Earnings Call: Q3 2020

Feb 4, 2020

Ladies and gentlemen, we shall now start begin the earnings announcement session for the Q3 of the fiscal year 2019. My name is Hayakawa, the IR, the General Manager. It's possible for Financial Affairs. I'd like to introduce our speakers for the day. We have the Senior Executive Vice President, Chief Financial Officer, Hiroki Totoki and then Senior Vice President, Senior General Manager of the Finance Department and Corporate Planning and Control Department, Naomi Matsoka and then we have VP, Senior General Manager, Global Accounting Division, Hirotoshi Korenaga. Mr. Totoki will make the presentation today first, and then we'll follow that with the question and answers. And we plan to spend 40 minutes altogether. With that, Mr. Totoki, would you please start? Before I explain our results today, I would like to speak a little about the spread of infection from the new coronavirus. First, we extend our condolences to the families of the people who have passed away and send our thoughts to those who have been infected. Sony is very concerned about the spread of infection. At this time, it is difficult to fully grasp what is going on, but we are exerting all efforts to gather information and assess the situation, and we are taking actions where possible. Now I will explain these two topics. Fiscal 'nineteen 3rd quarter consolidated sales increased 3% year on year to 2,463,200,000,000 yen and operating income decreased 76,900,000,000 yen year on year to 300,100,000,000 yen Net income attributable to Sony Corporation stockholders decreased 199 point 4,000,000,000 yen year on year to 229,500,000,000 yen As is shown on this slide, certain extraordinary items were recorded in both the current quarter and the same quarter of the previous fiscal year. Excluding these extraordinary items, operating incomes would have increased 16,500,000,000 yen to 276,500,000,000 yen Also excluding these extraordinary items, net income attributable to Sony Corporation's stockholders would have increased 58,300,000,000 yen from 157,900,000,000 yen in the same quarter of the previous fiscal year to 216,200,000,000 yen Next is the consolidated results forecast for fiscal 'nineteen. Consolidated sales are expected to increase 100,000,000,000 yen year on year to 8,500,000,000,000 yen and operating income is expected to increase 40,000,000,000 yen to 880,000,000,000 yen. I will explain the breakdown of sales and operating income for each segment when I explain the segment results. Income before income taxes was upwardly revised to JPY 8 60,000,000,000 and net income attributable to Sony Corporation stockholders were revised upward to JPY 590,000,000,000. The forecast for operating cash flow, excluding the Financial Services segment, is JPY 760,000,000,000, unchanged from the previous forecast. The assumed foreign exchange rates for the 4th quarter are JPY 109 to the U. S. Dollars and JPY 121 to the euro. As for the dividend this fiscal year, we expect to issue year end dividend of JPY 25 per share. And when combined with interim dividend already paid, the annual dividend will be 45 per share, 10 more than last fiscal year. Now I would like to discuss the impact of the spread of new coronavirus infection. I just explained the upward revision of our consolidated results, but that impact of the spread of the virus is not included in that forecast. At this time, it is difficult for us to assess the impact on our results. But depending on how the situation evolves, the impact could be large enough to limit operations, especially in the INSS and EP and S segment. Going forward, we will continue to gather information, assess the impact and take any necessary actions. Please go on to that. If there is any material change to our forecast for the current fiscal year, we will disclose that change. Now I will explain the situation business segments. 1st, Game and Network Services. Sales for the quarter increased decreased 20% to JPY 632,100,000,000 primarily due to the decrease in PS4 hardware sales and software sales as well as a negative impact of the PS5 next generation console, unit sales decreased year on year. The EM based average selling price of the hardware decreased due to the negative impact of the exchange rates and an increase in the proportion that we saw during the selling season. However, we were able to secure a margin on hardware that was flat year on year because we kept the promotional price at the same level as the last fiscal year and because promotional costs were offset by year on year reduction income component cost, Excluding this decrease in the free to play titles, the impact of the exchange rates, software sales were essentially flat year on year. Operating income decreased JPY 19,600,000,000 to JPY 53,500,000,000 primarily due to the impact on the decrease of the 3rd party software sales, partly offset by the increase in the profit for the growth of the network services PS Plus. And we revised downward our fiscal 2019 sales forecast by JPY 50,000,000,000 to JPY 1,000,000,000,000 JPY 950,000,000,000 and the operating income forecast by JPY 5,000,000,000 to JPY 235,000,000,000. The revision in sales was due to a change in our forecast for 3rd party software sales, including the impact of postponement into next fiscal year of several type of sales. And despite the benefit of operating cost reductions, operating income was revised downward mainly due to the decrease in software sales. Our financial results this fiscal year are in a period of adjustment as we approach the transition to the PS5's new generation console and because the contribution of free to play titles last fiscal year was quite large. On the other hand, when you look at our results over the mid to long term, you can see that our game business is steadily growing as evidenced by the growth of network services such as PS Plus and we expect this growth to continue going forward. Mainly due to the increase in the number of PS Plus subscribers to the next, unlike in the past when profitability deteriorated significantly due to development and marketing costs incurred. Next, the 3rd quarter sales increased JPY 4.8000000000 year on year to JPY 36,300,000,000. This decrease was mainly due to the absence of remeasurement gained resulting from the consolidation of EMI Music Publishing recorded in the same quarter of the previous year and a decline in sales of mobile games in Japan. Excluding these items, our Music business is steadily growing, mainly year on year and 20% year on year excluding the impact of the conversion to the yen. And there's no change to full year forecast for sales and operating. Next is about Pictures segment. The 3rd quarter sales declined 15% year on year to JPY 236,000,000,000 and operating income decreased JPY 6,200,000,000 to JPY 5,400,000,000. This decrease in profit was mainly due to the significant decline in Motion Picture revenues, partially though offset by an improvement in profitability due to the benefit of a channel portfolio review in Media and Navios fiscal year, the major hit, Venom, was released at the beginning of October, significantly contributing to profitability throughout that quarter. But this fiscal year, the hit Jumanji, the next level, was released only in mid December so that while there were other releases that did not meet our expectations, all in all, I believe that our Motion Pictures business has been performing well. The fiscal 2019 sales and operating income forecast is unchanged. Global box office revenue for calendar year 2019 increased led by growth outside of the United States. And similar to last year, Sony Pictures had the 4th highest market share of box office revenue in the United States in calendar year 2019. However, while all the major studios except Disney experienced a decline in box office revenue, Sony Pictures share increased 1 percentage point compared to the previous year, mainly due to the contribution of the major hit Spider Man: Far From Home. I think this success is due to leveraging 5Ps such as Spider Man and Jumanji to build strong franchises. Next, let me discuss our EP and S segment. Sales for the quarter decreased 9% from last year to JPY 650,400,000,000, mainly due to a decrease in sales of smartphones and TVs and the negative impact of exchange rate. Operating income increased JPY 14,100,000,000 year on year to JPY 80,300,000,000 and this increase is mainly due to the benefit of restructuring of mobile communications and reductions in operating expenses in the various businesses within the EP and SS segment, partially offset by the impact of the decrease in sales. In order to reflect the deterioration of market conditions, we have reduced our sales forecast for the fiscal year by JPY 40,000,000,000 to JPY 2,070,000,000,000. The forecast for operating income remains unchanged as the impact of the decrease in sales is expected to be offset by improvements in operating costs across the various businesses. The competitive environment during the 2019 year end selling season was primarily intense in the key product areas of TVs and the mirrorless cameras, but overall we're able to control pricing, supply and inventory. Although competition in mirrorless cameras has increased as other companies have entered the market in earnest. We maintained our share in major markets and produced results for our overall digital cameras that are higher year on year. The intensely competitive environment in the TV market continued due to the deterioration in panel prices, but we maintained high average selling price year on year by focusing on high value added large screen models, and we have maintained inventory at an appropriate level. On the other hand, our Broadcast and Professional Use Products business has seen a significant slowdown in China, an important market for the business due to U. S.-China trade friction and the negative impact that it is having on the economy. To respond to these circumstances, we are taking a variety of actions, including a review of our business structure. Due to the benefit of restructuring that is ongoing, the mobile communications business continued to record a profit in the 3rd quarter. In the Q4, we intend to implement yet another fixed cost reduction plan and take other action to integrate the operations of this business with the other businesses in EP and S. We expect to record significant one time costs primarily due to these actions in the Q4, but the transformation of the business is progressing steadily towards breakeven next fiscal year. Next is the I and S segment. 3rd quarter results increased 29% year on year to JPY 298,000,000,000, primarily due to an improvement in the product mix and an increase in unit sales of image sensors for mobile devices. Operating income increased JPY 28,700,000,000 year on year to JPY 75,200,000,000, mainly due to the impact of the increase in sales, partially offset by the increase in research and development costs and depreciation expense. We revised upward fiscal year 2019 sales forecast by JPY 50,000,000,000 to JPY 1,090,000,000,000 and our operating income forecast by JPY 30,000,000,000 to JPY 230,000,000,000. Demand for image sensors in the 4th quarter continues to be strong. Also production capacity is expanding according to plan, and we continue to operate at full production capacity utilization, sales increasing due to a strong near term demand, and that is preventing us from stockpiling strategic inventory as originally planned. In addition, partly due to the introduction of a highly competitive new product this fiscal year, we have been able to maintain our overall margin, all of which has been enable us to operate this business extremely well. There is no change to our view that demand would continue to increase over the mid to long term from next fiscal year. But in regards to next fiscal year in particular, we cannot be too optimistic due to the impact of the spread of infection from the new coronavirus that I mentioned earlier, as well as competitive environment and various geopolitical risks. We will continue to closely monitor demand trends and external environment as we manage this business going forward. Now I would like to talk about the action we are taking over the mid- to long term. Top sensors, which we expect will be the next growth driver after image sensors, have begun to sell well, although their size within the mobile business is still small. We expect the adoption, primarily in mobile devices, to increase further from next fiscal year. Taking a longer term view, as we made a point of showcasing at CES last month, we are taking steps to expand the adoption of Sony's imaging and sensing technology in the mobility space and in a diverse industrial and factory automation space. We plan to proactively invest even more in technology development to grow this business in the future, such as hiring of personnel, including algorithm and software engineers and the building of an office in Osaka to serve as design and development center for image sensors. Lastly, I would like to explain the Financial Services segment. The Q3 Financial Service revenue increased significantly by JPY 243,600,000,000 year on year to JPY 407,200,000,000. This increase was primarily due to a significant increase in the investment performance of variable life insurance products in the separate account at Sony Life, resulting from the rise in the domestic and foreign stock markets during the quarter. Because a significant portion of the investment performance of the separate account is attributable to the owners of insurance policies, the contribution to operating income is minimal. Operating income decreased JPY 5,300,000,000 year on year to JPY 32,600,000,000. This decrease was primarily due to the deterioration of net gains and losses as a result of a decrease in the provision of policy reserves and appraisal losses from its hedging activity, both pertaining to minimum guarantees for variable life insurance, resulting from strong stock market conditions. We have revised upward our forecast for financial services revenue to JPY 1,460,000,000,000 to reflect the current market environment. On the other hand, we have revised downward JPY 10,000,000,000 our focus for operating income to JPY 160,000,000,000. This is primarily due to the 3rd quarter results and the fact that increase in policy amount in force is slightly below our expectations. Lastly, I would like to show the forecast for each of our segments. This concludes my remarks. Thank you. Now the floor is open to your questions. Those of you with questions, please wait for the microphone and please identify yourself by stating your name and affiliation before asking your questions. When questions are asked in English, there will be consecutive interpretation into Japanese and answers be given in Japanese. In view of time constraint, please confine the number of questions to 2 per person. Now any questions? Ono of Morgan Stanley. Thank you. Concerning I and SA segment, two questions. The operating income, JPY 230,000,000,000 upward revision. And concerning top line, the what about the volume upside and the improvement of product mix in view of those aspects, roughly speaking, what do you think had a greater impact on the outcome? 2nd question, the increase in fixed asset, and you've reduced it slightly. Is it because of the higher efficiency investment? Or are there any factors related to this? First, on INSS, the upward revision for annual forecast, what are the factors, volume increase or product mix improvement. On this matter, we explained this during the Q2. The balance between unit increase and product mix improvement, the contribution is about more or less the same. And the increase in the fixed asset decrease in the fixed asset increase of ISSS. Well, with the improvement of Xiancy, we could secure the assumed capacity without increasing capital expenditure. That was a factor behind. Next question please. Nishimura, Credit Suisse. Thank you. The first question is about INRISSS. Earlier, talking about next year, talking about competitive environment, you are not optimistic about the competitive situation. But looking at the supply demand, the industry as a whole is enjoying sort of a good situation. So what is your take on the risk? And the second question is about the game business. Free to play business is declining in the 3rd quarter compared to the 1st and second quarter. The Q3, what was the size of the decline? And also for the next year, the decline in free play revenue, is this just a temporary situation for this year and not be repeated next year. Well, the competitive environment, we explained that we're not optimistic about the situation next year, But it's difficult to explain that quantitatively. But the image that I have in my mind is this, next year, I think I said this at the previous last meeting, initially, forecast was that the first half will be very strong demand. So thinking about the balance against the production capacity, if I want to build a strategic inventory in the Q4, but as things stand currently, most of the strategic inventory that we're going to deliver next year, it would have to be delivered this year. So whether we can meet the demand next year is still a problem. 800,000 micron sensors, that's contributed to our profitability. We are in the 2nd year of production, but there's catch up made by the competitors and also the price competition will become more severe in the second year of the production. So this is the situation that we are forecasting. But it is for me to say This concern about the coronavirus, we have not incorporated any impact of that in our numbers. So as we learn more about the data, we'll have to face that in our results forecast. And next about the game business, the decline in free to play business, what was the situation in the 3rd quarter? How much decline did we experience? And also, has that decline completed this year or is it going to be repeated next year? Well, the so called 3rd party software is the significant decline that we experienced. Much of that is really to decline in free to play titles. But for other software titles, new titles and also the library of existing titles, the business is basically flat. So the free to play titles, our it's been very difficult to forecast the business and that was the experience this quarter as well, the difficulty of forecasting the business. But for all other businesses, there has been no significant change. So we'll have to advise methods of forecasting, particularly looking at the free to play titles. Next question, please. Hinakawa from Merrill Lynch. My two questions are on the game business. The first is as follows. You discussed about PlayStation Plus. Now in your previous statements, if there are major titles that would trigger the increase of the membership of subscribers. In that context, I saw that you will struggle during the October, December period. But nevertheless, you were able to increase the subscription of the member space. What did you do to achieve this growth? And as you move on to the next generation, what would happen to your subscriber or the customer base? We have to steadily increase the membership for PS Plus and how to increase efficiency of retention, there are a number of plans and ideas. Of course, in August, there was a revision of the price. If you subscribe for the entire EAI, you enjoy a certain discount. And this has led to the increase of steady stable users. In providing such, the users would enjoy the online multiplay and free play and also 100 Giga PlayStation 4 is also combined. And also they enjoyed the promotions for discounts. And by combining different ideas, the users favored styles and we were able to increase the membership. There is a trend of increasing the membership during the Q3, but by improving the services and providing variety of services, we'd like to continue this trend and have a robust increase of the customer base. Now about the future generation. Of course, we would definitely like to increase the base to prepare for the next generation of the product. But there's very little that I can discuss about the future generation of the console today. But when the time is right, we will disclose the new product. The PS5 is to be launched in the selling season towards the end of the year. So what will be the guidance the future guidance for March 2021? You have not disclosed the price for PS5. So what would happen to the guidance that you'll be releasing in April for the next fiscal year? It's very difficult to really discuss this timing wise. But as of today, we will provide the guidance at time period, which is comparable to the past. So we will not change the time schedule. Next question please. Ezawa of Citigroup. Two questions. First one concerning EP and S. The what about the guidance of operating income for the Q4? I understand that there will be a major loss. And you talked about the recording of onetime expense. But in the way of breakdown, what is the trend for each product and what sort of factors you foresee? Or what about the amount of onetime expense to be recorded? And for the coming fiscal year, to what extent the profit of EP and S business be improved, including the impact of onetime expense? During the Q4, EPNS operating income would be in a deficit. And in my presentation, I made a mention that structural reform of the mobile business and recorded a onetime expense. And the impact of this is considerably large. But to what extent we can control this amount is something we are scrutinizing at the moment, and we like to minimize the amount as much as possible. And other categories of products, we do not think any expense would go beyond the normal seasonality. The level of inventory is, as I mentioned. And during the Q3, we could successfully control the level of inventory. And concerning TV, for the time being, As I mentioned during the last time earnings announcement, we are thinking of launching some products during the Q4, and that plan remains unchanged. However, the current supply chain concern in China may surface. There may be some delay in ramp ups. Do you have the factors for increased profit next fiscal year? About the new fiscal year, we have not finalized our plan yet. But our plan intention are that in the course of fiscal next fiscal year, we like to make a good start so that we will not be drawn by the negative legacy and make a solid plan. One point of confirmation, the 4th quarter JPY35,800,000,000. In the restructuring budget for the fiscal year was increased by 20,000,000,000 yen and subtracting that, what remains would be around 13,000,000,000 yen and that will go to mobile. And then would there be other deficits in other sectors than mobile, which would add up to 38,000,000,000 yen? Well, as you analyze, that may be an appropriate line of understanding, but we do not show the details in terms of industrial breakdown. And another point concerning the game business, my second question. 3rd party software performance was not very good. But what about the 1st party titles performance? To the extent possible, was it higher than or lower than the expected first party title performance? Or were there any major titles? Basically, we cannot answer in terms of the amount compared to how we expected. So I'd like to give you the impression observation. The about the 3rd party full game, our assumption of the older titles were lower and we could not reach it. And the 1st party full game, our assumption was our expectation was higher, and we did not quite reach that level. And concerning PS Plus and so forth, along the line of our regional expectation and assumption. Please raise your hand if you have questions. Thank you, Okazaki, Nomura Securities. Firstly, Habara INSS. You always disclosed the actual product capacity at December. Can you give us the figure gain? Mr. Kuranaga, can you answer that question? Yes. The image sensor collection capacity at the end of the third quarter, our capacity was for 115,000. Our expectation before was 7,000 and there was some decline, but this is due to the change in process mix. So the established capacity itself, there's no delay in setting up the capacity. The end of 4th quarter, it's going to be 124,000. About input, the 3rd quarter situation does full operation and for the Q4, we expect to operate the capacity fully as well. The second question is about Pictures. You are enhancing the franchise business, you mentioned. And can you talk about the inventory you made investment you made in October December? Particularly, the gameshow network is the nature of investment is different. And I think you are working on non profitable franchises, particularly. So what are you doing in terms of investment? For the acquisition plans, the Game Show Network, so we fully subsidiarize this operation. Originally, it was held by ATT. We acquired 42% stake in that and then made a full subsidiary sorry, we acquired AT and T's 42%. Originally, we had 58%. They have the original game shows distributed in U. S. Cable TVs. That's the nature of the business. And GSM and games, online games online games are also provided. And this business unit for us from this point of view, believe is profitable going forward. And therefore, in order for us to be able to make strategic decisions in a flexible manner, we felt that making this 100% full subsidiary was a good idea and therefore we did that. Another point is about the Supercade. I think this is for anime development and production for the children and also have digital licensing. And S Board and cable TV, we've prepared 7 titles for them, original titles. And so our purpose in this business is to get excellent talent. And this business as a category is very attractive. That's been our view consistently. And we've connected with Thanos. And now that we found this opportunity for acquisition, we moved rather quickly to make the decision for acquisition. We are going to take the next question. So please raise your hand. Thank you. JPMorgan, Ayata is my name. My question first is on INSS. To check back to the 3rd quarter, there has been a product mix and increase of volume. Now in the Q4, what is the momentum for sales of increase per wafer? I think the Q2 there was better momentum. Was it true for the Q3? Now also during the Q3 was I think the inventory fluctuated and that resulted in a negative impact on P and L. Now, I and SS, 3rd quarter, you're right in saying that both the mix and the volume increased. And the momentum for wafer? Now, I think you're referring to the unit cost of wafer, which we are not disclosing. So I would like to refrain from making any quantitative statement. But as the wafer size enlarges, the yield would come down per wafer. And therefore, we have to make the average selling cost, which would offset and which will surpass that drop. That's the logic. Therefore, the sales per wafer and the sales cost or unit cost momentum should be maintained and we are working on that. And also in the meantime, we are working on the betterment of yield. And for new products, we would like to make sure that the ramp up would be very smooth, because which would consequently improve profitability. So we will be focusing on those measures. Now the Q3, the inventory fluctuation, what impact did it have on the P and L? The Q2 and the 3rd quarter, if you compare the 2 quarters, the inventory declined by JPY 7,800,000,000 approximately. And this is true that it has pushed down the earnings, the profit. Now on a year on year basis, the difference is more than JPY 10,000,000,000. Thank you. The second question is on the Game and Network Service. And please answer if you can, to the best you can. Mr. Totoki said that you intend to have a smooth transition to the new generation. And as you do so, what are the factors that you can control, such as marketing or development cost? Or there could be factors which are not visible, could be volume or price. So that best you can can you discuss on what you can discuss and what is already visible? First, we must absolutely control the labor cost, the personnel cost, it must be controlled. And it leads to what should be recognized as a cost. We will definitely control that. And the initial ramp up, how much can we prepare initially? We will work on the production and the sales and we will have to prepare the right volume as we launch this. What is not very clear or visible is because we are competing in the space. So it's very difficult to discuss anything about the price at this point of time. And depending upon the price level, we may have to determine the promotion that we are going to deploy and how much cost we are prepared to pay. So it's a question of balance. And because it's a balancing act, it's very difficult to say anything concrete at this point of time. But when I said smooth transition, we mean that we will definitely choose the optimal approach. And that we would try to have the best balance so that we will be profitable in the life during the life of this product. Next question? Thank you. Katsuda Mitsubishi Nikko Securities. Concerning INSS 1 point, in the slide, you refer to the product rather than image sensors. And what do you think of the contribution of these products from next fiscal year onward? And on the investment side, in your explanation, you mentioned that probably you do not have to do as much investment as you expected because of higher efficiency of the operation, including the use of outside capacity. Probably, you are thinking of the various ways. And you have the overall framework of 700,000,000,000 yen in 3 years in MRP. And what are the other factors? Other than the contribution by other than mobile image sensors, the sensing sensors 1 for airway and automotive applications are the ones. So other than mobile application, by 2025, we'd like to increase the contribution percentage up to 30%. That's what we have been talking about. And this target remains unchanged, and we will we are doing what is necessary to achieve that target right now. And the short term products or maybe the tough sensors for mobile with a shorter lead time and by and by, we will be able to show the possible percentage from next fiscal year onward about TOF sensors. The it's not that we need a capital investment only dedicated for TOF sensors, so it has a high potentiality for business contribution. And we should be able to secure the appropriate margin on top sensors. About the investment efficiency, about the decline in investment by JPY 15,000,000,000, thanks to higher efficiency, but over the medium term, JPY 700,000,000,000 is number. We do not foresee any major change. But next fiscal year, we will be looking at the next MRP from 2021 to 2023. So at that timing, we will look at the way of investment over the coming 3 years for the next MRP. We should be able to show our view on such investment. Time is limited. So this next one will have to be last question. Yes. The UPS Securities. But IS and NSS, I have a question, short term question. For the Q4, what will be the inventory fluctuation? Is it going to be less or greater amount of inventory? Of course, it depends on the market demand, but what is your target? It will be more or less the inventory for the Q4? The second part of the question is, October, December, your business is very good. But your largest customer in the United States, there was an understanding change in the mix. The rest of the company, was affected negatively because of this mix. And there was difference in results between the 2 and the 3 sensors cameras. So there's an adjustment in the business in China starting in December. So as a consequence, January to March and also April to June, can you expect demand sufficient to fill all your capacities and supplies? Well, initially, for the Q4, we had a plan to increase the strategic inventory to prepare for the next year, but what happened was a strong demand from the customers for the Q4. Therefore, it was difficult for us to actually build up the strategic inventory for the future. We had to deliver whatever we had. But there's impact of this coronavirus and it may not be much for me to explain this is shown excluding that potential possibility, but there's a likelihood that demand will slow down because of that. So considering all this altogether, the inventory will only slightly increase compared to the 3rd quarter. So will not change significantly in the 4th quarter. That's our current expectation. But then again, nothing is definite now. I cannot say that for definite, but that's generally our view. Well, if you may add is, on an output basis, what is your plan for January, March period? The output of the shipment. I think you gave us data output based on production capacity, 100 ks for the Q1. That's you're talking about capacity. Well, installed base and input and output, there are 3 elements. The capacity is already installed, input is what you're inputting, output is the result of that input. The shipment is not included in this. So the point of your question is, again, well, January, March, wafer shipment, the production, what will be the amount. So we do not disclose output numbers, but lead time is between 5 6 months. So use that as a basis of calculation. Thank you. Our time is up. And with this, I'd like to conclude this earnings announcement. Thank you for your attendance.