Good afternoon, everyone, and welcome to the Lantronix first quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Rob Adams. Sir, please go ahead.
Thank you. Good afternoon, and thanks for joining us for our first quarter of fiscal 2023 conference call. Joining us on the call today are Paul Pickle, our President and Chief Executive Officer, and Jeremy Whitaker, our Chief Financial Officer. A live and archived webcast of today's call will be available on the company's website. In addition, you can find the call and details for the phone replay in today's earnings release. During this call, management may make forward-looking statements which involve risks and uncertainties that could cause our results to differ materially from management's current expectations. I encourage you to review the cautionary statements and risk factors contained in the earnings release, which was furnished to the SEC today and is available on our website, as well as the company's SEC filings, such as 10-Ks and 10-Qs.
Lantronix undertakes no obligation to revise or update publicly any forward-looking statements to reflect future events or circumstances. Please refer to the news release and the financial information in the investor relations section of our website for additional details that will supplement management's commentary. Furthermore, during the call, the company will discuss some non-GAAP financial measures. Today's earnings release, which is posted in the investor relations section of our website, describes the differences between our non-GAAP and GAAP reporting and presents reconciliations for the non-GAAP financial measures that we use. With that, I will now turn the call over to Jeremy Whitaker, Chief Financial Officer.
Thank you, Rob, and welcome to everyone joining us for this afternoon's call. I'm going to provide the financial results as well as some of the business highlights for our first quarter of fiscal 2023 before I hand it over to Paul for his commentary. In September 2022, we closed the acquisition of Uplogix for $8 million in cash consideration and an additional cash earn-out of up to $4 million if certain revenue targets are met. We funded the acquisition with an increase of $5 million to our existing term loan and available cash. As a result, our first quarter of fiscal 2023 includes approximately two weeks of operating activity related to the Uplogix acquisition. Although not significant to our first quarter results, the acquisition was accretive to non-GAAP earnings and is expected to be accretive on a go-forward basis.
For the first quarter of fiscal 2023, we reported revenue of $31.8 million, an increase of 15% when compared to $27.7 million for the first quarter of fiscal 2022. As expected, revenue was down sequentially as compared to $35.9 million reported in the fourth quarter of fiscal 2022. Our most recent acquisition contributed approximately $400,000 of revenue in the current quarter. GAAP gross margin was 44.1% for the first quarter of fiscal 2023 as compared with 41.9% in the prior quarter. The sequential improvement was related to lower supply chain costs in addition to improved product mix.
Selling, general, and administrative expenses for the first quarter of fiscal 2023 were $9.2 million, compared with $7.9 million for the first quarter of fiscal 2022 and $9.4 million for the fourth quarter of fiscal 2022. Research and development expenses for the first quarter of fiscal 2023 were $4.5 million, compared with $4 million for the first quarter of fiscal 2022 and $4.9 million for the fourth quarter of fiscal 2022. The year-on-year increases in SG&A and R&D were largely driven by the acquisition of the TN companies at the beginning of fiscal 2022. However, as a percentage of revenue, expenses were down from the year ago period.
GAAP net loss was $1.7 million or $0.05 per share during the first quarter of fiscal 2023, compared to a GAAP net loss of $2.3 million or $0.08 per share during the first quarter of fiscal 2022. Non-GAAP net income was $2.7 million or $0.07 per share during the first quarter of fiscal 2023, compared to non-GAAP net income of $2.5 million or $0.08 per share during the first quarter of fiscal 2022. Now turning to the balance sheet. We ended the September 2022 quarter with cash and cash equivalents of $13.1 million, as compared to $17.2 million in the prior quarter. Working capital was $50.3 million as of September 30th, 2022, as compared with $54.5 million as of June 30th, 2022.
Net inventories were $45.3 million as of September 30th, 2022, compared with $37.7 million as of June 30th, 2022. The sequential increase was primarily due to the assumption of inventories in the Uplogix acquisition and the purchase of components to support the Enel project, which is expected to ramp during the second half of the fiscal year. Now turning to our revised annual outlook. After adjusting for our recent acquisition of Uplogix, for fiscal 2023, we are increasing our target as follows, revenue of $155 million-$165 million, and non-GAAP EBITDA and non-GAAP EPS in a range of $0.41-$0.46 per share. We expect the revenue and earnings growth to be more heavily weighted in the second half of the fiscal year as our two largest design wins are expected to ramp into full production during the second half.
I'll now turn the call over to Paul.
Thank you, Jeremy. While we expected a slower start to our fiscal 2023, I'm pleased to report we made good progress on a number of fronts in the quarter. Revenues grew 15% year-over-year. We saw some margin improvement, thanks to lower logistics and supply chain costs, and we acquired a high value add systems business. We also laid the groundwork for the remainder of the fiscal year. We have a watchful eye on the economy, and while we do note some caution in bookings patterns as some customers have begun to book orders in the later quarters, we entered the December quarter with starting backlog up versus September, and our total backlog is up as compared to last quarter.
All in, we see a return to sequential growth in December, followed by accelerating growth in the second half as we ramp to volume production with two of our larger compute customers. Turning to our product discussion. Embedded IoT solutions totaled $15.1 million, down 18% sequentially, but up an impressive 22% year-over-year, representing 47% of total revenues. We saw strength in our NIC and SFP products, which benefited from seasonal strength at key federal customers, but this was offset by a falloff in compute due to co-processor component supply constraints after a strong performance in our fiscal Q4 June quarter. We currently see embedded systems strengthening throughout the year, driven by our compute products. In Q3 and Q4, we plan to benefit from shipments to electric vehicle customer, Togg, which just had the grand opening of its production facility in Turkey.
Togg will begin taking shipments this quarter, and we expect to be in full swing by the March quarter. Turning to system solutions. Revenues here totaled $14.6 million or 46% of revenues, flat sequentially and up 11% year-over-year. Within system solutions, switching products saw the strongest growth, benefiting from significant interest from our growing smart city customer base. In addition, our growing Fed business resulted in us benefiting from a stronger Fed buying cycle for network interface products. This strength was offset by lower media converter solution sales, which slowed after a strong fiscal year-end quarter. For the remainder of fiscal 2023, we expect to see a rapid acceleration of our systems business, led by the ramp to volume production of the Smart Grid Quantum Edge Device, or QED, for our customer, Gridspertise.
We received our first purchase order for the pilot run in the September quarter and will begin recognizing revenue in the current quarter. We expect to complete a purchase contract for ensuing production this quarter, and we currently expect to ramp to volume against our previously announced production awards in our fiscal Q3 and Q4. Within the systems business, we reported approximately $400,000 of revenue from our recent acquisition of out-of-band networking supplier, Uplogix, which closed in the middle of September. Uplogix is a key acquisition for us on a number of fronts. Number one, the Uplogix product offering augments our existing out-of-band solutions with high-end, higher port count devices that offer a high degree of automation, control functionality, and security, which makes them especially valuable to federal and financial customers.
These systems complement our existing portfolio, giving us a broader product offering to address data center applications with increased scale and synergies. Number two, this is a margin-accretive transaction. The Uplogix product margins are in line with our own out-of-band solutions, and our new portfolio brings with it a strong base of recurring software and support revenues. On the whole, this acquisition is expected to be nicely accretive to Lantronix corporate margins. Lastly, this acquisition delivers energy engineering synergies and solidifies our product roadmap. Today's data center architectures are changing, and our product roadmap was due for a refresh. Acquiring Uplogix is expected to save us an estimated $3 million in next-generation product development. As we have demonstrated previously, the fragmented IoT market continues to offer value.
We were able to acquire this high-margin system supplier at a discount to its last twelve-month revenue of $9 million, paying $8 million in consideration. For the remainder of the fiscal year, we are expecting revenues to be over $5 million from this acquisition. Looking at software and services, revenues in Q1 accounted for 7% of total revenues, or approximately $2.1 million. Software and services revenue was down 28% sequentially following a record quarter in Q4, which was driven primarily by pre-production activity for compute customers, Gridspertise and Togg. We do expect some volatility in this line. In addition, after accounting for the acquisition of Uplogix, we exited Q1 with a high-margin subscription ARR of greater than $5 million.
In summary, while Q1 results showed a pause to our growth trend, we are confident in our prospects for the remainder of fiscal 2023. We expect to resume our growth trend in December, led by the resumption of compute revenues, and we expect that trend to accelerate in the second half of our fiscal year as we recognize volume shipments to Enel and Togg. Our backlog remains healthy. The supply chain is seeing improvement with more easing expected in the new year, and our acquisition of Uplogix will drive incremental revenues, much of which will come from customers new to Lantronix and to whom we can offer a more comprehensive IoT solutions product offering. That completes our prepared remarks for today. I'll now turn it over to the operator to conduct our Q&A session.
Ladies and gentlemen, at this time, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. If you are using a speaker phone, we do ask that you please pick up the handset prior to pressing the numbers to ensure the best sound quality. Once again, that is star and then one to ask a question. Our first question today comes from Mike Walkley from Canaccord Genuity. Please go ahead with your question.
Great. Thanks. Congrats on the solid start to the year. I guess, Paul, in previous quarters, you've talked about the supply chain and, you know, metric of customer requested product that you couldn't ship during the quarter. Can you just elaborate maybe on how supply might be improving and where that metric might be now?
Yeah. The latest CRD shipment came down slightly in the quarter to $8.3 million. I believe this was additional shipments requested in the quarter that we were not able to meet. Overall backlog is higher. Total backlog at the end of the quarter was higher than the previous quarter. We're seeing some bookings taking place in the out quarters. I think that explains a little bit of you know some of the economics that are going there. In terms of supply chain, we've had some disappointment on the mixed signal side. I'd say largely you know some of the digital semiconductor components are more readily available today. Memory certainly has normalized. We're seeing some of those PPVs come down. They take a while to work through the P&L.
Some mixed signal components in particular are still difficult to get. Analog is still difficult to get, so TI, ADI, NXP, Cypress. Also we've been having some issues with some Cypress supply as well of late. Overall, I'd say, you know, it continues to improve. We've gotten some easing out of out of Murata blocks, for instance, and some other suppliers. I'd say the picture is still looking better, and as we enter this new year, I'd expect it to continue to improve.
Great. Thanks. Yeah, as a follow-up question, you know, gross margins were stronger than expected this quarter, and it sounds like Uplogix seems like a good fit, and that's margin accretive also. Any update on how we should think about gross margins? I know there's a lot of moving parts with different projects ramping in the year also.
Yeah. We still like the mid-40s model for gross margins. I think as we kinda take on more and more software revenue, we're gonna see that rise. Certainly, and when we talk about an ARR number, you know, once again, we're talking about 90%+ margin business, essentially. You know, that $5 million or so of ARR as it works through into the P&L, it's certainly gonna help bring things up. I'll also note that in terms of supply chain easing, we saw roughly just over $800,000 of savings on the component sourcing side this quarter. It takes, once again, a while to work through the P&L because those PPVs kinda rack up, and then you have to chew through the inventory.
It does bode well for an improving picture on a go-forward basis. We're not changing our model per se at this moment, but I think in terms of thinking about a longer-term model where gross margins begin with a five handle, I think that's certainly on the horizon.
Great. Last question for me, I'll pass it on. As far as Gridspertise and Togg, are you gonna have revenue for those in that December quarter, or is it really the second half of the year where you start to see the uplift from those two big projects? Thank you.
It's not significant revenue. Gridspertise is a subsidiary, just as a reminder, of Enel. They formed that subsidiary last September of last year, I should say. It is expected Gridspertise is the customer, although a lot of the supply chain agreement is with Enel, the parent. We expect continued separation between those two over time, and that, you know, will be an extended opportunity as there will be both consumption internally at Enel and in the general marketplace for Gridspertise products. If we in terms of the timing of that revenue, we will definitely recognize revenue this quarter, the beginning of revenue this quarter from Togg with the initial shipments of those SOM modules. We've been recognizing services agreement revenue with Togg over the last year.
The ramp really doesn't start to take place till the March quarter. The same thing holds true for Gridspertise. We would expect to see some minor revenue this quarter, beginning in this December quarter as we've guided before. Really the lion's share of that revenue starts to take place in March with a stiff ramp through next calendar year.
Great. Thank you. I'll jump back in the queue.
Thank you.
Our next question comes from Christian Schwab from Craig-Hallum Capital Group. Please go ahead with your question.
Hey guys, congrats on the solid quarter. Paul, can you tell us what you know of your $155-$165 guidance, you know, either by customer or together, you know, when we take a look at Togg and Enel for lack of the real name. Because it sounds like it's just gonna be a start to ramp and those things can always happen, but not at the initial pace expected. I'm just wondering how much revenue you guys are assuming from those two applications, you know.
In contrast to that, you might have a lot better visibility, I would assume, about what you would expect to ship in calendar 2023, versus exactly what might be shipped at the end of March and into the June quarter. Any clarity or color you could help us with would be really helpful.
Okay. So I think in terms of as we look beyond this fiscal year, you know, we guide the fiscal year, but I would expect us to continue to grow as these programs really just start to touch fiscal year 2023. As you think in terms of full year, full fiscal year impact in FY 2024, I would expect that growth trend to continue. I wanna be cautious not to guide individual pieces of business. You know, at some point at least with some of these programs are gonna be, you know, I need to be careful about putting out too much information just to be able to stay competitive. I think we'll see.
We talked about Togg as being really a kind of $50 million opportunity over four years. Doesn't mean that it has to be that. I'm mindful of what my customers are asking for versus what I think can actually happen. What we have done previously, what we've said previously is that, you know, Enel would begin to affect us into the December quarter. In fact, that is happening, and, you know, with a $10 million-$20 million impact in this fiscal year, fiscal year 2023, and I think that still holds true. I will say that the customers' internal schedules are a bit more aggressive. They have not hit them for, you know, various reasons. Mostly they've been due to other suppliers not delivering on time.
With the visibility we have, it's starting to happen, you know, this quarter, and it's playing out exactly as we've been, you know, guided before in previous conference calls. I think where it goes is kind of a guess at this point because we're talking about next generation design. We're negotiating an engagement on what that next generation design looks like. Ultimately, how much volume, you know, do we get, and what exactly does it look like still remains to be seen, which I think is a positive for us now that, you know, Gridspertise is still in engineering mode. To recap that, Togg, what we've said is $50 million over four years.
It's going to be a ramp into really kind of post second years where we get some meaningful volume. Initially this year, their production schedule is around 30,000 units to start. But as stated previously, that factory can support up to 167,000 or 165,000 cars a year. I don't know how many they're ultimately going to be able to run through that factory. It's a little bit of a guess. Enel would like to get to 100,000 units a year. When that happens, I would expect production to be split between multiple suppliers.
Great. Thank you for that. If we kind of look at the, you know, the core business, you know, ex acquisitions and, you know, large new customer products, you know, what are you thinking about that remaining core business? What do you think that steady growth rate is, you know, on a go forward basis?
Yeah, that's a great question. I think this past year we talked about that base business having really outperforming better than it really should. At some point in the June quarter or at midyear, I kinda expected it to pull back to mid- to high-single-digits. That is kind of built into the guidance for this next fiscal year. We are thinking in terms of that base business pulling back to mid- to high-single-digits growth. It's still clipping along nicely. We continue to introduce new products in that space, and they continue to get picked up. That's an industrial-like business that doesn't move, you know, fast up or down. That's the in-line, you know, mid- to high-single-digits really is what it should do.
Great. One last question, if I may. You talked about, you know, the nice, you know, software driven, you know, margins and the growth expectations for that to continue and an opportunity, you know, not just to have 45% gross margins, you know, as a target, but eventually in the not too distant future, I think were your words, you know, to be 50%. You know, with these large program wins, you know, that we just walked through earlier, can we ship a significant amount of revenue to those and still operate the company near a 50% gross margin? Is that what you were trying to say?
I'm not saying that. What I'm saying is, mid-40 %, definitely. I think the answer to the question is mid-40s. As software becomes a larger component, I think we can start to creep that gross margin up. It does take a couple of things. One, software traction. We still have our sights on getting to that hurdle of 10% of company revenues coming from software sales. When I say software sales, talking about 90%+ margin again. As we kinda enter that stage, obviously, we will refine the hardware portfolio to start extracting higher value dollars as well. I expect the benefit from supply chain easing costs. We got some benefit this quarter from freight as well coming back down.
A number of things kind of driving the company towards that five handle, but I think that we'll see some bottom-line profitability changes as well. I believe I said future, I didn't say not so distant future, but I'm thinking in terms of, you know, this fiscal year getting past it, operating at mid-40s, and then looking to see some margin expansion beyond that.
Fantastic. No other questions. Thank you.
Our next question comes from Scott Searle from Roth Capital. Please go ahead with your question.
Hey, good afternoon. Thanks for taking my questions. Nice job on the quarter. Hey, Paul, I apologize, I got on the call a little bit late, but I was hoping to dive in on Uplogix. I heard you say $5 million contribution for the year. I'm not sure if there was any contribution in the September quarter. I was wondering if you could provide a little color there. Also, the number of employees that came on board as part of it. And as we kind of think about the gross margin mix going forward, I would think that that has an upward bias.
I'm kind of wondering now as we start to have Enel coming into the mix and Togg coming into the mix, you know, should we be expecting a little bit of a step backward before we start marching up into the mid-forties and higher?
$400,000 contribution from Uplogix in the quarter, kind of negligible. We did say it was immediately accretive or accretive in the quarter, but it's not significant. In terms of five million, it was over $5 million of revenue in this fiscal year. This is a business that did $9 million trailing twelve. We're picking it up partway through the fiscal year. There is some seasonality to that business. 25 employees was what was at the business when we acquired. We can expect, as we integrate, that number goes down a bit, but it was a very good talented team. We're happy to see that to integrate that team into Lantronix proper and to leverage that group.
I will say mostly an outsourced company in terms of hardware engineering, so we get the benefit of some of the resources we have here, as well as contract manufacturing. Just looking at the bill of materials, you know, we know immediately we can take 30% of the cost out of the COGS line. So we're gonna get a nice little pickup as we continue to take over that business. But there was a decent chunk of inventory that was attached to the asset, so we have to get through that first. In terms of overall margin profile, you know, one of the reasons why I'm saying mid-40s is we'll have pieces of business in software begins to take over or we get better traction in software.
That's gonna counter some of the lower margin, more aggressive opportunities that we have to chase. I wanna be cautious about guiding a particular piece of business and talking about that effect because I would, in net effect, start to negotiate with myself with public remarks, and I'm sure you can appreciate that I probably shouldn't do that. Just think in terms of the totality. If we get aggressive on a hardware program that provides a nice lift to the top line, we are at the same time getting good traction in the high-margin portion of the business. I think this fiscal year, that gives us a blend of mid-40s unless we get some supply chain easing that happens a little bit faster.
Beyond that, I think we can start to inch upward with better traction on the software and high margin hardware business as well.
Gotcha. Very helpful. Paul, if I could just to dive in, I think on the guidance for this year of $155-$165. You know, quick back of the napkin kind of math implies that those gross margins are, you know, kind of in the mid- to maybe, I'd say like sub even 45%. Is that the right ballpark, or are you expecting to ramp up some sales and marketing and other, you know, R&D efforts a little bit more aggressively as we go into fiscal 2023?
I will probably have some things to fund in the second half of the year, but you know, given the revenue profile, I think I'd have a hard time you know, bringing all that investment to bear. But you know, fundamentally speaking, we're still thinking in terms of 10% EBITDA margin you know, as we do have a number of good programs. If I look at the pipeline of opportunities that we have, we're chasing well over $200 million of new revenue growth, and some of that is gonna require investment, some of it's gonna require you know, partial customer buy-in. But you know, things just look pretty good right now. Correct me if I misinterpreted your question on that one. Did I get it right?
No, that was perfect. I guess to just kinda drive on the gross margin front, it just sounds like you're being fairly conservative, right? While 50% is a target, that is certainly not built into the guidance that you're talking about today.
That is correct. mid-40s this fiscal year, and you know, we're starting to see some traction on the high margin side of the business. You know, I think we can start to think in terms of long-term chasing that five handle on the gross margin and some increased profitability. We're not there yet, but we can see a pathway to get there.
Perfect. Lastly, you kinda hit on it in certain terms of some of the pipeline. I'm wondering if you could provide a little bit more color on that front. I think that's true, we've gotten myopically focused on Enel and Togg, but there's a big pipeline out there that's building. I was wondering if you could provide a little bit more color on that front. I guess as part of it, edge compute is one of the areas where you had some severe supply constraints recently. How is that doing? Kinda how should we be thinking about that pipeline of business timelines that's deliverable, how you're seeing your win rates, you know, so we can kinda synthesize what that $200 million type of number looks like over the next couple of years. Thanks.
Okay. Yeah, in Q1, you know, Q4, we got some additional processors that came in. There was a Samsung fab issue that prevented us from backfilling that in the Q1 quarter. We saw a subsequent boost to Q4 revenue and then, you know, we weren't able to backfill in Q1, so that drove the number a little bit lower. Competition definitely hit us a little bit. As a result of the mix, you see a slightly better margin profile, so it kinda makes sense. In terms of pipeline, you know, I will say, you know, the IoT story really is a really nice secular trend right now.
There's so many silly opportunities, but you know, opportunities that you don't necessarily, or applications you don't necessarily think about, where customers are trying to eliminate truck rolls. Truck rolls are just incredibly expensive. Labor shortage is begging for remote management. We had a customer come in with a custom project, and I think a silly application, but you know, being able to power reset commercial machines that are sitting in convenience stores, being able to do that remotely would save them you know, close to $1 million a year. They're wanting to roll out a system that enables them to do that. You know, we've got some really eight-digit opportunities, both in smart cities, in DOT-type applications for municipalities.
A telematics tracking business in the Middle East right now is eight digits. The out-of-band remote management opportunities continue to bear really well for us. You know, it's a bit of a lumpy business, but we're looking at eight-digit or I should say seven-digit opportunities with multiple players there, but some rather large ones. On the enterprise side, where the sales cycles tend to be a little bit shorter, those product life cycles, we are continuing to pick up audio/video conferencing applications. One rather large one has given us a verbal award, and we expect to start that engagement in terms of development work this next quarter or this quarter rather, I should say. That one also would provide good scale. We're talking eight digits attached to that.
Our work on the automotive front continues to migrate to other EV-type platforms. Really like the growth prospects of the company. We're still focused on garnering the scale. We're still marching as quickly as we can to $250 million. This year will be a very good start for us in achieving that target.
Perfect. Thanks so much. Nice quarter.
Thank you.
Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Harry Wilmerding from Needham. Please go ahead with your question.
Hey, how's it going? I'm just curious quickly if you can discuss the general market updates and the dynamics of the market you're seeing, how any changes in macro affect your outlook for certain verticals or geographies.
Yeah. I'd say largely our markets are robust, fairly robust. You know, I do think though, I would expect to see some pricing pressure. I'm a little bit concerned in EMEA, in particular. You know, the erosion of the euro against the dollar has really kind of raised the cost of goods that territory is seeing. So I'm expecting a little bit of trepidation out of there. That is the area there where most of our growth is coming from, though, in the short term. You know, it helps to be in applications like smart grid just as Europe is entering an energy crisis, the need for upgraded infrastructure to maximize the power delivery and self-healing networks, in particular on smart grid is really compelling.
That's driving the investment. We're lucky, or fortunate, I should say, to be involved in spaces that are infrastructure and are still being invested in. I am a little bit nervous about the currency exchange with Europe in particular, and I'm expecting to see APAC pull back a little bit as well, although most of our revenue is generated out of U.S. and North America, North America in particular, and EMEA. Not really an overall impact. Aside from that, you know, we're still getting quite a few opportunities in terms of that automation. I think it's where people are trying to save dollars, they want less people touching something, and so they're looking to save costs other ways with technology.
I think it bodes well for us.
Great. Thank you so much. Appreciate it.
Our next question is a follow-up from Christian Schwab from Craig-Hallum. Please go ahead with your follow-up.
Hey, just a quick one. On our $250 million revenue multi-year target, it's safe to assume that you would like to be operating, you know, as we kind of think about earnings power of the company, you know, at or near the 50% gross margin range by that timeframe. Is that fair?
Yes.
Great. No other questions. Thanks.
Ladies and gentlemen, with that, we'll conclude today's question and answer session. I'd like to turn the floor back over to the management team for any closing remarks.
Thank you for joining us today, and hope you have a great evening.
With that, ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.