Teledyne Technologies Q2 2023 Earnings Call Transcript

Participants

Corporate Executives

• Jason VanWees, Vice Chairman
• Robert Mehrabian, Chairman, President and CEO
• Sue Main, Senior Vice President and CFO

Analysts

• Jim Ricchiuti, Needham & Company LLC
• Joe Giordano, TD Cowen
• Greg Konrad, Jefferies Financial Group Inc.
• Unidentified Participant
• Guy Hardwick, Credit Suisse Group AG

Presentation

[Operator]

Ladies and gentlemen, good morning and thank you for standing-by. Today's conference is simple. Welcome to the Teledyne Technologies Second Quarter Earnings Call. [Operator Instructions] This time, it's my pleasure to turn the conference over to your host, Jason VanWees. Please go ahead.

[Jason VanWees, Vice Chairman at Teledyne Technologies]

Thank you, Dan. This is Jason VanWees, Vice-Chairman. I would like to welcome everyone to Teledyne's Second Quarter 2023 Earnings Release Conference Call. We released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Chairman, President and CEO, Robert Mehrabian, Senior Vice President and CFO, Sue Main, and Senior Vice-President and General Counsel, Chief Compliance Officer and Secretary, Melanie Cibik. Also joining is Edwin Roks, Executive VP.

After remarks by Robert and Sue, we will answer your questions. Of course, before we get started, our attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risks and caveats, as noted in our earnings release and our periodic SEC filings. Actual results may differ materially. In order to avoid potential selective disclosures, this call is simultaneously being webcast, and a replay both via webcast and dial-in will be available for approximately one month. Here is Robert.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Thank you, Jason, and thank you for joining our earnings call. In the second-quarter. We achieved all-time record quarterly sales with overall sales increasing 5.1%, Furthermore, sales as well as GAAP and non-GAAP operating profit and operating margin increased Year-over-Year in every segment. For the total company, GAAP and non-GAAP operating margins increased 105 and 73 basis-points respectively. Excluding foreign currency headwind, which negatively impacted second-quarter sales growth by approximately 40 basis-points, growth in local-currency would have been 5.5%. GAAP operating margin of 18% was a second-quarter record, and non-GAAP operating margin was 21.4%.

Second-quarter GAAP earnings per share were $3.87 and non-GAAP earnings of $4.67 were also second-quarter record. And finally, including continued debt repayment through July, which totaled about $620 million year-to-date, our constant consolidated leverage ratio declined to 2.1 times.

I'll now comment a bit further on the performance of Teledyne FLIR and they announced cost reductions and the outlook for the balance of the year. In the two years since we've owned FLIR, we have resolved the most significant legacy tax matters, exited the consent agreement with the Department of State, consolidated leadership in marketing and operations for the FLIR defense portfolio, and corrected some historical product quality issues. As far as this effort, we also took a much more focused view of the defense business, aggressively pursuing those opportunities where we have truly differentiated technology.

I am pleased to report that the order book and backlog of FLIR, especially FLIR Defense significantly inflected during the second quarter. For reference, the commercial business across digital imaging. Both DALSA e2v and FLIR grew organically in the second quarter. While FLIR Defense sales declined year-over-year, nearly all of this was lower revenue in unmanned drone systems, as we achieved the milestone of shipping our 1,000 Man Transportable Robotic System increment 2 to the U.S. Army. Overall, orders at all of FLIR were 1.18 times sales and 1.5 times sales at clear defense. Larger orders not only included the recently-announced Black Hornet nano UAV to the U.S. military, but also additional UAVs for customers in Europe, as well as counter UAV systems and missile defense systems, utilizing both FLIR Imaging, radar and AI-based software systems, additionally, more surveillance imaging systems for the U.S. and foreign customers.

Having stabilized the business including achieving strong stronger backlog, it is now time to focus on execution and additional margin improvement. Thus, the charges announced this morning are for further reduction in the clear operating footprint and related headcount. We are accelerating the elimination of three leased sites, all of whose activities will be relocated to other FLIR Defense facilities, most of which are own locations. Today, we are reaffirming our prior 2023 full-year sales and non-GAAP earnings outlook including excluding the $10 million to $12 million charges that I just covered.

Supply-chain challenges have continued to improve and we were once again able to exceed our original second-quarter sales and earnings outlook by pulling forward some revenue from the 3rd-quarter. On revenue specifically, we continue to see total 2023 growth of approximately 5%, or sales of approximately $5.73 billion, with the third quarter being roughly $1.4 billion. We continue to see non-GAAP earnings of $19.10 at the midpoint of our guidance, excluding the charges referenced above.

I will now further comment on the performance of the four business segments. Second quarter sales in our Digital Imaging segment increased 2.3% with greater sales of X-ray products, commercial infrared imaging components and solution, and industrial scientific cameras, partially offset by lower sales of unmanned drone systems for defense applications. GAAP segment operating margin increased 51 basis points to 15.7%, and adjusted for reduced intangible asset amortization, non-GAAP, segment margin was 28 basis-points higher at 21.5%.

Turning to our Instrumentation segment, overall second-quarter sales increased 5.1% versus last year. Sales of marine instruments increased a healthy 10.5% in the quarter, primarily due to ongoing recovery in offshore energy markets, also greater sales of autonomous underwater vehicles.

Sales of electronic test and measurement systems which include oscilloscopes, digitizers and protocol analyzers collectively increased 4.9%. We encountered some softness in sales of analyzers for electronic storage and data center application, but this was more than offset by sales for wireless and video protocols as well as continued strong sales of oscilloscopes. Sales of environmental instruments were flat compared to last year with greater sales of air quality, process gas, safety analyzers, offset by drug discovery and laboratory instruments.

Overall, instrumentation segment operating profit increased 10.6% in the second quarter with GAAP operating margin increasing 123 basis-points to 24.8% and 80 basis-points on a non-GAAP basis excluding reducing the intangible asset amortization to 25.9%.

In the Aerospace and Defense Electronics segment, second quarter sales increased 10.2%, driven by growth of both defense electronics and commercial aerospace products. GAAP and non-GAAP segment operating profit increased over 20% with margins approximately 250 basis-points greater than last year. In the engineering Systems segment, second-quarter revenue increased 18.5% and operating profit increased 33.7%, representing 112 basis-points increase in margin from last year.

In conclusion, our short-term more economically sensitive businesses remained resilient in the second quarter, collectively drawing year-over-year. Although comparisons for some do become more difficult in the second-half. In addition, our longer-cycle Medical, Aerospace, Defense and Marine businesses continued to perform very well. Quarterly operating margin in our Instrumentation segment was an all-time record. Operating margin in our Aerospace and Defense Electronics segment was a second-quarter record, and just slightly less than the fourth quarter of last year.

And now through a combination of sales growth, operating leverage and the more aggressive cost actions mentioned earlier, I fully expect Digital Imaging margins to grow considerably over-time.

Now I want to turn the call over to Sue.

[Sue Main, Senior Vice President and CFO at Teledyne Technologies]

Thank you, Robert and good morning, everyone. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our third quarter and full-year 2023 outlook. In the second quarter cash-flow from operating activities was $190.5 million. Free-cash flow, that is cash from operating activities, less capital expenditures was $163.2 million in the second quarter of 2023, compared with $176.1 million in 2022.

Capital expenditures were $27.3 million in the second-quarter of 2023 compared with $20.8 million in 2022. Depreciation and amortization expense was $80 million for the second quarter of 2023, compared with $52.7 million. We ended the quarter with approximately $2.99 billion of net-debt that is approximately $3.35 billion of debt less cash of $364.2 million. Stock-based compensation expense was $8.4 million in the second-quarter of 2023, compared with $6.4 million in 2022.

Turning to our outlook, management currently believes that GAAP earnings per share in the third quarter of 2023 will be in the range of $3.76 to $3.90 per share, with non-GAAP earnings in the range of $4.70 to $4.80. And for the full-year 2023, our GAAP earnings per share outlook is $15.60 to $15.88, and on a GAAP basis, we are maintaining our prior outlook of $19 to $19.20. Both the third quarter and full-year non-GAAP outlook excludes estimated pre-tax charges for further FLIR integration costs. The 2023 full-year estimated tax-rate excluding discrete items is expected to be 22.3%.

I will now pass the call-back to Robert.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Thank you very much, Sue. We would now like to take your questions. Operator, If you're ready to proceed with the questions-and-answers, please go-ahead.

Questions and Answers

[Operator]

Thank you. [Operator Instructions] And our first question today will come from the line of Jim Ricchiuti. Please go ahead.

[Jim Ricchiuti, Analyst at Needham & Company LLC]

Thank you. Obviously, you can hear me okay. One and two, talk a little bit, Robert, if I may, about Digital Imaging. If we exclude the acquisitions, it looks like your revenues were down year-on-year sequentially, and some of this may be partly due to what you're seeing at FLIR, but I wonder if you could just expand on what you're seeing in Digital Imaging, just because it's a large category that covers a lot of ground.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Well, thank you. I think what you're referring to is in the organic growth or decline year-over-year. That was a lower 1% decline, 1.5 to be exact. We see several things. First, there are government programs that we have in Digital Imaging, especially in FLIR that declined year-over-year. On the other hand, as I mentioned, we had a very successful first-half, especially second-quarter in getting orders for our products both here and in Europe. So, we feel that that part of the business is stabilized. On the rest of Digital Imaging, if you look at healthcare, which is part of our business there, there has been significant expansion in Healthcare and Medical. If you look at commercial aero, any parts of digital imaging that deal with, let's say, satellite communication, there has been expansion.

I think there is some headwind in the commercial part of Digital Imaging in the far east, but our exposure there is not that high, and we're making that up with new products and that includes some of artificial intelligence capabilities. So, we feel comfortable with our commercial aspects that was [Indecipherable] from imaging. So, in summary, I would say that there is a little pressure on parts of our Digital Imaging in the Far East, especially China. But this is offset by other products that we manufacture for Europe and the U.S., so I would say, machine vision, which is what I'm referring to is going to be relatively flat. Maybe a little down year-over-year, but the other parts of Digital Imaging, are going to be healthy, and we feel pretty good about that. So all-in-all, it's a big part of our portfolio, but it's a pretty varied portfolio, ranging from space to medical to machine vision for automated semiconductor inspections, flat-panel displays, etc. So, it's like Teledyne is pretty resilient to various economic conditions.

[Jim Ricchiuti, Analyst at Needham & Company LLC]

Thank you for that, and follow-up question, I wonder if you could talk a little bit about -- just an update on the rate at which you maybe burning through some of that higher cost component inventory that you had, and just in general, it sounds like supply-chain has gotten better, and how you're seeing that part of the business.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Yeah. I think you're right. As I've mentioned earlier, our supply-chain issues have significantly moderated. We're still paying some premiums, but perhaps as much as year-to-date, 65% to 70% lower than we did at the first quarter or second quarter of last year, so that's a positive. But we're still paying some premium, and our inventory remained fairly flat between first quarter and second quarter, but as these supply-chain issues relax, we are going to reduce our inventory for the remainder of the year. So, I feel good about how we have dealt with the supply-chain. We really didn't lose a whole lot of revenue because of that.

[Jim Ricchiuti, Analyst at Needham & Company LLC]

If I could just slip one more in, I apologize, but you did talk about some pull-in from Q3. I wonder if you could size that for us.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

I'm going to say approximately $10 million, not a whole lot, but when we have the opportunity and I hope we will have in the future quarters, we're going to try and do that. The flip side of that, Jim, is that a lot of our customers also ordered a lot of inventory anticipating shortages. So, they are little resistant about letting us ship all the stuff that they've ordered before, but we're balancing that because, again, our balanced portfolio help us along in all of those directions.

[Jim Ricchiuti, Analyst at Needham & Company LLC]

Got it. Thanks very much.

[Operator]

Our next question will come from the line of Joe Giordano representing TD Cowen. Please go ahead.

[Joe Giordano, Analyst at TD Cowen]

Good morning, guys. I want to continue first on DI. I'd say 90% plus of the questions I get from investors are about the margins there. So, I mean, I think over the last couple of quarters, they've probably come in, and the outlook has come in a little bit below what you thought. I know there's some elements, high-margin machine vision, probably market declines there. But can you talk about what's been slightly different than you thought on the margin side, and how should we really think about that business kind of in the 2024, like what's realistic for like a baseline margin assumption.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Let me start with second-quarter margins. Actually, second-quarter Digital Imaging margin is up about 28 basis-points, let's say 30 basis-points year-over-year, and we think for the year, it might -- it will be probably flat, maybe down about 10 or 15 basis-points, but relatively flat. I think what is going to happen is that the FLIR margins are going to increase somewhat and historic our legacy Digital Imaging, they're going to decline a little bit. Basically, we think year-over-year, it's going to be flat. We've had, as I mentioned before, we've had a slower revenue and lower revenue in defense in the first-half of the year. But as I mentioned earlier, that's turning around now, so I think that's going to help us for the rest of the year. That's about really all I can say about the margins. I think, second-quarter year-over-year, we saw an improvement of about 28 to 30 basis-points for the whole year. It might be flat or down maybe 15 basis-points, but not much. And again, the balanced portfolio is really going to help us. The flip side of it is, if you look at our Aerospace and Defense segment, there second-quarter margins increased 247 basis points, and for the year, we're projecting 80 basis-points expansion. So sometimes when we look at Defense, yes, we differentiate defense that's in Digital Imaging, what I have talked about before, and then, but we have a whole bunch of defense programs in our Aerospace and Defense portfolio which are doing really well. So overall, I think we're okay.

[Joe Giordano, Analyst at TD Cowen]

Just one quick clarification. I know DI margins are up year-on-year, but, sequentially, they were down on higher revenues, so was there like a mix change going on there, and then I have a quick question on test and measurement.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

I don't know, they were down sequentially about 20 basis-points. I'm not so concerned about that. There are so many moving parts in there that it just balances itself out, that's not something that worries me. That's all I would say about that. Go-ahead with your other area, please.

[Joe Giordano, Analyst at TD Cowen]

Just curious on, if you have any color on like the order - the order intake for things like oscilloscopes versus the revenue delivery now, like I know, the revenue is strong, our orders starting to slow there. I'm just curious, like what that revenue trend looks like, like how much backlog do you have? How fast is that kind of coming out and is it being replenished at the same pace.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Yeah, as you know, on the test and measurement, we have two distinct product lines. One is oscilloscopes, the other is protocols, and both of those are relatively short-term revenue. So big backlog that doesn't make a whole lot of difference. Our oscilloscope revenue in Q2 was outstanding, really good. Our. Protocol revenue was relatively flat, and partially that's because new protocols are coming out in September, and we expect that revenue to pick up. If you look at the whole year, we think that we're going to have something like 3.5% to 4% growth in scope and protocol products, and we think third and fourth quarter are going to be alright, then they may not expand as much as the first-quarter, but year-over-year, we're going to be fine.

In terms of just answering your question on backlog book-to-bill in that test and measurement is very close to 1, it's 0.98, so I would say it's 1. So again, it's not something that concerns me right now.

[Joe Giordano, Analyst at TD Cowen]

Thanks.

[Operator]

Thank you. Our next question will be from the line of Greg Konrad with Jefferies. Please go ahead.

[Greg Konrad, Analyst at Jefferies Financial Group]

Good morning.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Good morning, Greg.

[Greg Konrad, Analyst at Jefferies Financial Group]

Maybe just one clarification. I mean it seems like you brought that, you didn't change guidance for the year, but brought down digital imaging, you talked about the strength in A&D. Has there been any change to the overall company margin guidance for the year just given, it seems like A&D is tracking ahead and instrumentation continues to be and maybe slightly above expectations.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Yeah, I'd say, if you went back to April guidance versus today, probably margin is going down 10 basis-points, again, nothing significant. For the full-year, we expect margins to go up about 26 to 30 basis-points year-over-year. So, overall, that's not something that concerns me, because as I've mentioned several times, because of our diversity of our products, for example, Instruments margin will go up 80 basis-points year-over-Year, aerospace and defense, similarly, 80 basis-points. Even Engineered Systems will go up about 38 to 40 basis-points. So, a flat Digital Imaging doesn't change anything at this time.

[Greg Konrad, Analyst at Jefferies Financial Group]

And then, I mean, you've talked about FLIR Defense and kind of what you're seeing on the order front, and A&D performance topline was really strong in the quarter. I mean, what are you seeing that across Teledyne, as it relates to defense, and how you kind of thinking about runway just given orders and some of the '23 budget money coming through.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Yeah, as you mentioned, there has been a change in the budget. For a long time, the budget look healthy but money was not coming through, and it started to come through more recently. Overall, I'd say, we are fairly comfortable with our Defense businesses, probably across everything, mid single-digits growth year-over-year. We are enjoying actually pretty good margins and orders in our legacy Defense businesses. And as I mentioned, our FLIR Defense businesses are turning around and had a good book-to-bill in Q2. It's not just the U.S. defense. If you look at defense also in NATO countries, their expenditures are increasing and we have a significant amount of sales overseas in both our Defense as well as FLIR defense, including things like traveling wave tubes for missile defense products in places like South Korea. So, it's a pretty, pretty healthy environment right now.

[Greg Konrad, Analyst at Jefferies Financial Group]

I'll leave it at that. Thank you.

[Operator]

[Operator Instructions] And let's go to the line of Jordan [Indecipherable] with BOA. Please go ahead.

[Unidentified Participant, at Teledyne Technologies]

Hey, good morning. This is Jordan [Indecipherable] with Bank of America. So, I just had a quick question on the backlog for defense. Are you guys seeing any specific constraints that can put the deliveries at risk. And also, Q4, when should we expect the majority of them to come through for '23 or extend out into the out years.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Some will come to in '23 and some will come through in starting in Q4. For example, let me just give you one example or two. We do have some counter drone products that are going to Europe, probably about $25 million, $26 million, most of that will come in '23. On the other hand, the Black Hornet 3 that we just announced for the U.S. Army is $94 million, only about 10% of it will come this year, the rest will come in future years. So, it's a balance I think we'll get some of it this year and a lot of it in future years.

[Unidentified Participant, at Teledyne Technologies]

Got It. Thank you.

[Operator]

We will go to the line of Guy Hardwick with Credit Suisse. Please go ahead.

[Guy Hardwick, Analyst at Credit Suisse Group]

Hi, good morning. Robert, I think you said in your prepared remarks that Digital Imaging margins should grow considerably over-time. Could you little bit flush that out a little bit for us what is over-time and could this mean that Digital Imaging margins succeed the 24% levels that I think that you delivered in 2021.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Yes, the answer is yes. And the reason I say that is the margins in our legacy businesses are already around that, and even higher than that, and I think FLIR margins will increase especially as we take the cost-out that I just mentioned. And overall margins for Digital Imaging this year, we are projecting to be 22.3%, this will go to 24% at 170 basis-points expansion. Yes, we can do that.

[Guy Hardwick, Analyst at Credit Suisse Group]

I think last quarter, you had pointed out negative mix, lack of price increases, I think in the medical business. So, was there any other mix effects other than Defense that you talked about in Q2 as anything else that we should be aware of which may have held back margins because I think three months ago, you did expect sequential improvement and steady basis-points out for full year.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Yes, I think, in the healthcare business, things are really good for us. We've had significant expansion both in our X-ray products that is panels as well as components that we put out for X-ray systems. As I said before, there is there is some slowdown in China. If you look at China as a whole, they have had some contraction, even though you don't hear about it. There has been some contraction there. On the other hand, less than 10% of our portfolio is sold to China. So again, our balanced portfolio helps us. The flip side also is that we've gotten some really good higher-margin product development programs that are helping overall in digital imaging.

Shipments have been a little slower, but I think bookings are okay. So again, it's not something that worries me, where we don't have, let's say, commercial imaging system that somebody would buy-in China. On the flip side, we have custom products that we're developing which are very profitable. It should be more profitable than commercial.

I sit here today and I am just looking at our portfolio, and I wouldn't change it with anybody else, considering all the uncertainty around the world. Once area may go down a little bit, to be picking-up at somewhere else, and that's the resilience of our earnings year-over-year, quarter-over quarter.

[Guy Hardwick, Analyst at Credit Suisse Group]

Thank you. Just one last one from me, in Aerospace and Defense Electronics, I think previously you had mentioned that you benefited from a particularly good mix there. Is that presumably that is continued in Q2 and assume that continues in the second half, given your guidance for the margin.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Yes, we think we may have a little lower revenue in the second-half. On the other hand, the products that we make in aerospace go primarily in commercial aircraft, and that market has expanded as you well know, very close to pre-COVID. Q3, Q4 margins for aerospace and defense might be a little lower than Q2, but it will be higher than Q1. So, again, I don't see major inflections in that area.

[Guy Hardwick, Analyst at Credit Suisse Group]

Thank you.

[Operator]

And we'll go to line of Jim Ricchiuti with a follow-up from Needham. Please go ahead.

[Jim Ricchiuti, Analyst at Needham & Company LLC]

Robert, you gave us some book-to-bills. And I'm just wondering if you could perhaps provide us the book-to-bill in the different segments. I feel like I've got pieces of it.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Sure, Jim in the instruments, our book-to-bill is above 1.05, so over 1, led by our marine businesses, which are doing really well, both in underwater vehicles as well as oil discovery and production. In the Digital Imaging, as a whole, the book-to-bill is about 1.07. In aerospace and defense, that's a little more and Engineered Systems, those are much more lumpy orders. So, quarter-over quarter, book-to-bill may change, but it's not affecting revenue that much because we expect revenue in both segments to grow. Overall across the company, our book-to-bill is about 1.

[Jim Ricchiuti, Analyst at Needham & Company LLC]

Okay. And last question from me. Just given the debt pay-down, I'm wondering how if anything has changed with respect to thinking about acquisitions, including any change in areas that you might be pursuing, and I know you can't be specific, but I was just wondering, just in general, what your appetite is for M&A as you look out over the next several quarters.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Well, as I mentioned earlier, Jim, we paid down $620 million this year effective today, let's say. That has taken our Net-debt to EBITDA ratio to 2.1. We have about $60 million of debt left that's variable, which we pay 6% out of the $3 billion plus that Sue mentioned. The rest of our debt is all fixed. So other than that $60 million, our interest payments are 2.1% in future years, which is a very healthy place to be, because we haven't really touched our line-of-credit. So, we have a lot of capability to do acquisitions.

Last year, even as we were paying our debt down, last year we did three bolt-on acquisitions, and spent about $160 million. We will expect to continue that bolt-on acquisitions. On the flip side is that, because if we don't do anything else, if we don't make acquisitions, if we don't do anything, our debt-to-EBITDA ratio is going to go less than 1 in about a year and year and a half. So, we are bullish about acquisitions, including larger ones if we can find them, and of course, we are continuously looking at that. The last question was, what areas? Right now. I would say in the general Instrumentation area is what's very attractive. We have done some digital imaging acquisitions as you know, we made the ETM acquisition, we made the acquisition for our [Indecipherable] acquisition, but I think it would be nice if we could find some things in our Instrumentation area.

[Jim Ricchiuti, Analyst at Needham & Company LLC]

Got it, thanks very much.

[Operator]

And we have no other participants queued up at this time.

[Robert Mehrabian, Chairman, President and CEO at Teledyne Technologies]

Thank you, operator, I'll now ask Jason to conclude our conference call.

[Jason VanWees, Vice Chairman at Teledyne Technologies]

Thanks, Robert, and thanks Thomas to get the replay information to the audience, I would appreciate it, and again all our news releases are available and for those who want to talk to me, please feel free to call me at the number on the earnings release. Thanks everyone, bye.

[Operator]

Absolutely. Thank you, ladies and gentlemen. To dial into the replay, it will be available this morning and starting today at 10 AM in the Pacific time zone, and lasting through August 25th at midnight. You may access the AT&T playback service at any time by dialing 866-207-1041, and please enter the access code of 2597973, and that'll be available for one month through August 25th at midnight. We thank you for your patience and using AT&T Event Services.