Q4 19/20

May 6, 2020

Ladies and gentlemen, good day and welcome to Persistent Systems Earnings Conference Call for the Fourth Quarter and Financial Year ended 03/31/2020. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. We have with us today on the call, Doctor. An Deshpande, chairman and managing director mister Christopher O'Connor, executive director and chief executive officer mister Sandeep Kalra, executive director and president technology services Unit Mr. Suneel Kapre, Executive Director and Chief Financial Officer Mr. Mukesh Agrawal, Chief Planning Officer Saurabh Deveri, Head of Investor Relations and Mr. Amit Patray, Company Secretary. I would now like to hand the conference over to Mr. Christopher O'Connor. Thank you, and over to you, sir. Thank you very much, and everybody, welcome to our hour to spend about our performance. We had a very productive year this past year with a lot of dynamics, a lot of changes and growth. We crossed the $500,000,000 mark for the first time. So $500,000,000 in our pocket at $501,610,000 for the year. That in Indian rupees is a 5.9% growth rate and we are solidly pleased with our performance. In terms of fourth quarter financial performance revenue, revenue was at US127.05 million dollars That was a contraction of 1.8% quarter on quarter, however, a growth of 7.1% year on year. As for margins, EBITDA stands at 13.8%, while EBIT stands at 9.2% and PAT is at 9%, and we remain focused and have work to do in that area. For our full year performance, our revenue, as I've stated, was $5.00 $1,000,000 Growth, U. S. Dollars 4.3% and INR 5.9% EBITDA at 13.8% EBIT at 9.2% and PATH at 9.790.5%, excuse me. And Sunil will cover more of these details at a much more granular level than I will here. As to the business and the focus on the business, in quarter marquee wins continued to be a part of Persistent. We continued to grow inside of our large accounts. Likewise, we continued to find new business elsewhere, adding several 100 new logos to the Persistent ranks as customers and clients of ours. We continue to do great work with Salesforce, building a COVID-nineteen care response solution for their healthcare systems. This was highlighted in work and articulation by the CEO of Salesforce, Mark Benioff. We continue to scale COVID-nineteen solutions or scaled COVID-nineteen solutions as they became needed, delivering CDC compliance SaaS solutions for healthcare providers. And likewise, we've built a patient engagement engine, sort of a digital front door with Salesforce at one of the largest pediatric healthcare providers in The United States. So our focus and our work around health care and our pivot as COVID developed throughout the quarter became a part of our business as well. We likewise, in the pharmaceutical industry, launched the patient relationship management solution, again, using Salesforce as the base platform. We delivered, in addition to that, other solutions and other types of tools as well into the industry. We delivered a new secure digital voice authentication mechanism for banks and credit unions, again, extending our digital reach into the industries. We used IBM ELM tools to give access to critical oil and gas data within hours instead of days in terms of being able to coalesce information and provide it in a useful format. And we provided work around cybersecurity products as well as multiple internal applications for a global leading supplier of semiconductors So our client list continues to remain robust. Our focus across different industries such as healthcare and banking continues to be strong. We continue to find business with our alliance partner and continue to expand that scope. We did see a drop in our royalty revenue. And as we all know, a drop in royalty revenue goes straight to our bottom line in terms of how the margin looks, and that was a primary driver in some of the places where our margin is not where we want it to be. We focus on a plan to make this business more profitable, and I'll talk a little bit more about that in the Alliance section just below when we cover that. Likewise, we've put a keen focus on margin levers, and we were in a year of transition this year, would be probably one of the best things to state. We created and we knew created a bubble of change. And a bubble of change does cost us money and that does hit on the bottom line. We are through that change. We have the management team we want to have. We have the people we want to have. We have the sales leaders we want to have. We're done with the rebranding exercise, which was an endeavor that had real expense as well. And those are behind us. And we start the year in most spots in a positive position compared to 2020 and compared to 2019 from a total expense point of view in many of our categories that we're tracking. So we've got a strong pipeline in front of us. We've got a strong view of how to go after that pipeline. And we're in the middle of COVID-nineteen just like everybody else is. The units themselves, technology services grew strongly. And Sandeep will take you through the story of what's worked there and what hasn't worked there. It's a great story. We grew at 14.7% year on year. Sandeep will provide you all the details. In the Alliance business unit, we were in ups and downs. While we saw strong growth in certain categories and continued to grow in the reseller business, year on year we saw change in our royalty structures that continued to be something quarter on quarter that we have to work about. Full year revenue is about 4.7% down from last year, and that continues to remain a work item for us. COVID related, so everybody wants to know about COVID and what it's doing to us. First, we brought 11,000 people home in a week. The last day of us bringing people home was the first day that India had its lockdown. So we saw this coming. We brought our people home. Our clients were with us in bringing people home. And nearly across the board, all of our clients were in full support mode of their work continuing as we brought everybody home. We did have one or two cases in financial institutions where we had to make some adjustments and some regulatory compliance items. But for the most part, we brought all of our people home within a single seven day period of time. We were done bringing our people home just as the lockdown in India started. And everybody was at home with productive means of being able to do work on laptops that had been secured, that had been joined to the networks and had been approved by our clients in all of this situation. So we're home, we're safe and we're secure and we're productive. We have very regular communications with our employees. We talk to our employees on a regular basis. We have started a coffee break for all 11,000 employees every day. And we all gather on a single channel to be able to just even share stories about how we're doing. COVID-nineteen, while unfortunate and not something we want to see in the world, has presented opportunities for us to be more together while alone and we've engaged in that. These coffee breaks are fantastic as sometimes thousands of the employees and myself and Anand and the executive team gather to have coffee for fifteen minutes every day on a virtual channel where we can share pictures and stories. It's kind of amazing to see. We are also in communication with, I would say just about everybody. One of the things that's a phenomenon with COVID-nineteen is everybody wants to know what everybody else is thinking. And it's been a fantastic door opener and a fantastic opportunity to talk to analysts, to talk to consultants, to talk to our customers in particular and to talk to our peers in the industry and find out what are you doing, what do you see, what works and what doesn't work and what suggestions do you have. And so I would tell you one of the artifacts of COVID-nineteen is a tremendous door opening exercise. I myself, my executive team, my sales team have never been more busy talking to clients. It's not always in a method of new work. Often it is just in terms of sharing stories, but the opportunity to be a part of their environment and for them to be a part of ours has been absolutely fantastic. And we've built several models that go along that. We've built a model on a V shaped recovery, elongated V, a U shape. We anticipate some degree of a U shape recovery in terms of how COVID is going to run. We think the quick down and up is behind us and not going to happen. It's going to be some degree of go down, bounce around the bottom for a short period of time, a short period being several quarters and then come back up. The key question I think on everybody's mind is about a vaccine as well as will there be a second wave as countries, geographies and regions reopen slowly and figure out what reopening means. And we'll participate in that with everybody else. The good news is our clients want to stay home for the most part. Our clients are going to follow governments and municipalities. So our clients are not restaurants and our clients are not parks and things like that. So as those reopen, our clients will stay home. And in many cases, our clients are with us and have told us, you guys stay home too, stay productive. And we'll follow in the following weeks once we see what that does, once we know it's safe to come back. We do have customers at times asking us for a discount. We do have customers starting to ask us, in some cases, to delay new phases or second phases. And we are expecting there will be some impact on our business. We have not seen any large scale degradation of our business, but we do have a rolling list of impacts that you would categorize in any individual one as small, but you add them up in aggregate there will be impact. On the same token, we are finding new business. Some people talk about this. I'll talk about it in the Alliance section. But we do see new business out there in the industry and that we are pursuing. We have found new business in the Alliance business unit. Likewise, we have found new business in TSU as well. Both new logos seeking our skills, healthcare provider, for example, that signed with us on April 1 in the August, just absolutely needing our digital front door as a capability. And then we have examples also of existing clients asking us to do more given their satisfaction rate with our services. So as we judge the quarter, we definitely have puts and takes and we aggregate that together into us not being panicked or not being overly concerned. However, there is concern and we do have to watch this situation daily and we do have to understand that the quarter is not over and our clients have the capability of continuing to ask for things. But where we sit today is with a set of puts and takes that give us the belief that with management prudence that we can work as a team and be solidly through this. And we'll be able to see what the total is and whether that's a little up or a little down. That remains to be seen as we work into the future. We are maintaining a strong focus on our margin and our EBIT. As I mentioned, we had the goal to get all the team changes, all the work we wanted to do with one time work, things like rebranding done last year and we accomplished that goal. We have a set of levers that we've put in front of ourselves around EBIT and some of those have been pulled and would have been pulled COVID or no COVID in terms of how we're going to do that. And we are maintaining a focus also on levers that we can pull around COVID. Myself, the Board, my senior executive team have all taken a pay cut of between 2520%. And likewise, we have cataloged and looked through our team in the rest of the world and we do have levers in the rest of the world that can be utilized and we have started to utilize those in certain geographies. These pay cuts would be temporary and obviously based on recovery oriented scenarios as we do them. Likewise, we have scenarios and levers that we are pulling around how we manage the expense that we have in keeping people at home. Certainly, our travel goes to the positive side, but we do have increased IT costs. And so we're squeezing in all of those areas and there's room to squeeze in all those areas as we look at the work that we do at the same time. We did our sales kickoff. We had all of us around the world, 300 people gathered on the phone doing our sales kickoff virtually. It was an overwhelming success in terms of the way we did it. We did one day a week for about four weeks and we gave homework assignments. We had salespeople shooting videos of themselves. We had Mackenzie. We had other people come in and speak and provide us insights on what's going on. We got, I think, some of the best reviews off of the sales kickoff, both in its nature, the fact that it was enduring over a four week period of time. And it really provided a degree of confidence and encouragement as well as the ability to double down on our top accounts and make real account work sessions and opening sessions in the face of COVID to be able to go after business and new business. We remain strong in the areas that we advertised to you earlier around BFSI and Healthcare Life Sciences. If you recall, we started showing those numbers. Those numbers remain strong. Some people speak more of the strength in banking, in particular, as we go into his section. Gianni, our President and Leader for the Alliance Business Unit, couldn't be here due to time zone differences. So I'm going to cover her section right now. And in this next brief discussion, I'm going to talk about the Alliance business. The Alliance business continued to see some headwinds. We were able to push aggressively to try to make the business more profitable, and that work needs to continue. We did receive IBM Gold Partner status, which given our size and our scope was a significant achievement. We are the number one reseller in some of the product areas where we work with the royalty products and we are the primary reseller or VAR along with being the primary mechanism for that product being constructed. And that was a new milestone achieved this past year as well. And we had that as we entered the quarter. We are likewise continuing to balance the variation of how we do work with our largest clients. We are building more services revenue with them and we are leveraging the IP relationships we have to be able to open more doors around the services business. Likewise, the skills and knowledge we have on some of these clients have let us open up doors with other ISVs and other systems providers. And we have announced an expanded partnership with Dassault Systems. And you can see that press release happened in the last several days over in Europe. And so now we are the systems provider of capabilities and service in both North America and in Europe and we anticipate results out of that. Likewise, we continue to be a strong IBM partner and we pivoted to focusing on Red Hat as well. Red Hat is very hot in the industry. There's a lot of need for their capabilities. And because we are building Red Hat capabilities for IBM products, it makes us have a prime capability to take those same skills and use them in the industry with IBM customers, which we have started to do. We have started to close deals in this past quarter around Red Hat expansion. And we think that is a theme of balance that we'll provide in the Alliance business unit, particularly as we look into 2021 as well. And quite frankly, it gives us the ability to come at cloud from a different point of view with a very solid capability that Red Hat is taking to market. So we thus are not only registered with IBM, but we are also registered with Red Hat now as a prime provider of service and working in that micro in environment. We see a healthy pipeline there as we look at that and also IBM's clients striving to live in a hybrid cloud environment. In other news, we, as a part of COVID-nineteen, contributed INR25 crore or USD 3,300,000.0 to relief efforts that will be distributed around the world. We continue to pivot our business and we're seeing recognition from analyst firms like ISG, like Constellation and like Xenoff. Sandeep will provide some more details on some of the work done with ISG and Xenoff in particular. It's good to see the recognition and it's good to be a part of those communities as we do our work. With that, I'm going hand it over to Sandeep, our President of the Technology Services Unit, and he'll provide you an update on that business. And then after that, Mr. Sunil Soprae will speak on the overall financials. Sandeep? Thank you, Chris. So good morning, good evening to you all. Hope you are all keeping safe. I'll just give you a brief commentary on the TSU Q4 and a little color on the current situation. So from a TSU perspective, the q four came in pretty strong, as Chris alluded to. We ended the year also on a high note. The q four highlights were the revenue being $93,700,000. This came as compared to $90,300,000 for the last quarter, giving us a sequential growth of 3.7%. And this 3.7% comes on the back of a 6.4% growth the quarter before. So that should show you the strength of the DFU business and the consistency of growth. On a yearly basis, we came at 14.7% growth compared to q four f y nineteen. For a full year comparison, for f y twenty versus f y nineteen, we came in at 12.1%. Some of you track the digital revenues and services revenues, and we have said that we will stop reporting that from the next quarter. But for this quarter, if you were to look at the digital revenues, we grew sequentially at 7.1% quarter on quarter. And if you are looking at the COVID scenario and a lot of people talk about how in the COVID scenario, people would tend to become more digital. And in the post COVID world, digital and all these forward looking technologies will play a bigger role, that should give you some amount of color on our capability and our might to address that demand as it does. From a technology services booking perspective, the quarter came in pretty healthy. We don't report the bookings numbers, but we can only tell you that over the last few quarters, this was one of the best quarters we had from a booking perspective. From an industry vertical performance, BFSI led the pack one more time, and our quarterly growth in BFSI came in at 5.5%. This was followed by our software, which is basically the IFP business, and high-tech with 5% growth. The health care life sciences segment came relatively flat as compared to last quarter, and that's where the three verticals stand up from a horizontal service line perspective. On the service line side, Salesforce business that we have, the Salesforce service line, continued the growth momentum. We delivered 13% quarter on quarter, and we also saw a very strong traction in our cloud and infrastructure service line. We have a fairly strong pipeline in the cloud and infrastructure, you know, business as well. From a customer's quarterly performance perspective and the number that I'm going to talk about are TSU specific, so please correlate to that. The top customer in TSU grew by 3.9%. The top five grew by 4%. The top 10 by 2.28%, and the top 20 by 3.84. That should show you that there's a secular growth across the top 20 accounts, and the secular growth is built on the back of cross selling, upselling, all our services that we can provide to our customers. Increasingly, we are seeing wallet share in our customer base become higher based on the strong service lines that we have based and the strong propositions that we've built over. Chris talked about the deal wins in the health care, etcetera. And, you know, I will not talk much about that, but I can answer any questions in the question and answer session. From a large deal pipeline perspective, we have a fairly decent pipeline of large deals. And when I talk large deals, we are talking about multimillion dollars, multiyear kind of stuff. A number of these are also offshoots of our conversations on proactive proposals with our top customers, and a number of these are coming from different channels, whether it's our regular, you know, business development, the sales team that we have or the private equity channel relationships that we have formed over the year, or social adviser that Chris alluded to. These include the likes of, you know, ISB and the consensus from people like Constellation Research and many more. From an analyst recognition perspective, we saw Q4, you know, reinforce our competitive position. We had ISB name us as a top 15 sourcing standout, you know, people in The US. It's basically the America's booming 15 category. That is a validation of our pipeline builders of over the last year. I you also recognize us as a Salesforce, you know, leader category as compared to the rising star the year before. That reinforces our foray and our, you know, move forward in the Salesforce business. From a, you know, perspective, we saw that, you know, zones come out for engineering and r and d services, and we're proud to say that for the seventh consecutive year, we were rated as a leader in the engineering and r and d services. It basically talks about the might that we have, and as compared to some of even our larger, you know, peers, we were ranked much higher on our capability and expense. With this, I hand over to our CFO, Sunil Prate, and we'll be happy to take any questions as we go on. Over to you, Sunil. Yeah. Thank you, Sandeep and Chris, and good evening, good morning to all of you. And hope you're all safe and doing fine in these difficult times. Now that you have heard the business updates from Chris and Sandeep, let me take you through the margin movement and the financial performance for the quarter and the year. Before we just get the the differential details, I just wanted to mention that as a result of the outbreak of this pandemic and the lockdown, and furthermore, we also had new auditors appointed during the year, we needed some more time to complete the financials and the audit. And hence, the audit related part of the board meeting, which we had on twenty third to twenty fifth, was postponed to May 5 and which was concluded yesterday. So let's now move to the financial part, and I'm glad to mention about the fact that we crossed the much awaited milestone of $05,000,000,000 during FY 2020. The total revenue came in at 501.61 with a growth of 4.3% in dollar terms and 5.9 in rupee terms. As you know, the fourth quarter for us is seasonally soft in terms of IP revenues. So while you see good growth on the services revenues, the drop in IP revenues resulted in a Q o Q decline of 1.8% at 127,050,000 in fourth quarter, which was a growth of 7.4% on Y o Y basis. In rupee terms, the revenues were 164,009,000, a growth of 0.4% held by the currency on Q2 basis and 11.4% on Y o Y basis. The linear revenue grew by 4.2% quarter on quarter. The fact that Q3 is a seasonally strong quarter and Q4 is a seasonally weak quarter reflecting the decline that you see in the IP led revenue, which declined by 24.3%. This also has an element of the reseller portfolio, which had an impact, particularly during the month of March. As you know, most of the new license deals happened during the month of March or the third month of any quarter. We had some setback over there because of the COVID-nineteen situation. On the linear revenue, the offshore linear revenue grew by 5.1%, comprised of growth in volume by 4.9% and billing rate increased by point 2%, while the on-site linear revenue grew 2.8 constituted by an increase in billing rate by 3.1%, while there was a decline in volume by 0.2%. In terms of the unit, as Sandeep mentioned, the growth in technology services during the quarter was 3.7%, while for the whole year, the growth was 12.1%. And he has dealt with the comments with respect to the growth in different verticals during the year. The sales and marketing expenses came in lower this quarter by 1% as we had few exits during the end of last quarter and some of the effect of adjustments that Chris talked about in his opening comments. The g and a expenses remained in the same range as last quarter except that, as you know, we are also to factor the expected credit loss in the context of COVID-nineteen situation, and we have made a provision, particularly in respect of small customers who may face liquidity crunch, and the extent of this provision made in the books is about rupees 30,000,000. You will recall that we have deposits of rupees $430,000,000 with ILNFS, and we have provided about eight percent of that in the previous quarter. We have now provided the balance amount of rupees 48,500,000.0, taking the provision to 100%. So we now fully provided for this exposure. The EBITDA came in at INR $1,277,000,000 with an increase of 3.4% over previous quarter. The EBITDA margin was 13.8% as against 13.4% in the previous quarter, and the currency benefits during the quarter was 50 basis points. The full year EBITDA was $4.09 $3.00 rupees at 13.8 of revenue, as against 17.2% in the previous year. So if you look at EBITDA split between direct costs and SG and A, you will find a increase of 2.4% in the direct costs, and that must dip in the gross profit and about 1% increase in the SG and A, and that contributes to the dip in EBITDA. Some of the investments made in sales and marketing, has talked about, had significantly higher sales and marketing expenses in the first half of the year. But these are now thought optimized, and we have that change behind us. The depreciation and amortization was nearly at the same level and came in at 4.5% of revenue as against 4.6% in the previous quarter. EBIT was $857,000,000 rupees at 9.2% as against 8.7% in the fiscal quarter. And for the full year, the EBIT was $3.02 $7.00 rupees at 9.2% of revenue as against 12.6% in the previous year. The treasury income for the quarter was steady at INR $229,000,000 as against INR $232,000,000 during the previous quarter. As you know, we had dividend payout during this quarter, that is Q4, both the first interim dividend of rupees 9 per share and the second interim dividend of rupees 3 per share. The foreign exchange gain was rupees 44,000,000 and against $1.00 2,000,000 in the previous quarter, primarily on account of the mark to market loss on the hedges that stand in the books, which were taken last year. For the next quarter, the hedges are in the range of 72.5 to 72.8, and that is why you will find that mark to market loss gets adjusted against the gain that is recorded against realization from customers, and hence, the foreign exchange gain is lower as compared to the earlier quarter. The PBT was within $1.01 $3.00 at a margin of 12.2% as against 12.4% in the previous quarter. The ETF for the quarter was 25.9% as against 22.9% in the previous quarter, and this is primarily because of fact that the foreign exchange gain, which is accounted in the Indian book, has a direct impact on the tax liability. And that is why you will find that the stand alone profit for the quarter is significantly higher. PAT for the quarter was 2,838,000 at 9% as against 9.5% in the previous quarter. And for the full year, PAT came in at 103,053,000 at 9.5% as against 10.4% in the year ago year. The operational CapEx for the whole year was $523,000,000. The cash and investment on the books amounted to be 796,014,000 at the end of this quarter as compared to the $1,300,779,000,000 as of December 2019. The value of forward contracts we have is 125,000,000 at the close of the year with an average rate of 74.03 per dollar. One update that you would have noticed that we had filed on the April 23 when we had the Board meeting that Mr. Praveen Kadli has been inducted as an additional director on the Board. He's an independent member of the Board with effect on twenty three, twenty twenty. With that, thanks everyone and I hand it back to Chris. Thank you very much, Sunil. Thank you, Sandeep. So at this point in time, we'll turn it over to the general population that's all here with us today, and we'll be happy to take questions. Sure. Thank you very much. We will now begin the question and answer session. Participants have requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment to answer the questions to the assemblies. Perfect. The first question is from the line of Sandeep Agarwal from EagleWise. Please go ahead. Hi, Sandeep. Hi. Thanks for giving me an opportunity and I wish everyone good health, and please stay safe. And also thanks for providing me an You faded out on me. Right. You seem to have lost the line for Mr. Sandeep Agarwal. We move to the next question. I'll be back. Yes. The next question is from the line of Manu Mabhu from Centrum Broking. Please go ahead. Yes. Hi, sir. Congrats on a steady execution and tough environment. Sir, most of the companies are giving a hint on how 1Q would be and how bad it can be. So do we also expect kind of a mid single digit kind of a decline? Or or what are the areas where we are seeing weakness? Can we quantify anything on 1Q? Pradeep? Yeah. So we as you know, we don't give forward looking guidance. What we can tell you is, as Chris alluded in his prepared comments, that we are seeing a mixed bag. There are some customers with that in the smaller category which are coming in asking for some discounts or some accommodation. But we have also seen them offering us more business as they go along. As of this point in time, we remain cautiously optimistic about our quarter, and so we will not want to give any forward looking guidance. We are on the execution path. We are in very close touch with our customers, whether they are the top 25, top 50, and we will give an update as we go along, but we would want to not give a forward looking guidance at Q1. Annal, if you want to add Yes, to it, please go think the only thing I'd add to it is we're busy. We've never been this busy. It's a good busy. It's depth in clients. It's new relationships. And it's working with clients around current problems, which in some cases could have a negative earnings effect or negative revenue effect at the same time. So as I mentioned, we're in the middle of a whole group of puts and takes. And it's positive in the fact that all the puts and takes are taking place. There's a lot of activity. And the activity, we view every piece of activity as an opportunity to strengthen or broaden our relationships. We had one client ask us to take a revenue trim. And of course, they're great clients. So we said yes, but along the way, they asked us if we'd look at three other things. And so we're off looking at three other things with them right now as well. I think that's the best way to say it. Think cautious optimism is in our ability to float neutral and minimize any significant downturn. And think that's the best we can say right now. And second question is on the we have a lot of project based work on Salesforce and some of these platform implementations and all, which currently we have a travel ban across most of the countries. So is that leading to a lot of pushback in discretionary spend? And my last question is on a possible buyback because the cash on balance sheet is now at a very strong level. So last buyback, we completed in August. So would we look at a buyback post August this year? Thanks. I'll let Sunil talk to the buyback. In short, we don't have an immediate plan. The second part of your question about Salesforce, we see good strength and demand around Salesforce projects that are in the interest of connecting clients together digitally as a part of the extension of that value. And so sales force has areas where it could be discretionary. Some of the work we're doing particularly around hospital systems, around patient care, around digital front doors for healthcare and non healthcare institutions is absolutely the pivot that clients are making in COVID-nineteen and Salesforce is a prime platform in that as well. So we're out marketing opportunities around these solutions to clients around Digital Front Door right now. And Salesforce is one of the components that we bring along and we organize in that as an option. And from that perspective, Salesforce is healthy. So I don't have a negative downturn to say about Salesforce in general in terms of how we see that business for us. Sandeep, over to you perhaps. Yeah. No. I I chime in what you said, and, Madhu, if you look at it, Salesforce is a SaaS based platform. Right? So in a business as usual, you know, time as well, not just COVID, a number of our people on the execution side can work remotely. So from an execution perspective, that is not impacting our ability. On the demand side, Chris has made the comments. So hopefully, that answers it. Sunil, share buyback. Any questions there for you? Yes. Hi, Madhu. We do appreciate the fact that we have cash on the books and we have to look at the best use of it. Honestly, we had at the start of the quarter a couple of acquisitions that were in the pipeline. But as you know, with the evolving situation, they have been on the back burner right now. So we'll take a fresh look at it as the quarter rolls by. And as you rightly said, we have the cooling time, which we are to take a look, and we will make the Board will take a call on that in due course. Yes. Okay, sir. Thanks and all the best. Thank you. Thank you. Thank you. The next question is from the line of Mohit Jain from Anand Ghati. Please go ahead. Hi, sir. Two questions. One is on the top line. Now you specified in the opening remarks that you have got some contract with Red Hat or you have started working with them. So from a quantification perspective, do you think that the decline in top client is sort of done with and we can have a fresh start this year in FY 2021? So in a normal business environment, I would tell you that certainly is our plan. In a COVID-nineteen environment, our top line as partnered with our largest client is dependent on their ability to navigate COVID-nineteen as well. And so there is some vulnerability that we're measuring in that. And so while we see gathering services strength with our top client and their customers because we've opened up channels through them to their customers, they have a transactional revenue number to hit of software that far, far bigger than ours and that drops down into some of our royalty agreements. So that will push on us potentially as we work through the quarter and depending on how well they do, that will translate into how well we do as well around that total top line. We have taken several steps to offset new partnership with Dassault that expands into Europe for the first time. And we have deals that we're working with Dassault in that geography to date. Likewise, the Red Hat partnership lets us not only sell Red Hat capabilities inside of our largest client as they migrate all their products to be based on Red Hat. It allows us to sell those in the general enterprise, leveraging our relationship with our largest client. And we have we've built a healthy, healthy multiple digit millions of dollar pipeline on that, and we're working our way through that right now in the COVID world. So in a normal world, I would tell you, we are strongly on that path. In a COVID-nineteen world, there is some risk. So from our performance perspective, because COVID will hit everyone in the industry, so our performance from here on will be more aligned to how our top line does versus earlier situation where we were like falling off or declining faster than what our top line was reporting? Yes. I think we're in a good neutral to better positive position right now. And I think we have the pipeline to be able to work multiple facets, particularly around Alliance Business Unit. Overall, for the company, we've got a lot of different areas that we're working to open up. And that presents lots of opportunities for us as well. Second is on services. So now you will stop disclosing the split between legacy and digital services. But as a total unit, what do you think in terms of your orientation is more towards digital business where the impact potentially is lower? Or do you think it is more discretionary in nature and therefore your impact could be a little higher in FY 2021? I'll talk for a second at the company level and then I'll have Sandeep give us kind of a really good answer, a really good introspection around TSU. Across the entire country, the company, Red Hat work and Dassault work included, just about everything we do has a digital flavor and focus. When I arrived at the company a year ago, one of my first questions I asked the company was, I don't understand why we have these delineations. And the story and the work that we all talked through was multiple years ago when cloud was a question, People understanding what was on prem and what was cloud work was a key question. And back in 2015 and 2016, that was an interesting question to ask. But now it's 2020. Persistent has continued to focus on partners that leverage new technology and new capabilities. So for example, even around Dassault Systems, they've come out with an online digital manufacturing system and we're one of the prime integrators being able to convert people to that new digital capabilities. Red Hat is all about hybrid cloud and being able to pick any cloud vendor and put hybrid capabilities on top of it and leverage any application base you want with that hybrid cloud capability. That's digital as well. And so the world has really shifted in a lot of the new projects of value to be digital, and that has been where Persistent is focused. As you know, we don't run large IT data centers. We don't do conversion projects on old code, on legacy systems. That's just not who we are. And so we as a company are keenly focused. And if you look at our key partners, focus on digital partners and digital expansion and that whole march of cloud presence inside of TSU, think that's even stronger. And Sandeep, over to you for a few words on how TSU is navigating this. Sure. Thanks, Chris. So as Chris said, if you were to just step back and look at our business mix versus what our competitors do, we are not focused on any of the legacy platforms. We are not focused on LinkedIn. We are not focused on Oracle or SAP production support and so on. Most of the investments that we have, particularly, have done over the last years, and I would even say, are in forward looking technologies. We've always been the first to predict the trends and, you know, ride the trend to some extent. Now if you look at our investments in cloud, our relationships with AWS, Azure, we start working at we look at our relationship with, you know, of this world, the data, you know, companies of this world, the platforms that we work with, the intelligent business automation companies like Appian, OutSystems, and so on. If you combine that with our progress that we have on traditional product engineering, which mocks itself in today's world to application development and maintenance, So the entire story is about the forward looking side. Our investments in security, identity, access management platforms as we work in more remote environment, as we become more digital, all of that is very relevant in this current environment. Now You're talking about what's the change on the business. Right? I'm talking about the PSU business overall. If you look at it, PSU business is comprised of all these things. PSU is 73% of the company. Yes. No. I was looking at the services which you used to disclose in the earlier classification where digital was more like 32,000,000, services was 62,000,000. Like, I was referring to that. It's a 2,000,000. Sure. So, Mohit, that is what we are trying to clarify for you. That while you may think as services being traditional services compared to our peers, the services that we deliver, even when we say services, that is more digital oriented services. Now if I was just to put a test for you, what we are doing is we are looking at more if you look at our growth, the services growth, if you look at PSU specifically, our growth for the first quarter to second quarter was 3.5%. Second to third was 6.4%. Third is 3.7%. So that should tell you that we are not discretionary project dependent kind of a company. Otherwise, you know, these growth sequentially, that growth is not possible. So that is coming on the back of larger multimillion dollar deals, multiyear deals, and those are sticky businesses, platform development, you know, at scale, product development at scale, application development at scale, and so on. So in short, you know, our focus will remain more on the forward looking technology. Our focus will remain on the larger pieces of the pipe in our top customers and in the right and even in our newer projects. Hopefully, that answers you. So by definition, you should be less risk related to this. Mohit, there, I'm really sorry to interrupt, but maybe requesting rejoin the queue for follow-up questions. Thank you. And Mohit, maybe you can take it offline as well. Sure. Thank you. Before we take the next question, we'd like to inform participants that in order that the management is able to address questions from all We take the next question from the line of Mr. Sandeep Agarwal from EagleWise. Please go ahead. Hi, Sandeep. Hi. Sorry, I got disconnected the first time. So I just want to congratulate on a very good performance for services. So I have only one question to the whole management team that we have now revised very strongly our services piece, and it is showing up in numbers for last couple of quarters or three quarters. Is there a way, you know, we can also probably fix the balance piece, which is the IPLR piece? And I know probably it will be very difficult to do a quick fix, but that piece is basically pulling our overall growth and margin quite substantially. And have you guys thought something on that front? And if I can squeeze a small piece of another question, is that this quarter also a second time in a row that, you know, we are seeing beyond 10 doing reasonably well. So can we assign that, you know, the top client, top five and top 10 client, all are being pulled down by single client, and that is more due to COVID nineteen. Thanks. Sunil, you wanna do this? Yeah. Hi. Sorry. I was on mute. So thanks, Sandeep. See, the your question is very valid that there is a 22% business in the alliance unit and about 4% business in the accelerate unit. And put together, that is 26% and the rest 74% comes from PSU, which is growing. It has grown by double digit this year as to what we are doing to manage the drag on the overall growth of the company. So what we have done actually is the the fact that these relationships need to be leveraged on a complete cross sell mode. So today, if you look at the alliance business, sell it to business with IBM is one piece where we are dependent on their performance partly due to the fact that what they outsource to us and partly due to the fact that the sales product of which we get revenue share. But the third relationship that we have is with respect to the several logos that we have opened in both industrial and, you know, high technology kind of companies. And we are making a very conscious effort to leverage that into TSU growth as well, where we can take these offerings of Persistent, which are outside of the alliance unit, mainly on the new technologies to these customers. So you will see more and more that kind of a leveraging of business while the dependent because of the, you can say, tag along effect, which is there because the partner revenues will be there to some extent. And to the extent Acceleride is concerned, we have blended Acceleride based on the underlying competencies with the issue business. It has now been fully integrated with respect to data security cloud products, which we had in the Acceleride portfolio, and we cross mine those accounts as well with with the issue offering. So that is what I would say, and we can also have a offline chat because there's several this one in the queue, but I think that would be my perspective. Yes. Thanks. Thanks a lot, and please stay safe. Thank you. Thank you. Thank you, Sandeep. Thank you. The next question is from the line of Keshav Ghal from Counter Cycle Investments. Please go ahead. Sir, I wanted to understand, sir, that our operating margins are consistently falling from around 25% levels in, sir, FY fourteen to around 14% this year. So so first of all, what is the reason for this? And, sir, it looks like a structural downturn. And, sir, do you expect now margin to finally stabilize at this level? Or further there is going to be a fall because you are saying that customers are asking for discount? Sunil, over to you, particularly with the history part of this. Yeah. Sure. So just to reflect back on the construct of the business that was there in 2014, and you would find that essentially we had a significant portion of the revenue coming from the ISB business, which was largely offshore. The percentage of people who were in the high cost geos were much more than seven to 8%. But that business had a limitation to grow, and when we started to grow in the enterprise side of the business, we started with the, partnership approach, sell this kind of partnership with whether it is, Salesforce or, the local, no code players and so on, and as well as the Oracle piece of it. So as the years progress, you would find that our on-site presence has increased from that 8%, what I talked about, to about 18% today. The other fact which has happened is also the fact that in 2017 and '18, we had significant trust on building the new technology. And the fact that we find today, you know, what you call, place where we can navigate and fix to the customers as to what we can do for them in this kind of a scenario of COVID nineteen, There is a lot of work that has gone in building those. And as you know, we have not been capitalizing any of the r and d or, accelerators that we create we charge off to p and l. So there is a 2% kind of an investment that has gone into building of various new technologies. The accelerators both in Salesforce, health care, and BFSI, whether it's a digital bank and so on, will bring both license and services revenues for us. So and the remaining part of, thing is the fact that if you look at the sales and marketing expenses, we were at a six, six and a half percent kind of level, and that is at an elevated level right now. So, definitely, there are, levers that we have that we will pull and improve the margins on a sustained basis. Okay, sir. And sir, also wanted to understand, so that since all air travel is shut now and we don't know till then, sir, so without I mean, what happens to your on-site side of the business wherein you send your employees to work, I mean, abroad at the client's location? I'll give a brief answer to that and then we'll move on to the next question. Our on-site people are home on-site just like all the employees are of that same company. So everybody has moved to a work from home environment very productively, but everybody's moved to a work from home environment. And if they are on-site, that company is home as well right now across the entire United States. So there's no place for them to go to work and that company in nearly all cases has figured out how to keep projects and work going and team meetings and everything else using virtual means. It's been quite fantastic to watch, but they're home as well. I hope that helps. Let's move along to the next question. Yes. Thank you. The next question is from the line of Girish Pai from Nedbank Bank Equity. Please go ahead. Thanks. Thank you very much for giving me the opportunity. I just had two questions. One is regarding the opening remarks that, Chris, you made regarding the change in the royalty structure. Is that the reason why IP revenues are down about 15% year on year in FY 2020? Let me be very clear. We did not change the structure of the royalty. The amount of royalty revenue arriving has been what has changed. So quite simply, the amount of royalty revenue due to us was not quite what we expected in some cases and that's where that change comes from. And what's the outlook for FY21 on IP? The products remain essential in many, many cases. And so the basic component of those products, which is around service and support of software already sold, remains there and viable for us. And in some of those products, that's three quarters to 90% of the revenue we receive as a royalty. In some of those products it's 50%. So the other component besides service and support of software that adds up to royalty is new sales, new transactions. And the new transaction component is what we'll have to watch carefully with our largest client to see how they do in their worldwide and global sales. And that is what could be at risk or suspect around the COVID-nineteen oriented impact. But base component of service and support we anticipate to remain very healthy and strong, which is from 50% to 90% of the revenue we received in a royalty format. Just one last question regarding spending in FY 2020, it was indicated there have been some one offs in terms of branding and recruitment of sales and probably even recruitment of people in the technology side. How much would you quantify that one off as? Sayul, do you want to give a good answer there in some sort of percentage format? Yeah. Yeah. I mean, the in terms of the amount actually spent as one off is $1,500,000, Harish. Just $1,500,000. Yeah. Yeah. On the branding exercise, particularly, which is one off? I think I think that's reflected, Sunil, of the branding exercise. I don't think that accounts for all the overlaps in personnel as we transition. Yes, yes, that is only on the branding exercise. So we likewise at the same time had a tremendous shift inside of our leadership team. And in all those shifts, they were done with overlaps in most cases, meaning a new person was coming in, an old person was transitioning out and whether that's in form of a payment or whether that's in form of just meeting the legality of the geography, where that transition took place, there were transition costs as well that went into the unit expenses of both Alliance Business Unit as well as TSU. So Cindy, I don't know if you want to comment further there, but that was also a substantial onetime shift that we see. We think we're largely through those transitions. Okay. Thank you. Thank you. The next question is from the line of Dipesh Mehta from SBI Capital Securities. Please go ahead. Yeah. Thanks for the opportunity. Two questions. First, to Sandeep. Sandeep, want to understand for technology service unit, what will be the mix of business between annuity and project dependent business? And how we want to shape up our technology service unit maybe over next three years between these two mix? Second question is about operating cash generation this year. In FY twenty, we have a relatively weak conversion to cash. And considering now some credit period extension request, which we may receive from client, FY '21 would also seems to be having some challenge. So if you can provide your perspective, how one should look OCF conversion into FY '21? Thank you. Okay. So, Ditesh, we don't disclose the numbers, but I'll take a shot at it. I'll give you an approximate number. And when we talk annuity, our annuity business would be, let's say, defined by contracts with our multiyear contracts. Customers who have been with us for many, many years will give us annual contracts, but these are basically you can think of them as extended teams for our, you know, customers who have been continuing for maybe, in some cases, two years, five years, and some even twenty five years. And so if we were to look at those mix of long term deals versus long term customers, I would tend to believe 65 to 70% of our business on the services side is based on that. And then, you know, there is business that comes in on project basis, and that project could also be, you know, six months, twelve months, eighteen months, whatever. And it could also be the combination of net new business that we do. And as we go along, we are on the journey of increasing this every quarter. So that that's where you see the consistent growth come in and the deals that we have been announcing and so on. And on the other part, I'll let Sunil answer the second part of your question. Yes, sure. Yes, hi, Deepesh. So on the operating cash generation, yes, we can provide you more details, but probably I don't have it right now handy. So we will connect offline and give you. We have a good idea of how it will happen. On your question about the extended credit period, etcetera, I don't think the impact is going to be so heavy or something like that. And we are trying to balance that along with the discussions that we have with clients with respect to getting more work as well. So it's not just a very we are very conscious about the fact that we will not give extended credit in a way that has a net impact on the business approach. Thank you. Thanks. Thank you. The next question is from the line of Shruti Kumar from Value Add Research and Analytics. Please go ahead. Hello? Hello? Hello. Yeah. Good evening. I had one question regarding the BFSI segment. While your peers are showing negative growth, I mean, decline in the revenue, How is your company coping up with the COVID situation in the BFSI segment? And how is the outlook going forward? Sandeep, over to you and perhaps a mention of our Mosaic strategy as well. Sure. Sounds good. So if you look at our business mix, shooting, as compared to our peers and competitors, whatever you don't want to call them, a number of our programs are forward looking. And even when we talk about the COVID situation, what are the discussions we are having with our banking customers? The discussions are more about how the world will become more digital, and that's where Chris, you know, alluded to. We have the strategy of, know, what we call digital mosaics, which are basically decomposable portions we can bring to bear, and they can build on some partner solutions, which could be things like a little bank in a box where you could be layering, let's say, an AWS or Mambu and a few other components, putting it together in a rapid manner. Now if you look at those kind of things, that's where we believe the dollar spent will be more and more. And the first while, you know, legacy kind of applications, etcetera, would get squeezed. So that's our point of the, you know, the way we look at it from our vantage point. But, obviously, we will see as COVID progresses. So we are cautiously optimistic about our in banking and similarly in other places as well. So, hopefully, that gives you a call. Yeah, that's it. Thank you. Thank you. Before we take the next question, a reminder to participants to please limit your questions to one for participant. The next question is from the line of Devesh Shabad from Javas TradeComm Realty. Please go ahead. Yeah. Sir, I have heard in the news I've read the news that Persistent System is awarded order order of 5,200,000.0 US dollars from US military. So you can throw some light on it and whether it is a one off deal, one off type of order, or there would be more orders such orders in the short term. Sandeep? Yeah. So we would not want to comment on any specific dealings, and I don't know what your source of information is, but we would not want to comment on this at this point in time. Thank you. The next question is from Sandeep Shah from CJSCIMD. Please go ahead. Yes. Thanks for the opportunity. Just a question on the services side. So we at the one end, we say that most of our services are forward looking, which is good. But as the BCP, which is important for you, would be also important as a priority for the clients. So don't you believe this forward looking projects can, to some extent, get deferred, where clients' current focus would be more in terms of business continuity and run the side of the business rather than the team decide of the business? So in that scenario, what makes you cautiously optimistic even in the 1Q and 2Q as a whole? So are you believing that even in a COVID situation, most of these change side of the business or digital side of the business is more defensive? Chris, I can answer that. Yes. Two, three parts to it. So number one, when we talk of forward looking technology, we are talking of not just change the business, but even supporting our current technology customers, for example, in their current things and most of our technology customers are product companies which are delivering latest generation cutting edge technologies and so on. So our work is with them on both their current generation, which also for a lot of our peers is maybe the next generation. And when I talk about the enterprise side of the house, everyone when they are talking about resiliency are talking about building these now. It is not about you know, changing the business. It's about their survival. If they have to survive in a COVID world or a post COVID world, the digital front door that Chris referred to is their pathway to assessing, you know, their customer base. So it's a lot of the work that we are talking about building for them is essential for their business survival and is no longer, you know, a good thing in the business kind of a scenario. So that's that's where we are cautiously optimistic, and we are seeing enough traction to be able to say that. Obviously, you know, in the COVID world, nobody has got a crystal ball to firmly say this number and so on, but that's where our crashing is. Thank you. The next question is from Karan Agarwal from Old Bridge Capital. Please go ahead. Hi, Suraj. Hello? Yeah. We can tell him. Go ahead. Yeah. So I just wanted to understand that, you know, if I look at your margin compression in FY '20 over FY '19, that's mainly an account of employee expenses and sales and marketing. But I understand that there are a lot of initiatives that were taken, but employee cost now accounts almost 61 and a half percent of your revenues. So go going forward, do we see this proportion to be maintained, or do we see this to reduce? That's one. The second is in in the post COVID nineteen era, do you anticipate much larger proportion of your workforce working from home as compared to a pre COVID era? Two questions. I'll take the second question and then Sunil, you can take the first one. The second question around post COVID, we anticipate that the comeback to work is going to happen very gradually and it will be accelerated and slow all at the same time. We intend to follow the lead of our clients in most cases and work with them on the desired work format that they'd like to make sure we can do. There is benefit to being able to get back to the office, both offshore and onshore in terms of teaming new onboarding, mentorship in some of those capabilities. And while we've put in place measures to account for those items, sometimes there's nothing better than working lives together. Our clients, for the most part are moving at a speed that is comfortable for them and not at the same speed as perhaps governments and states in North America are moving. And in fact, in some cases, our clients are telling us they intend to deliberately move more slowly in terms of coming back to work. And so in some cases, our clients have even, out of social well-being, encouraged us to stay at home. And that has engendered an entirely next generation of work processes and procedures, a fantastic focus on being able to concentrate on the digital aspects of how to do work, which is yielding a new productivity. And we'll also yield a shift in travel and a shift in business in terms of how it's done. And the long term effect of this will be a partial permanent change. Think of this as if COVID shoved us three steps forward into this work from home environment. We'll take one or two steps back to what was normal, but I don't believe we'll go back 100% to full normalcy or where we were. The new norm will be a much more partial environment. And it will take multiple, multiple months for us to even be at a non restrictive point of view to see what that norm is. The good news is we're home and we're productive and our clients are productive with us right now just across the entire organization. Sunil, you want to handle the other question around the 61%? Yes, sure, Chris. So in terms of the specific initiatives on managing the direct costs, we have levers which we are working on and you will see how things pan out going forward. But the fact is that at least 100 to 150 basis points is something that we have specific initiatives in progress on. You. Due to time constraints, we'll be able to take the last two questions. We take the next question from the line of Sudhir K. From Motilal Oswal. Please go ahead. Yes. Good evening, Thanks for the opportunity. If you look at the yields reported in the presentation, there is a sharp sequential decline of around 6%. This is despite the fact there is a 3% odd sequential increase in the yield of global delivery centers. I do understand that the billable percent month in India showed a higher increase than in global delivery centers. But even if I take a weighted average, I'm not able to reconcile the sharp decline in the blended yield. So is there any other factor at play here? Sunil, over to you. Possibly, Sunil, we will connect offline, but I don't have that this one. It will be better to just go through that, and we can help you with that. You can connect with Saurabh offline. We'll help you with that. You. We'll take the last question. We'll the last question from the line of Mr. Rahul Jay from Laurent Capital. Please go ahead. Hi, Rahul. Yes. Hi. So basically, I want to more deeply understand the strategy for the Alliance business. I mean, we have taken several action in the recent past, but it seems that problem do not is not anywhere closer to getting stabilized. So what is the real road map out here? What are the hope element in this business? What are the reasonable aspects on the cost side in case it does not? So how it looks like both from growth as well as profitability perspective in this region? It's a great question. As some of you may recall, we've gone through a set of transitions in the Alliance business unit with our leadership there as well. And that has given us and presented us as all transitions do the opportunity to thoroughly examine that business. And I think you said it very well in that we have cost variables that we can go after as well as we have revenue acceleration that we can go after as well. Several things. On the revenue side, we are in the process of extending our relationships to new sources of revenue that we see based on the skills that we've acquired out of that, that we think are unique valuable skills in the industry around industrial sector. Our partnership with Dassault Systems, as evidenced in our press release several days ago, part of that where we have expanded our ability to work in Europe as well as in North America with Dassault Systems. And that will yield a much stronger services to software ratio than our largest partner has yielded with their product set. We see evidence of that already. The second thing is we've looked into our largest client and looked at how we penetrate to their customers, not just with that client as an ISV, but to their clients as well as enterprise solution builders using the digital mosaic that Sandeep so accurately described. This born in our partnership with Red Hat, which is an independent partnership from our largest client and opening that channel up to work with the world of clients that are implementing OpenShift and Red Hat based technologies to do hybrid cloud. And the Alliance Business Unit will lead that charge as well into that environment. And we think that that is an active segment of the market and it fits in our vertical and horizontal strategy across the company rather well. So we do see new revenue avenues there to go after. I'd like to note that our reseller business with IBM was on target to do extremely well. And in the last month of our last quarter, they were knocked down by COVID-nineteen in terms of new sales not taking place. And so while we had been tracking at 20% quarter on quarter growth for several quarters, our fourth quarter in the month of March took a severe hit of revenue there. And so we will continue to feed that avenue as well, growing more services and more clients there. We did add around 60 new clients in the Alliance's industry solutions focus in the last quarter despite this as we grew. So that's the revenue story. On the cost story, you will see us continue to focus on cost. We have a widely distributed team around the world. We've worked with our largest client on location and size and expertise. There is an opportunity there to drive for some consolidation. We'll execute on that consolidation as 2021 goes through. And you'll see us move to a different cost equation as well, which I think will benefit the overall units business results and outlook. So we're working both levers. Hopefully, that gives you an overview. Thank you very much. We'll take that as the last question. I would now like to hand the conference back to Mr. Christopher O'Connor for closing comments. I want to thank you all for your questions. The world is an exciting place right now. It's full of discussions and opportunities. We will absolutely, I believe, a world and a set of societies emerge in a slightly different spot than when we went in to COVID-nineteen. We maintain excitement around all the questions and all of the activity we see with our existing clients and new clients. And that excitement hopefully comes across to you when you hear words from us like cautiously optimistic. We see and we feel and can help many of the questions that clients are asking. And it is exciting to us. There aren't enough hours in the day for us to be able to work through kind of all the activity that we see out there. So the market is highly active and while the words shelter in place are used around the symptom of the disease, our clients certainly are not sheltered in place in terms of having conversations, asking us, challenging us, and presenting to us discussions of all types. And in that, we'll work through the quarter. We'll continue to update you. And with that, I want to thank everybody for the call and we'll see you next quarter. And if you have other questions, you can certainly contact us offline. So onwards, and everybody be safe, and thank you. Sure. Thank you very much. On behalf of Persistent Systems Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.