press release. Thank you. And over to you, Ryan. Thanks very much, Isabelle. Thanks very much, everybody, for joining us. I'll make a few opening remarks as usual. We're coming to the end of 2020 now. It's been a year that's completely unprecedented, unprecedented challenges. I think it's right to just have a quick reflect on our performance and some of the commitments that we've made for the years ahead. Going all the way back to the beginning of the year, we came in with good momentum having turned a bit of a corner as we emerged from a period of extended period actually of investment in new large civil engine programs to be looking forward to a period where we would see higher returns reaping the returns from that investment and our large installed base and increased market share that have been achieved. We were also on a position of solid growth in Power Systems and Defense with a particularly strong order book there. Then COVID, and an exogenous issue, nothing we could do about COVID. Our focus had to be on the things that we could control. And when the first wave of COVID hit, we took quick decisive actions to conserve cash, restructure our Civil Aerospace business. By the time of our interim results, we've already achieved approximately GBP 350,000,000 of in your cash savings. And now we are confident that we will deliver our target of more than £1,000,000,000 for the full year. We've also made good progress with a more fundamental restructuring. In May, we announced at least 9,000 rolls will be removed by the end of 2022. In October, we launched our £5,000,000,000 refinancing package that was necessary to increase resilience to see us through this crisis and strengthen our balance sheet as well as support our long term strategy. And we're very pleased to have concluded that process. We're also very grateful for the support that our investors showed us at that time, both with the equity raise and with the debt that it serves to unlock. This means that we can now look forward with confidence that we have sufficient liquidity to get through this crisis, no matter how extended it is. Turning to what's happening in the business since we last gave you an update. In Civil Aerospace, our year to date large engine invoiced flying hours were at 42% of 2019 levels. We've been seeing a gradual tick up in flying activity every month since April. October November combined were 33% of 2019 levels, and that was a trend up from 29% in Q3 and 24% in Q2. Meanwhile, our business jets have continued to perform relatively well with demand much less affected by the pandemic. While the second wave of COVID-nineteen has delayed near term recovery in air travel, It's very good to see the recent progress on vaccination. That's encouraging, welcome news. Flying looks likely to exit 2020 at a lower level than we expected. And that is likely to recover more slowly in the first half of twenty twenty one. But we still expect recovery then to accelerate in the second half as borders start reopening and economies pick up. We continue to see the disparity in the pace of recovery for different routes and different aircraft. And in particular, we've seen improvement in flying hours in areas like China, where infection rates have been kept very low after the first wave passed and travel restrictions have been reduced. We've also seen the fastest recovery on the younger aircraft, those programs that have the newer planes, things like the Trent XWB97 on the A350-1000. That's already back to 2019 levels. Now that's only a relatively small part of our installed base, but it's an indicator of the of what happens with our younger fleet. To preempt any later questions, by the way, on in service issues on some of our Trent 1000 and Trent XWB engines, just a quick update there. We've completed our inspections of all high cycle TrentexWB engines. We found early signs of wear on the first stage of the IPC blade in around 20% of cases, which is exactly the same as we reported in August. Most of these were already being refurbished to return to the customers and we have ample spares in place. The root cause investigation and testing is still proceeding, but it has progressed as planned. On to the Trent 1,000 in service issues. We remain we first achieved the ambition about 0 aircraft on ground, clearly helped a little bit by the pandemic. But we have continued with the development work on the final fix for the HPT blade on the Trent 10 10, and we remain on track to start installing that by the middle of next year. During the year, we have built sufficient spare engine capacity such that even if all those Dreamliners took to the air again tomorrow, we would be fine to maintain that 0 aircraft on ground position. Our defense business has been largely unaffected by COVID-nineteen throughout. We've been able to keep all our facilities operational throughout and demand has remained intact. We've benefited from very good support from our government customers. And 2020 one revenue cover in our backlog is around 90% at the moment for defense. The recently announced multiyear defense budget increases in the UK, very encouraging. They're supporting the investment in generation capabilities, including the Tempest program, and we're a core partner there. We've recently received an order from the German Air Force, 56 new Eurofighter engines, and that has benefited our defense business. It's also benefited ITP Aero. Our Power Systems business has been impacted by the pandemic, but much less so than our Civil Aerospace business. Some sectors and regions are holding up better than others. Again, a bright spot for us is China, where we have been growing market share, as you know, in recent years, and strategic relationships there have helped us increase our market presence. At a recent China International Import Expo, we announced provisional agreements with 6 Chinese companies, almost 1,000 MTU engines and systems, for instance. And our book to bill in Power Systems as a whole this year is getting to about 1. Demand from government customers in Power Systems has been resilient throughout, and we're starting to see early signs of recovery in some of the other end markets. Now whilst the current year is important and the impact of COVID is important. It's also important that we keep an eye on the future and look ahead. And despite everything that has happened this year, we've been able to keep focused on our ambition to deliver more sustainable power. We know that society at large is a pivotal moment in the drive towards a net zero carbon economy. And we think that Rolls Royce has a key role to play. We're a leading British industrial technology company. And our key role is not only to do the right thing for ourselves, but to drive change through innovation in our products and services. We already make some of the world's most efficient jet engines, things like the XWB on the A350. That's the most efficient wide body plane available in the market today. But as we look ahead to the future, we are investing in hybrid and electrical alternatives. In November, we ran ground tests to demonstrate that our Trent engines can operate with 100% sustainable aviation fuel, and that's an important piece of groundwork for industry wide certification. To achieve net 0, society needs a huge step up in power generated from alternative sources like nuclear power. The UK government has committed £215,000,000 for a 4 year development program for our small modular reactor consortium. This investment in our nuclear energy solution will support the decarbonization of power generation in the UK. But we've also signed strategic agreements with Exelon Generation and FEZ, highlighting the international appeal of our small modular nuclear reactors. Back inside the business, our key focus, as I said at the start, is being on controlling what we can control. And the restructuring that we announced in May, for instance, we've had to adapt to very challenging new reality as we look forward. And that has presented difficult choices about consolidating our global production footprint. We've had to make some very tough proposals after the last few months, but we can't afford to retain capacity where demand in the medium term has been so dramatically reduced. We announced a number of proposed changes for our Civil Aerospace business as we focused on reducing costs and positioning the business for recovery. Last week, we announced the proposal to transfer some of our structures and products manufacturing to ITP Aero and further changes at some of our civil manufacturing sites to make them more competitive and reduce costs. And these changes are in addition to the proposals that we'd announced previously about bringing assembly and testing of our wide body engines back and consolidating in the UK and consolidating our fan blade manufacturing into Singapore. It includes the we'd already announced the closure of a manufacturing site in the U. S. And a reduction to workforce in Germany. Now this makes it a very difficult time for some of our people. We have removed more than 5,500 roles this year, but that has mostly been achieved through voluntary severance and early retirement. And that's helped us move ahead much more quickly with less uncertainty for our people. We're actively engaging with the trade unions and those discussions are very constructive, but remain ongoing. So now moving on to our financial priorities, rebuilding our balance sheet, increasing our resilience, these are absolutely key to positioning the company for the future. When we launched our £5,000,000,000 recapitalization in October, we made a number of commitments. And I'm very aware of the responsibility that, that means we now have to deliver on those commitments over the coming years. Firstly, we're targeting more than £2,000,000,000 in proceeds from disposals. On Monday, we announced the agreement to sell our civil nuclear instrumentation and controls business for Amazon. This business, by the way, doesn't include any of our nuclear submarines activity or any of our SMR, small modular nuclear reactor activity. It generated around €100,000,000 in revenue last year and has a workforce of about 5.50 people across sites in France and the Czech Republic and in China. There are other assets under consideration for disposal, and we've talked before about ITP Aero. And we've also seen mention and it's true medium speed gas and diesel engines business, Bergen engines, we're also looking to divest. We'll say more about these as and when it's appropriate to talk about them. So moving on to operational cash flows. We do expect to see free cash outflow in the region of GBP 4,200,000,000 this year. It's an approximate guidance. The actual outturn is heavily influenced by timing of significant working capital cash flows around the year end. So we can't be more than approximate at the moment. And in particular, there are some issues around OE concession payments, which depend on the timing of new aircraft deliveries to airlines, and these are outside of our control. This guidance, however, I'll remind you, does include £1,000,000,000 of negative impact from the cessation of invoice discounting that we talked about with our half year results. It also reflects the huge effort group wide to save more than GBP 1,000,000,000 of in unit cash costs. As a result, we expect overall our euro net debt position to be around £1,500,000,000 with liquidity of around £9,000,000,000 which is enough to see us through the crisis even in a reasonable worst case scenario. Our primary goal from a financial standpoint is to get the business away from consuming cash as soon as possible. We are targeting reaching breakeven at some stage during the second half of twenty twenty one, primarily driven by our reorganization program. Now the timing, the exact timing will also be a little bit impacted by the pace of recovery in engine flying hours. If the recovery is slow, it might be a bit later in the second half. But we're going to do our best to get there as soon as possible. The other key financial objective is to generate at least £750,000,000 of free cash flow as early as 2022. And of course, that is linked to the pace of market recovery, but it does include headwinds like Trent 1,000 remediation costs, foreign currency exchange, rightsizing on the hedge book costs that we talked about earlier this year. And obviously, as we look forward into the future, those one offs will disappear. So €750,000,000 remains firmly within our sites in that time period. In the medium term, our restructuring will enable us to be a leaner, healthier business, stronger operational gearing than we would otherwise have been and well positioned for a recovery in revenue. 2020 has been a very tough year indeed. There's still a lot of work to be done in 2021, but we think the fundamental drivers behind our business remain intact, and we can see structural and strategic growth opportunities across all our core businesses. I've talked long enough, so I'll pause now and we'll answer your questions. Thank Our first question comes from the line of George Zhou from Bernstein. Please go ahead. Hi, good morning, everyone. Warren, you said in the past there has not been discounts on the flight hour contract prices. So when operators are under the service agreements with you, it may be more difficult for them to cut back the cash outlay. But how do you think about the downside of that, right? I mean, where elsewhere do you envision potential pressure either now or in the future as operators are still very much under pressure to cut back maintenance? And we've seen that where they have flexibility under time and material model elsewhere, they have been doing exactly that to cut maintenance. Well, I think what we've said before is that as far as invoicing during 2020 is concerned, then the contracts are in place. And we've tried to be reasonable with our airline customers in terms of rescheduling payments and the like, and we've tried to be reasonable. On a forward looking basis, as airlines seek to resize their fleets and there'll be some airplanes that get retired and other airplanes that get flown. We'll do our best to maintain our flying hour rates, but where it's necessary to have a trade off between offering temporary discounts on flying hour rates in order to keep our airplanes flying rather than somebody else's, then we'll work with airlines and with leasing companies to come up with sensible commercial win win packages. And our flying hour rates are a portion of the costs, but they're by no means the only cost for an airline. There's the financing cost and many other operational costs. So our rates are a very small part actually of aligned operating costs, but we recognize we've got a part to play in that. All right. Thank you. And the next question comes from the line of Andrew Gollan from Berenberg. Please go ahead. Hi, guys. Thanks for taking my questions. A couple already for me. Firstly, on the engine flying out, you indicated that 70% down in Q4 roughly. You mentioned, Warren, within your prepared remarks about utilization of the XWB. Can you give an indication of what's going on in terms of utilization for the other models? So particularly the Trent 700? I'm interested in Trent 100. That's for Trent 1,000,000,000, that's the first question. Yes. So I think, like, TRIN 700, the older you get, the less utilized you are. That's the basic rule of thumb. And it's really quite difficult to generalize much more than that. Very, very approximately Trent 700 is about half the utilization rate of XWB at the moment. XWB and Trent 1000, the A350 and the 787, these are the aircraft that are getting used most in the wide body space at the moment. And then when you get into A330s, used less. When you get into the older aircraft, then it's used even less. And that's all of them. But we've got a bunch of different airline customers that all have just different approaches. Very approximately, utilization of aircraft, whether an aircraft is being flown or not is just one measure and how much it is being flown is another measure. So XWB and Trent 1000, they're getting used a lot. So XWB 97 ks is back to the levels that it was in 2019. But that is a very small part of our fleet. When you get into higher, bigger volumes and so on, then they used a bit less. And then during an individual day, whether a share craft is used, maybe it used to be used 2 or 3 times a day and now it's being used once a day. On average, XWB is about 12 hours a day at the moment for those that are getting used, which is significantly less than it would normally be used. Sure. Okay. Thank you very much. And then the second question is around free cash flow and first guidance you gave me for 'twenty one and 'twenty two. So can you confirm what your guidance is premised broadly around the base case scenario of a recovery to 70% in 'twenty one and 90% in 2022? And what gives you confidence that this is still realistic given the trends we're seeing today? Is it merely availability of vaccines? It's just going to free up everything in that time frame. Is that what you're assuming? Or any comments around that helpful? Yes. So I think we're going to give a bit more specifics about this when we do our full year results. I mean, there's a huge amount of uncertainty around what's going to happen in 2021. And there's less uncertainty, obviously, about what's going to happen in 2022 because we do see a picture of vaccines helping, vaccines being a significant factor. But it's all about government to government relationships and opening up of air corridors and routes. That is we see a 2021 second half twenty twenty one phenomenon. And that's why we can be a bit more certain about 2022 than we can be about 2021, which is giving us confidence. That's giving us some confidence in underpinning our 750,000,000 pounds target for 2022. What's giving us most confidence, however, is, as I said in the remarks a moment or 2 ago, the things that we can control, we know we are removing fixed cost from out of our business and improving the operational leverage. And that's the primary factor. Engine flying hours are going to and the rate at which engine flying hours come back is going to affect timing. And that's why we're a bit more uncertain about 2021. We remain confident we can get into positive cash generation territory in the second half of twenty twenty one. But whether that's at the beginning or the end of the second half, that depends a bit on engine flying hours and how they perform. And don't forget, we do have the other half of our business, which isn't civil aerospace large engines. Business Aviation holding up very well. Defense holding up very well, Power Systems responding a bit like civil aerospace, but much less so and it's a shorter cycle business. And if we look for instance at the rate of recovery in Power Systems in China, we saw that come back quite smoothly. So just remind people that there's another half to our business as well. Understood. Thank you very much. And the next question comes from the line of Ben Heelan from Bank of America. Please go ahead. Hi, good morning. Thank you for taking my question. 1, I guess, is back on what Andrew was asking there. I guess another way to ask it was you said that the recovery to positive free cash flow is going to be dependent on that recovery in engine flying hours. Is there a way to gauge what level of engine flying hours need to be back relative to 2019 in a given month for you to be free cash flow positive? Is there a way to frame it around that? That would be the first question. And then the second question, could you talk a little bit, has there been interest in ITP and Bergen? And are there any other facilities that you're considering putting into ITP to make it more attractive to EBITDA? Thanks. I'll take those two questions, Ben. So yes, we're not going to go into specifics at this stage or out. The shape of flying our recovery in 2021 and moving to cash positive. We'll share more of that with our full year results in March. I think what I would say though is that we've been tracking our cash flows very carefully over the last 9 months. We've seen a good trajectory and good we've got good confidence around that ability to cash positive sometime during the second half of next year. On ITP, we are already engaging with the potential buyer universe on this. There are several interested parties, and we expect that there'll be a pickup in activity in the first half of next year as we really get into the sale process and we go through the management presentations and all that usual sort of malarkey that goes on with the disposal process. And we'll keep you updated on the progress as we go along. Okay, great. Thank you. And the next question comes from the line of Nick Cunningham from Agency Partners. Please go ahead. Good morning. Yes, a couple of perhaps slightly longer term questions. Obviously, a lot of learning in the last year or so for everybody. I was wondering what the experience has said to you about what a prudent capital structure is to aim for at the end of all this process. Does Rolls Royce sort of have to be net cash, if you like, and without it before or after the lease liabilities, to be more precise? And then the second question, €1,300,000,000 of cost reductions. To what extent are those just aligned with the anticipated lower revenue base? Or is some of it going to result in a lower unit cost? And if so, any indications to what proportion we might see contributing to a lower cost base going forward? In terms of our view on ideal balance sheet, that hasn't really changed. We're looking for a net cash positive of circa £2,000,000,000 in the medium term. I think we had that view coming into this crisis and we were on a good trajectory to take that during 2020 actually. We were confident that getting there in 2020, coming into the year at 1.3 to 1.4 net positive. And I think that's still a sensible goal. It's driven by requirement to keep R and D going and that sort of thing. I'm terribly sorry. The second half of the question has completely slipped my mind. Sorry, it's the cost reduction. To what extent is that? Yes. No, I mean, of course, there's cost coming out through loads coming out, but over €1,300,000,000 is structural. So in other words, that was entirely stick. Revenue came back to 2019 levels, but then 2020, but in lower cost base? Yes, yes, yes. I mean, you only have to talk to some of the unfortunate people who are losing their jobs and keep sticking as far as our cost reduction is concerned. Thank you. And the next question comes from the line of Tim Schulte Millander from Redburn. Please go ahead. Hi, there. Thanks for taking my question. Standing in for Jeremy Bragg. A 2 part question, if I can. Just thinking about the Trent 1,000 and aircraft on ground being a sort of unexpected beneficiary of this COVID crisis. First part of the question is, could you tell us what will happen to the Trent 1000 provisioning flows in 2021 and 2022? And then just again on those Trent 1,000 sort of expected cash flows in 2021, What are you expecting now compared to what you would have expected, let's say, a year ago? Thank you. Yes. So I think with our half year results, we talked about a reversal of provision on TREN1000. And that was based on the fact that disruption that we had previously anticipated to be continuing to accumulate during 2020, we're now not seeing. And because of the ability to generate spare engines, we're now not anticipating even if they all started flying tomorrow, we wouldn't anticipate accumulating any more disruption costs. And that's why we were able to reverse that provision. And then in terms of impact on cash flow in 2021 2022, then we're still anticipating the already accumulated disruption costs and things like credit notes being utilized as before. And then do you know there's any rephrasing? Yes. No change in the previous guidance on that one. And just a reminder, 'twenty one and 'twenty two will be the last 2 years of any material cash outflow on the Trent 1,000. So 'twenty three will be unencumbered by those cash flows. And that GBP 750,000,000 number that we guide to as well for 2022 includes the final year of TRENT 1,000 cash costs of around GBP 250,000,000 in that year. Great. Very clear. If I could just sneak in one follow-up, and that's Stephen, on your replacements. Warren, could you maybe give us an update on where the company stands on the CFO search? Thank you. Yes. Well, it's still ongoing, but we expect to be able to we will have an announcement in due course. And obviously, you can't announce these things until everything's signed and sealed. We want to choose the right person to replace Stephen. And I'm sure by the time we get to our full year results, we'll probably have some news. Thanks. Thanks very much. The next question comes from the line of Sean Steuart from JPMorgan. Please go ahead. Hi. Good morning, Warren. Good morning, Stephen. I just have one quick question, please. You've reiterated your guidance this morning for at least $750,000,000 in free cash flow in 2022 pre the disposal. Are you able to give us any EBITA guidance behind that free cash flow guidance, please? Thanks a lot. No, we're not, actually. We may say something with our full year results next year, but no. And I would just like just a wording point here. Just to be specific, we said $750,000,000 as early as 2022, so just to qualify that somewhat. But as it stands today, that's very much in our plans. But no, we're not giving you the EBITDA guidance at this stage. Okay. Thanks a lot. The next question comes from the line of Harry Leach from Stifel. Please go ahead. Good morning, Lauren. Good morning, Steven and Youssabel. Thanks for taking my question. Time and materials revenues are trending? Are we going through the bottom there specifically? Are we still seeing some of the deteriorating trends? And then slightly different note, just thinking about receivables collection rates, could you give us a feeling about how those are going? And so we're just probably pushing it far too far. But in terms of payments, deferrals and delays regarding the customers, can you give us any sense about whether they were sort of reducing now to schedule the holding, customers aren't asking for payment deferrals? And any sense would be really helpful. Yes. I'll do the second question first. As you might expect, we're seeing a number of dynamics right now. We're seeing airlines saying that they are just not able to pay minimum flying hour contractual terms right now, and we understand that. And we are building up a debtors balance that you'll see at the year end, therefore, of overdue debts. What we're also seeing and that we expect to see in 2021 is increasing credit note utilization as well. So we're seeing airlines using credit notes to avoid cash out. So again, no surprise there. I won't I'm not going to go into details of numbers at this stage, but these dynamics are certainly out there. Beyond that, we at the same time there, we have many customers who are paying cash for their minimum flying out centers as well and they're in the majority. So it's just worth highlighting that side of it as well. And so I think those are probably all I would say at this stage on the cash flow dynamics around our customers this year. Yes. And on the long term service agreement versus time and materials, then it's broadly similar. And just a couple of comments. In the long run, of course, Time and Materials is more prevalent on the older programs than it is on the newer programs. And so you would expect to see in the long run time and materials declining slightly as a proportion. It's never going to disappear because as we've said before, part of our long term service agreement includes an element of time and materials for parts that mutually we agree with airlines and not covered by those long term service agreements. So broadly similar is the picture at the moment. And if I can just to clarify my understanding, Stephen, so when you take a credit note from a customer, is there any security you have for payment of that credit note? So for instance, when we agreed a compensation payment for disruption on Trent 1,000, instead of actually paying over pound notes to an airline, we gave them a credit note that they could then cash in at some stage in future. And each contract is a bit different. Sometimes we talk about proportions of those that you're allowed to use and so on. And it's all individual commercial negotiations. But there is a picture, general picture of credit note utilization in this period is airlines are strapped for cash. And that's going to continue in 2021 2022. They each have their own timing terms, but also degree of magnitude terms as well. And we have one more question from the line of Andrew Humphrey from Morgan Stanley. Please go ahead. Hi. Thanks very much. I know we're not talking in too much detail about 2021, but I wanted to make sure we understand some specific components of it if we're trying to kind of build models that bridge from 2020 on cash flow. You've obviously been quite clear about the non recurrence of the invoice discounting effect. I think we can probably do our own arithmetic on the flying hour impact based on an assumed level and the sensitivity that you've given around that. But I wanted to ask about other specific effects on free cash in 2021, specifically the first half of twenty twenty one versus 2020 that you can quantify versus, so for instance, the benefit of restructuring or any other components that you'd care to highlight versus this year as we're building bridges? I'll highlight 2 or 3. First of all, the savings from the restructuring week, the full savings, full run rate savings to be delivered by 2022 is £1,300,000,000 Now that will more than replace the £1,000,000,000 of cash mitigation actions that we've taken in 2020. That's a key component. Another important component is capital expenditure. I won't go into specific numbers at this stage, but we are expecting a further downwards revision of capital expenditure in 'twenty one versus the 2020 number. So that's important as well. I think a third area I'd point to is our operating costs generally and the work that we've done there during 2020 to really identify those non essential items of spend where we can operate with a lower cost base. And I think we've all probably all experienced that during COVID-nineteen, causes to have a new lens of the way of working generally. And that has we see opportunity in our operating costs as well. So those are the 3 key areas sort of outside of those assumptions that you just highlighted. Okay. Thanks. And we have one more question from the line of Andrew Gollin from Berenberg. Please go ahead. Yes. Hi. Thanks. One more for me, please. Working capital question and cash again, I suppose. Can you give some idea of the quantum of risk around the customer concessions issue? Or maybe answer it this way. What is the scale of payables built up on delayed Boeing 787 deliveries? I actually I'm not going to go into specifics around it. They can be material. You've seen that in recent years. But I won't go beyond that. And it's very much down to, as we've said in our trading update, the timing of aircraft deliveries, whether it's before the year end or after the year end. But beyond that, I wouldn't really want to add any more. That's okay. And then so to be clear, it's the risk is over and above the €4,200,000,000 guide? Yes, that's correct, yes. Yes. Okay. Thank you. I think that's it as far as questions are concerned. So let me just sort of summarize the messages we want you to take away. We're concentrating on controlling the things that we can control. We're very pleased with our progress on that, particularly around the restructuring and the operating costs as Colin just discussed. And that means there's essentially no change to our forward looking guidance. We remain confident of achieving positive cash flow going through that breakeven point in the second half of twenty twenty one and generating £750,000,000 of free cash flow as early as 2022. And with that, we'll thank you very much, and we'll be back to report on the full year properly in the Q1. This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.