Earnings Call: Q3 2020

Nov 17, 2020

Earnings release

Welcome to Joy Incorporated Third Quarter 2020 Earnings Call. At this time, all participants are in a listen only mode. After the management's prepared remarks, we will have a question and answer session. Please note this event is being recorded. I'd now like to hand the conference over to your speaker host today, Ms. Jane Choi, the company's Senior Investor Relations Manager. Please go ahead, ma'am. Thank you, operator. Good morning and good evening, everyone. Welcome to Joy's Q3 2020 earnings conference call. Joining us today are Mr. David Zheiling Li Chairman and CEO of Joy CFO, Mr. Vin Jin and COO, Ms. Ting Li. For today's call, management will first provide a review of the quarter and then we will conduct a Q and A session. The Q3 2020 financial results and webcast of this conference call are available at ir. Yy.com. A replay of this call will also be available on our website in a few hours. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which apply to this call as we will make forward looking statements. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in renminbi. I will now turn the call over to our Chairman and CEO, Mr. David Xuany Li. Please go ahead, sir. Hello, everyone. Welcome to our Q3 2020 earnings call today. Before updating everyone on our business progress for this quarter, I would like to take a moment to elaborate on the recent development in our domestic business. As disclosed in the press release we issued earlier on November 16, we have entered into a definitive binding agreement with Baidu, pursuant to which Baidu will acquire Joy's video based entertainment live streaming business in China, YY Live. The closing of this transaction is subject to certain conditions and is currently expected to occur in the first half of twenty twenty one. As pioneer in China's live streaming industry, Joy has been deeply engaged in the live streaming industry for many years. As a result of our years of hard work and experiences, we have built YY Live into what is now a leading video based entertainment live streaming platform in China. Today, MiWay Live possesses not only a comprehensive system of operational procedures, but also domain expertise related to the development of live streaming ecosystem and innovation of live streaming technologies, content operations, monetization features, as well as host incubation and host development systems. As a leading integrated information and knowledge focused Internet service provider in China, Baidu has built an extensive mobile Internet ecosystem, covering over 1,000,000,000 monthly active users, including over 200,000,000 daily active mobile users on its Baidu app alone. As a result of this transaction, YY Live will be able to assess Baidu's massive user traffic, boost its business growth and enhance its ecosystem monetization capabilities to unleash greater value in Baidu's massive business ecosystem. As a true win win arrangement, this deal will also bolster our own growth prospects. Going forward, we plan to leverage the resources obtained through this transaction to further accelerate our global dual engine growth strategy, establish a foothold in the industrial AI Internet sector and explore new business opportunities in e commerce as well as other areas. Beyond investing into our operations, we will also actively focus on exploring other ways to return value to our shareholders and delivering maximum shareholder value, including, but not limited to, the potential additional disbursement of dividends, for example. Now turning to our business updates for the Q3. 2020 has been a year of challenges and opportunities As the COVID-nineteen pandemic reemerged and regional geopolitical risks drive uncertainty throughout the global economy, video as one of the most effective tools for communication has become a crucial medium for consumer entertainment and social networking. As such, video is occupying an increasingly significant portion of users' time. During the Q3 of 2020, our platforms continued to gain user attraction, usage and engagement. Despite Indian government's measures to block certain Chinese owned apps in its local market and other geopolitical risks, we achieved rapid growth in other regions and our global MAUs remained relatively stable, sliding only slightly by 4% year over year to 390,100,000. Such accomplishment is a result of our unwavering commitment towards globalization, proactive penetration into multiple overseas markets and reduce reliance on any single market. By overcoming geopolitical challenges, we have not only validated our business model's resilience, but also laid a solid foundation for the continued implementation of our global dual engine growth strategy, driven by live streaming and short form video. Vivo Life maintained its robust growth trajectory during the Q3 2020 as MAUs outside of India grew to 26,500,000, representing an increase of 58% year over year and 16% quarter over quarter. Vivo Life also remained focused on its business development efforts in several key markets during the quarter, including North America, Europe, the Middle East and regions of the Eastern Pacific, further diversifying its geographic coverage and thus reducing its reliance on any single market. Consequently, Bebo's live streaming revenues increased by 131% year over year to RMB3.28 billion, which is US483 million dollars More specifically, on a year over year basis, Bigo's live streaming revenues from developed markets grew by 2 72%, European markets grew by 2 70% and Eastern Pacific regions grew by 2 31% year over year. Our long term commitment to localizing our overseas operations and team building has been instrumental to the success of Bigo Live. As the pandemic situation continued to evolve rapidly around the world, Our internationally distributed team and extensive experience in multicultural and multilingual cross regional operations enable us to quickly adapt to the changes in market dynamics and user needs. These efforts also allowed us to further strengthen Bigo Live's geographic expansion and launch highly localized campaigns during the pandemic. In Turkey, for example, Bigo Like introduced a large number of local KOLs, key opinion leaders, on this platform during the stay at home period, enriching its content, invigorating the interactions between Turkish users and their favorite KOLs during live streaming sessions, and significantly boosting social engagement on its platform. As a result, Bigo Live's user base in Turkey expanded significantly within a very short period of time. Secondly, we implemented a series of product upgrades and marketing tactics to boost our user engagement continuously. During the Q3, for example, we released a number of product upgrades and optimization designed to satisfy users' need for online social networking, significantly boosting the number of users hosting live streaming sessions or posting content. Additionally, we continue to see high levels of user engagement across the platform, with the percentage of total users who actively posted content consistently exceeding 10% in the period and the number of user interactions as measured by likes and comments achieving high single digit growth on a sequential basis. Our short form video platform, Likei, also accelerated its global user base expansion in the Q3. Despite Indian government's measures to block certain Chinese owned apps in its local market and the resulting short term impact on our operations. Laiqing maintained its solid user growth as its MAUs outside of India grew to 97,000,000, representing an increase of 147% year over year and 15.5% quarter over quarter. More specifically, LITE's MAUs in the Middle East, North America and Europe all achieved significant growth in the 3rd quarter, further diversifying and optimizing the platform's global user base structure and laying a solid foundation for its future growth on the monetization front. As the world starts to recover from the pandemic, we have also noticed that many of the more traditional offline entertainment industries are actively taking measures to bring their services online, helping to better cultivate consumers' entertainment habits and increase the amount of time consumers spend using online entertainment services. In line with this trend, we forged partnerships with many of these offline entertainment businesses, helping us to further expand our user base and enhance our brand influence in turn. In September, for example, we launched the Nike Music Billboard in Russia, wherein we organized the exclusive debut of new songs from top musical celebrities. As part of this initiative, we also introduced new product features, which enticed more fans to cheer for and interact with their favorite Russian musicians and thus attracted a significant number of new fans to the platform. Our persistence in localizing LIKI's content and improving its product functionality through innovation over the long run has been the driving force behind the platform's achievement in Russia. Such efforts have also resulted in the continuous diversification of our core user demographics, which will help to accelerate both our live streaming business in Russia as well as our short form video monetization capabilities across a broader range of international markets. Beyond increasing its global market share and advancing its regional localization, LaiQi also introduced new product features to better meet the diverse needs of its users. During the Q3, to further empower content creators, Laixi upgraded multiple functions for its video production tools and developed an innovative customizer function, enabling its users to easily create and share animated videos with their friends. In addition, laiQi also continued to augment the social nature of this platform, introducing a slew of novel social features with dynamic community and thematic functionalities, such as matchmaking brands and direct dialogues. Consequently, the daily average number of LaiQi users outside of India that hosted live streaming sessions increased by more than 90% quarter over quarter, with the platform's percentage of monthly content creators reaching approximately 18% in the Q3 of 2020. As for Hago, during the Q3, we quickly adjusted Hago's expansion plans in the period, entering into a number of emerging markets, including the Middle East and South America. As a result, Hago grew its MAUs by 20% year over year when excluding India. HAGO also made good progress in terms of monetization with its live streaming revenues increasing by 42.4% year over year. Looking ahead, we currently expect Hago to achieve breakeven for a single month in the Q4 of 2020. In summary, our global business delivered strong results in the Q3 of 2020. Going forward, we will continue to upgrade our platform functionalities, strengthen our localization capabilities, enhance our platform social nature, and execute our dual engine growth strategy. Despite the uncertainties caused by the resurgence of COVID-nineteen and geopolitical uncertainties, we believe that our global market coverage will help to steadily bolster both the flexibility and resilience of our business model. In addition, we remain confident that the combination of our technological advantages and stable user base will keep us on the right growth trajectory. Looking ahead, we remain focused on perfecting our ecosystem for live streaming and short form videos as well as establishing and solidifying our foothold in core regional markets around the world. With an innovative vision and a pioneer's foresight, we plan to continue expanding across the entire globe, bridging communications between individuals from all corners of the world and delivering joyful and useful experiences to all people. That concludes David's prepared remarks. Now as Joy's CFO, I will talk about the financial results. Please be noted that the financial information and non GAAP financial information disclosed in our Q3 earnings press release is presented on a continuing operational basis, unless otherwise specifically stated. After the deconsolidation of Huya, the company accounts for our investment in Huya as an equity method investment and applied the equity method accounting 1 quarter in arrears to enable us to provide financial disclosures independent of the reporting schedule of Huya. During the Q3 of 2020, we maintained our strong momentum and delivered robust financial and operating results. Our total net revenues for the 3rd quarter increased by 36.1 percent year over year to RMB6.29 billion, exceeding both the high end of our previous guidance range and Street consensus. In particular, our live streaming revenues for the 3rd quarter increased by 40.1% year over year to RMB6.05 billion, driven by live streaming revenues growth from Bigo segment. Other revenues in the Q3 decreased by 20.8 percent to RMB237.3 million primarily due to the decrease in other revenues in YY segment. Cost of revenues for the 3rd quarter increased by 38.8 percent year over year to RMB3.96 billion. Revenue sharing fees and content costs increased to RMB2.84 billion in the 3rd quarter from RMB1.95 billion in the same period of 2019, which was in line with the increase in live streaming revenues. Bandwidth costs decreased to RMB236.9 million from RMB286.3 million in the same period of 2019, primarily related to the termination of service and access to users in India after government's measures to block certain Chinese owned apps in late June. Gross profit for the Q3 increased by 31.9 percent year over year to RMB2.32 billion. Gross margin in the Q3 of 2020 decreased to 37% from 38.2% in the same period of 2019. The gross margin contraction was primarily caused by the fact that Bigo segment had lower gross margin, but contributed significantly greater portion of net revenues in the Q3 of 2020 compared to the corresponding period of 2019. Operating expenses for the Q3 increased to RMB2 1,000,000,000 from RMB1.81 1,000,000,000 in the same period of 2019. Sales and marketing expenses increased to RMB1.08 billion in the period from RMB950 7,300,000 in the same period of 2019, primarily due to the company's increased efforts in sales, marketing and initiatives in overseas markets. Our RMB expenses for the Q3 increased to RMB636 million from RMB538.1 million in the same period of 2019, mostly due to the increasing headcount and investments in talent recruitment as part of the company's efforts to enhance its research and development capabilities. Our GAAP operating income for the 3rd quarter was RMB466.6 million compared to RMB96.4 million in the same period of 2019. Operating margin for the 3rd quarter increased 7.4% from 2.1% in the prior year period, primarily due to narrowing operating loss of Bigo segment. Our non GAAP operating income for the Q3, which excludes share based compensation expenses, amortization of intangible assets from business acquisitions, as well as impairment of goodwill and investments and gain on disposal of subsidiaries and business increased by 77.8 percent to RMB825.8 million from RMB464.4 million in the same period of 2019. Our non GAAP operating margin for the Q3 was 13.1% compared to 10.1% in the same period of 2019. GAAP net income from continuing operations attributable to controlling interest of Joy Inc. For the Q3 of 2020 was RMB2.3 billion compared to RMB61.8 million in the same period of 2019. Net margin was 36.6 percent in the Q3 of 2020 compared to 1.3% in the corresponding period of 2019, mainly due to the gain from partial disposal of investment in Huya. Non GAAP net income from continuing operations attributable to controlling interest of Joy Inc. Increased by 64% to RMB809.4 million from RMB493.4 million in the same period of 2019. Non GAAP net margin increased to 12.9% in the Q3 of 2020 from 10.7% in the same period of 2019. Diluted net income from continuing operations per ADS in the Q3 of 2020 was RMB25.92 compared to RMB0.56 in the same period of 2019. Non GAAP diluted net income from continuing operations per ADS increased by 58.8 percent to RMB8.89 from RMB5.6 in the same period of 2019. In addition, in accordance with our quarterly dividend plan approved on August 11, 2020, we will be distributing a dividend of US0.31 dollars per ADS for the Q3 of 2020, which is expected to be paid on December 23, 2020 to shareholders of record as of the close of business on December 11, 2020. As we remain in an undrawnant cash position after recent transaction with Baidu, we will continue to invest in business development efforts to further expand our global market reach and cultivate new business to enhance our service offerings. We will also actively explore other ways to return value to our shareholders to maximize shareholder value. Due to the above mentioned transaction, the company will not provide any revenue guidance for the Q4 of 2020. That concludes our prepared remarks. Operator, we would now like to open up the call to questions. Thank Your first question comes from the line of Zhao Fengxi of Nomura. Please ask your question. Good morning, management. Congratulations on a very solid quarter. In the Q4. Yes, I have two questions. The first question is about Bigo and just wonder what is the latest market split by revenue for Bigo Live Business in the Q3. And we saw Bigo achieved very strong revenue growth and also profitable in Q3. And just wonder how we should look at the trend for Bigo's revenue and the margin in Q4 as well as next year. And the second question is about the investment. And I think management mentioned in the earlier remarks, Joy will continue to explore opportunities in China's Internet Industries such as the AI can elaborate a little bit. What are the areas Joy will likely look to enter or invest in China in the future? Thank you. Thank you, Chang Liu. I'll answer the first question and David Shulin can ask the second one. For the Bigo Life growth trajectory, since we cannot provide the numbers, I'll just give you some colors. In the Q3, you can see on a year on year basis and on a sequential basis, Bigo Life continue to give a very strong result. The main regional composition are developed wells, Middle East and Southeast Asia. If you look at the composition from developed markets, it's already well over 40%. And the key components in developed markets are North America, European countries, and also Japan, Korea, New Zealand, Australia. So these 3 sub regions on the developed markets continue to drive a lot of the growth for Bigo Life. Middle East is still around 1 third of the total revenue for Bigo Live. And again, that is a very established market with our clear leading position. So, we expect we will continue to drive additional revenue for Middle East. Southeast Asia and other parts of the world accounts for roughly, I would say, 25% to 30% of the total revenue for People Like. We still think that we will continue to establish our leading position in Southeast Asia and also explore other emerging markets as well. So I think in general, for the Q3 for the Q4 2020 and also going forward to 2021, the main driver for Bigelow will come from the developed markets with higher paying amounts and also higher ARPU, paying ratio and higher ARPU. So I would say that's the answer to your question. Thank you for your question. First of all, this transaction does not mean that Joy will abandon our domestic business. Actually, we will continue to explore new businesses in China and continue to execute or implement our long term strategy, which is to continue to bring those areas that Chinese companies have competitive advantages and to replicate these experiences and competitive advantages across the globe. So we have seen that Chinese companies have technology resources over overseas companies, and we have witnessed the successful replication of business models in overseas markets. And also, you also noticed that China has a lot of industrial chain advantages, especially in the manufacturing side. Historically speaking, Chinese companies have advantages as a manufacturing company on taking the OEM mode, which is without our own brand nor our own channel simply taking orders to manufacture other brands, products. In the future, we believe that more Chinese companies will be able to establish their own brand, establish their own channel and also build up a new innovative business model. And this is the future trend and opportunity that Joy foresees. So actually since last year, Joy has actually began to explore certain new businesses in terms of overseas e commerce. Going forward, we'll continue to be focused in our long term strategy that continuously bring the successful experiences, technology advantages and business models in China and replicate these experiences to generate more growth across the globe. Xiaolong, I think you also asked about the margin trend. Let me also give you some color. If you look at the margin profile for Bigo in the Q3 on the non GAAP operating margin level is already breakeven, is already positive. That is thanks to the in terms of the gross margin first, with the saving of the bandwidth cost and also with the leverage of economy, we have also reduced the percentage of our spending on the sales and marketing expenditure revenue. So that result in a positive non GAAP OP margin. I think that trend will continue in the Q4 and also next year. Even though if you ask me about the balance between user growth and margin, we still want to continue to invest in our business to attract more users around the world because we do think that globalized short form video and live streaming have massive potential. But again, as we have demonstrated our capability to generate positive margin, I think that will give a lot of confidence for investors as well. Your next question comes from the line of Alex Poon of Morgan Stanley. Please ask your question. My question is related to LIKI. Could management please help to share with us some of the monetization progress and the monetization user growth and investments target for next year? And in terms of monetization, for example, for live streaming, how is it compared with the engagement metrics with Bigo Live and short videos in China? And apart from live streaming, are we seeing any progress on advertising, maybe even e commerce? Thank you very much. Thank you, Alex. Let me address that question. For the monetization of the LaiQi business, as I cannot disclose these numbers, in general, it's growing very well. As I explained, in the first half of this year, it's still in a relatively, I would say, early stage, but we have speed up the monetization effort from the 3rd quarter and continuing through the Q4. So we are confident to achieve the level of live streaming monetization for LYT as we communicate with investors before. I think overseas, as I mentioned, users tend to have more social interactions. As I explained in the prepared remarks, we have incubated more functionalities to allow more users to create content and upload to LIKI's ecosystem and to share and comment on each other's content. So the engagement and the action between users within LIKI is very healthy. Even though we have encountered the Indian government's ban of Chinese app that result in quarter by quarter MAU decline. But if you ask for India, you can see likely user base on a year on year basis and on a sequential basis all achieve very high user growth. So we are confident that the additional users from other parts of the world will provide additional traffic funnel to monetization. In terms of the different formats of monetization, I think overseas market is still relatively early compared with China. So but everything happening in China will be replicated global as well. It's just a matter of time. So in the initial days, as I said, this year and next year, we will be focusing on converting user traffic funnel to live streaming because live streaming is a perfect twin brother with short form video because they all share similar characteristics. And we utilize Bigo Life's back end operation expertise to monetize the user in short form video like ecosystem. So, the paying ratio and ARPU will gradually trend up to the similar level of Bigo Life, which will take some time. After we realized a handsome portion of the user conversion to live streaming, then we will continue to explore advertising and e commerce. As I explained to investors before, advertising is a very natural monetization for short form video as well, because we can explore native ads as a way for user engagement as well as monetization for Nike. For e commerce, David has claimed that we have established the relevant e commerce capabilities for cross border transactions. So we also utilize Nike's massive user base to feed into this ecosystem, utilize Chinese supply chain and then to maximize the user value. But I think advertising and e commerce at meaningful revenue contribution will come at a later stage than live streaming. Thanks. Thank you very much. Your next question comes from the line of Yuan Zhang of Citi. Please ask your question. Mobile showroom and incubated the game live streaming and it also has exposure in the short video sizable market overseas. So what's your view of the live streaming model in the future? So apart from this model I mentioned, what are the opportunities TS you see and what role will YY play in the future? Thank you. Thank you. Let me address that question. I think interestingly, live streaming is not, I would say, I would say business model per se, it can be integrated with many different business model. That's the beauty of live streaming. For example, a social networking platform can use live streaming for monetization. A music app can use live streaming as a monetization. And that's the reason why we have sold our domestic video base and streamline streaming business to Baidu because Baidu does have a lot of traffic from its different apps. And those traffic can feed into live streaming and help Baidu to build a bigger ecosystem with better monetization also help Huawei Life to expand its capability of monetization in that big ecosystem. So, I think in China, live streaming will continue to grow. It will further expand to the different categories of industry and different business formats. Global wise, it's the same thing. But we think global wise, there will be more opportunity for live streaming, not only as a way for monetization with a combination of short form video, but also the live streaming, as I explained before, has 2 very unique features overseas. One is that, in general, the entry barrier for live streaming is low overseas. That's why the participation rate from host in overseas market is much higher than in China. Secondly, the social interaction between users among users, among host also more prevalent in overseas market, resulting in higher engagement and also high paying amount per users. So, in short, I would say live streaming has massive potential both in China and overseas, and we will make sure that we continue to invest in our overseas operation and create more opportunities down the road. Thank you. Your next question comes from the line of Daniel Chen of JPMorgan. Please ask your question. I will translate myself. My first question is on the Wildlife China business. This quarter, we see there's a substantial improvement in the margin. What's the driver behind? The second one is on Bigo. Among all the market segments, which market do we think has the biggest potential in both user and monetization in the next 3 to 4 years? Thank you. Thank you, Daniel. Let me address the question. If you look at the YY segment, it has 2 components. 1 is YY live streaming in China domestic and also the other is Hago and other business. In terms of YY domestic live streaming business, we have achieved better and better operating margin as you can see from the past few quarters. One is on the gross margin side. We tend to do some of the campaigns in the quarter, resulting in a low, I would say, revenue sharing ratio in the Q3. In terms of the sales and marketing, we have also paid more attention to the ROI. So we have achieved better, I would say, sales and marketing leverage as a percent of revenue. We have also paid close attention to the R and D and general personnel spending. So that's the reason why we have maintained a healthy and healthier margin profile for YY domestic licensing business. For other parts on the YY segment, including Hago, as I explained in the prepared remarks, Hago is on a well track to be becoming breakeven in some of the key regions. So the better margin profile for Hago also helped with the enhancement of the worldwide segment margin expansion. 2nd question is regarding the biggest potential area for overseas market. I think in general, it would fall under developed markets. As I said, it's well over 40% of the revenue contribution for B Google now. Within developed markets, we think that North America, particularly U. S. Market, would be one of the big market. And also secondly is the Japan, Korea, New Zealand, Australia, which I called Pan Pacific region or Eastern Pacific regions. 3rd one is the more on the Western Europe regions. Those regions share several key common characteristics. 1 is bigger population base. 2nd is the high disposal income. 3rd is very high propensity for social engagement and social interaction, resulting in a high paying ARPU within live streaming scenarios. Thanks. Thank you. Thank you. Your next question comes from the line of Lei Zhang of BLFA. Please ask your question. Thanks management for taking my question and congrats on the deal and strong results. My first question is regarding the competition in short video in overseas market, especially after the potential geopolitical change after the U. S. Election? And secondly, about the YY Live deal. Previously, we have been synergies in terms of data and R and D with YY Live domestic business. So do we continue to share those data or those stuff or any change we can see after the deal? Thank you. This is David. Let me answer your question. As for the short form video competition landscape overseas, I think our long term strategy will be consistent. Number 1 is that we'll continue to wait for the right time. Secondly, we will make sure that our business stay on a healthy and balanced track. And that is what distinguishes us from other competitors. As for our data storage and operations, ever since the establishment of Bigo in 2014, Bigo's operation has been fully separated from YY Life. All of our data of overseas and PRC operations are separating these stores and operators. Thank you. Thank you. Our final question is from Tian Hu of TH Capital. Please ask your question. Thank you, management. Congratulations for the great quarter. So after you sell YY to Baidu, so I guess the focus is going to be on your overseas business like T, Bigo and So after sale of Waimai domestic to Baidu, I guess the company's focus is going to be your overseas business, including LIGHTY, BIGO, IMO and JAGO. So I wonder, in terms of live streaming, the business operation, is that going to be similar to YY domestically, which is union driven? So that's number 1. Also, among different IPs, so what is the strategic plan for each of them? Which one is the traffic generator? Which one is the revenue or profit generator? So what's your plan? So that's the first question. The second question is domestic. As the management said, you guys are going to get into the new business. Last quarter, I remember, Xu Lindsou mentioned that you guys are going to enter into a community fresh produce purchasing program. It is a very high, how to say, momentum area. So I wonder what company's new business are going to be? And some of the new business you already started, what is the current status? That's my question. Thank you. As for our growth in the overseas sector for WeGo, we've seen obvious growth both in our revenue and user base. So Bigo's business model has been relatively healthy. As for LIKY, at the current stage, we mainly our current focus is mainly on the growth of user base. We have kicked off to start to kick off the monetization of LaiKey since the mid-twenty 20, and we foresee and expect to see more improvement in 2021. As for our domestic business in terms of community retrovascular purchase business, We did invest in a company focused in this area in this June, But that is our investment in the e commerce sector does not mean that we intend to enter into this sector by ourselves, but it shows our interest in this area. Our long term focus is to continuously replicate or bring the advantages of Chinese firms in terms of product, technology and business model and try to replicate these advantages overseas. Thank you. Okay. Thank you, David. Thank you. At this time, I would now like to hand the call back to the management for a short closing remark. I think that's the end of the call. Thank you everybody for joining the call. We look forward to speaking with everyone next quarter. Thank you. Thank you very much. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating and you may now all disconnect.