Cognex - Q4 2015
February 10, 2016
Transcript
Operator (participant)
Good day, ladies and gentlemen, and welcome to the Cognex fourth quarter 2015 earnings call. At this time, all participants will be in a listen-only mode. But later, there will be a chance to ask questions, and instructions will be given at that time. If anyone should require audio assistance, you can press Star, then zero, and an audio operator will assist you. And as a reminder, today's conference is being recorded. And now it's my pleasure to announce your host for today, Chief Financial Officer, Richard Morin. Dick, please go ahead.
Richard Morin (CFO)
Thank you, and good evening, everyone. Earlier today, we issued a news release announcing Cognex's earnings for the fourth quarter of 2015, and we also filed our annual report on Form 10-K. For those of you who have not yet seen these materials, both are available on our website at www.cognex.com. They contain highly detailed information about our financial results. During tonight's call, we may use a non-GAAP financial measure if we believe it is useful to investors or if we believe it will help investors better understand our results or business trends. For your reference, you can see a reconciliation of certain items from GAAP to non-GAAP in Exhibit 2 of the earnings release.
I'd like to emphasize that any forward-looking statements we made in the earnings release or any that we may make during this call, are based upon information that we believe to be true as of today. Things often change, and actual results may differ materially from those projected or anticipated. You should refer to the company's SEC filings, including our most recent Form 10-K, for a detailed list of these risk factors. Now I'll turn the call over to Cognex's chairman, Dr. Bob Shillman.
Robert Shillman (Chairman)
Thanks, Dick, and hello, everyone. I'd like to welcome each of you to our year-end call for 2015. As you might have seen in the news release issued a few minutes ago, we reported our fifth consecutive year of record revenue from continuing operations. We also reported the second highest annual net income and earnings per share. But that's the bright part of the story. When you look at it more carefully, the second half of 2015 was substantially slower. That slowdown has continued, and therefore, unfortunately, our prospects for Q1 of 2016 are lower than we had hoped. Right now, I'm at our R&D offices in San Diego, California. Everyone else on the call is at our Natick headquarters.
For details of the fourth quarter in 2015, I'm going to hand the microphone over to my partner, Rob Willett, our President and CEO, and I will listen intently and be available at the end of the call to answer any questions that you might have of me. Rob, the microphone is yours.
Robert Willett (CEO)
Thank you, Dr. Bob. Good evening, everyone. Looking back at 2015, we are pleased that revenue increased over a tremendous year in 2014, that many thought would be difficult to beat. Growth came primarily from Greater China, where factory automation revenues set a new annual record. The largest contributors from an industry standpoint were consumer electronics and automotive. Good progress was made on our growth initiative. Demand for Cognex's 3D displacement sensors, while still small, grew significantly over 2014. Penetration of the life science market began to bear fruit.
Our first customer purchased about $3 million of Cognex vision in 2015, as their machine containing our Advantage engine was introduced to the market. We see continued progress with other potentially large life science accounts that are designing us into their equipment. Important new products and software tools were introduced for both our In-Sight and DataMan product lines in 2015. The most important product launch of the year was our family of next-generation DataMan fixed-mount ID readers. The DataMan 150, 260, and 360 high-performance readers run the latest Cognex software to achieve the highest possible read rate.
They extend our product leadership in the mid-range fixed-mount barcode reading market. PatMax RedLine furthers Cognex's leadership in vision algorithms for pattern matching, a critical first step in most vision tasks. PatMax RedLine runs on three new 5-megapixel In-Sight vision systems, delivering higher resolution at extremely fast acquisition speeds for demanding vision applications. Also new to our In-Sight vision systems family is the In-Sight 2000 sensor, a highly competitive product for simpler vision applications.
We expect its ease of use and affordability to expand the market for our products to customers who are more price sensitive. During 2015, we exited the market for surface vision by selling the Surface Inspection Systems Division. In addition to realizing an after-tax gain of $78 million, the sale sharpens our focus on our core business, where we see stronger long-term growth potential. In summary, 2015 was a good year for Cognex, and I'm proud of our accomplishments. However, I'm disappointed that second half revenue was not as high as we initially thought it would be. Several factors contributed.
As you all know, the entire global economy appears to be slowing. More specifically to us, some large projects that we expected from consumer electronics and logistics customers were pushed out because of changes in their product roadmap... and demands on their engineering resources. Demand in the Americas industrial market was weak, and the strong US dollar reduced our growth rate by 5 percentage points. Revenue grew 11% in constant currency, but increased only 6% on a reported basis. The lower than planned revenue for the year, combined with continued investments in engineering and sales, brought our operating and net margins below our targeted range.
The outlook for 2016 continues to be uncertain, but nothing we see changes our view of the long-term potential for machine vision. It's important to note that our investments to bring new technology to market and to help large customers implement sizable vision projects remain intact. We expect margins to improve over time as our investments drive revenue growth. Let's turn now to details of the fourth quarter. Total revenue was $97.8 million, which was modestly above our expected range. Several reasons contributed to that, including the completion of certain projects before year-end.
In factory automation, revenue was $93 million and was flat year-on-year on a reported basis, but up 5% in constant currency. Looking at factory automation trends from a geographic perspective, growth from Asia, excluding Japan, continued to outperform our overall business. Although the growth rate has slowed from earlier in the year, we are confident about long-term prospects in Greater China. In Japan, revenue from the region's factory automation markets showed modest improvement, both on a reported basis and in constant currency. In the Americas, spending by US manufacturers in most industries we serve continued to disappoint.
Q4 reflected the first year-on-year decline in Americas' quarterly revenue since Q3 of 2009. Factory automation revenue from Europe declined significantly year-on-year due to the slower economy and the weaker euro. In the semiconductor and electronics capital market, revenue was $4.7 million in the fourth quarter, down 8% year-on-year. Demand from semi follows the market's cyclical trends. Our expectation for growth in this small piece of our business continues to be low. In regards to operating expenses, we continue to invest in our business, but at a slower rate than in recent quarters.
RD&E and SG&A for the fourth quarter totaled $55 million, up 5% on a sequential basis, as expected. Incremental costs related to additional engineering resources, new product development activities, and our sales and support organization. Turning now to our outlook. We expect revenue for Q1 of 2016 to be in the range of $91 million to $94 million. Unfortunately, even the high end of that expected range is below the $101 million of revenue we reported for Q1 of 2015. Unlike last year, the tone of business is more muted today. You can see that reflected in our starting backlog of $27 million, which is substantially lower than the $36 million we had in backlog at the beginning of 2015.
Gross margin for Q1 is expected to be in the mid-70% range. Operating expenses are expected to increase by approximately 5% year-on-year, mainly due to our investments in engineering. The effective tax rate is expected to be 18%, excluding discrete tax items. Now, let's open up the call for your questions. Operator, we are ready to take questions.
Operator (participant)
Okay. So at this time, ladies and gentlemen, if you do have a question or comment, you can press the star followed with the one key on your touchtone telephone, and that will place you into the question queue. So again, if you have any questions, it's star one to queue up for any questions. And if your question has been answered and you wish to remove yourself from the queue, you can press the pound key. So we will take our first question from Ben Rose from Battle Road Research. Ben, your line is open.
Ben Rose (President & founder)
Thank you. Thank you, and good evening. In the press release, Rob, in your prepared remarks, you noted the slowdown in industrial markets, kind of implying that most markets had slowed down. Could you speak specifically about the automotive market, both in China and or around the rest of the world, and also whether any of the verticals that you do serve are holding up better than others in this environment?
Robert Willett (CEO)
Yes. Hi, Ben.
Ben Rose (President & founder)
Hi.
Robert Willett (CEO)
Yeah. So, automotive is a large market for Cognex, and it had a very strong year in 2015. It is our second largest vertical market, representing more than 25% of our total revenue. I think what we saw, as we moved through the second half of the year, is that, although business remains at a high level, spendings become slower and our outlook is more cautious. And it's difficult, frankly, to predict how the market will play out over the next few quarters. Automotive customer roadmaps are quite lengthy, you know, going out normally around three years, that we're involved with.
From the plan shared by our larger customers, we expect continued growth from automotive over the medium to long term, but certainly we are seeing a slowdown in the nearer term. You asked about other markets. You know, I think we expect our consumer electronics business to grow this year. You know, we see a lot of good activity in that space that we think is positive for us as we move into the year. You know, and I would say overall, we do expect some growth for Cognex, but there are no particularly strong markets.
I would say overall, all of our markets seem that they're showing some general weakening as we move through time, not, not anything that's particularly stand out in terms of a strengthening trend.
Ben Rose (President & founder)
Okay. And then if I may, just one follow-up question. I noted in the 10-K that your largest customer, in 2015, was up from 2014 as a percentage of sales, and given that particular company's intention to substantially increase their capital expenditures this year, do you think that Cognex will participate in that spending?
Robert Willett (CEO)
So, you know, as reported in our Form 10-K, that customer represented about 18% of our revenue in 2015, up from 16% in 2014. You know, we feel our relationship with that customer is excellent, and they and many other large manufacturers see the value of our vision technology and our ability to solve problems. I'm very limited, really, you know, under legal obligation, what I can say beyond that, only that, you know, we, you know, we've had a positive relationship, and we see large consumer electronics opportunities continuing for Cognex, with, I hope, multiple players in the industry over time.
Ben Rose (President & founder)
Okay, thank you. Thank you very much.
Operator (participant)
Okay, thank you for your question. We'll take our next question from Jim Ricchiuti from Needham & Company. Jim, your line is open.
James Ricchiuti (Senior Equity Research Analyst & Md)
Thanks. Good afternoon. Just wanted to ask about the planned increase in engineering expense in the quarter of 5% year-over-year. In the past, when you've made investments like that, it has been in anticipation of, at least in the more recent past, of projects, larger projects. Is that the case here, that you anticipate some potentially larger deals in the near term?
Robert Willett (CEO)
Hi, Jim. You know, I think you're right in that you see an increase in our engineering expense at Cognex. It's really for two reasons, I would say. One is that we have some very exciting technology that we're working on developing and we'll be bringing to market over, you know, the coming quarters. You know, regardless of what we see externally, you know, we're very committed to bringing that to market, and we think it's key to the future of the company. The second is, though, that we have been investing more in engineering resources to support larger customers, and generally, those tend to be in the consumer electronics and logistics space.
You know, certainly we've gone on investing in those areas, and that's driving up some of our engineering expense in the near term, because we do expect to see you know, substantial revenue from those types of opportunities here in the coming quarters.
James Ricchiuti (Senior Equity Research Analyst & Md)
Is this something that we should consider could be several quarters of higher engineering expense, or could the engineering outlays be lumpy over the course of 2016?
Robert Willett (CEO)
Well, I think, you know, overall, we target, you know, engineering spend to be between 10% and 15%, and I think in quarters of lower revenue, you can see it bump up over that, you know, upper higher level, as you've seen. And then in some cases where we see revenue really high on a percentage basis, it can fall. But I do, I do think you're seeing engineering expenses run higher at the moment in anticipation of some larger opportunities. And as those come to market, I think you'll see engineering spend reduce as a percentage of revenue. And then, you know, I think, I think obviously a significant part of that engineering increase can be around supporting large customers.
As we see those large customers come through, as traditionally they have in quarter two or quarter three, you can see spend continuing behind those, but as a percentage of revenue, probably lower than you've seen in recent quarters.
James Ricchiuti (Senior Equity Research Analyst & Md)
Okay. If I may, one final question on the logistics market. We go back to last year, it looked like you were anticipating some larger orders in that market. Sounded like multiple customers. That didn't play out. Would you anticipate that the some of those orders could come to fruition this year, in which case you would see in deliveries in Q2, Q3? What's the pipeline like with your logistics customers?
Robert Willett (CEO)
Mm-hmm. Yeah. Yeah, I would say, you know, our journey into the logistics market continues to proceed well. You know, we made progress during last year, gaining traction in Europe. I'm seeing very significant growth in revenue there and winning systems integrators. We support a broader range of logistics customers in the US. There are substantial projects with large logistics customers in our sales funnel, and we're off to a good start this year with one significant order set for delivery in the first half, already booked. We're optimistic about growth in the Americas logistics market, following, you know, a difficult year last year, where we didn't see, as you pointed out, larger orders from some of our previously larger customers that we had expected. Where we see the potential for those to come in in 2016.
James Ricchiuti (Senior Equity Research Analyst & Md)
... Okay, thank you.
Operator (participant)
Okay, thank you. Our next question is from Bobby Burleson from Canaccord Genuity. Bobby, your line is open.
Robert Burleson (Md in the US Equity Research department)
Hi. Hi, thanks for taking my question. So, you know, I was just wondering, in terms of the consumer electronics growth you guys are expecting, and it sounds like you're gearing up for some potentially, you know, larger projects there. I'm wondering if the customer base for those types of projects is expanding somewhat this year, where you're gonna be working on larger projects for multiple consumer electronic customers?
Robert Willett (CEO)
So I think it's important to understand, you know, Cognex is the world's leader in sophisticated vision technology, which is central to automation in advanced production of consumer electronics. So, you know, you can pretty much assume that most, if not all, of the major, you know, consumer electronics manufacturing processes that are going on, you know, mostly in China, involve our products. So, you know, we're in at those customers, the question is, to what degree they're rolling out more ambitious plans with vision, and to what degree they're utilizing our technology in some of the more difficult and demanding applications, and they're gearing up capital spend around automation.
You know, I think we've made progress in recent years, where we're seeing larger deployments of vision at customers. Obviously, we have a very large customer in that space, and we have other large customers as well that have the potential to invest very heavily in machine vision and automation. We're making progress, but it's difficult to judge necessarily, you know, when, which quarters those opportunities will come in and, how significant they'll be.
Robert Burleson (Md in the US Equity Research department)
Okay, great. And then you mentioned earlier that consumer electronics should grow for you this year, and overall, you're expecting growth, even though some, you know, all of your verticals are somewhat subdued. I'm wondering, just logistics demand this year or growth in logistics versus consumer electronics, are you expecting more growth out of logistics versus consumer?
Robert Willett (CEO)
Well, logistics, percentage-wise, you know, we would expect, yeah, significant growth. You know, we've said in the past that we expect over the long run, our ID business to grow 30%. You know, obviously, in the current market conditions, that's not likely to happen. But we've said logistics will grow faster than our ID market overall. So it's definitely a market where we see very significant opportunities for large percentage growth. But in terms of dollars, you know, consumer electronics represents more than 25% of our revenue, and therefore, growth in consumer electronics can add more on a dollar perspective to the Cognex top line.
Robert Burleson (Md in the US Equity Research department)
Okay. And just one last quick one. In terms of gross margin, is there any you know update on whether or not there's much of a difference between the gross margin for consumer electronics, large projects versus some of these logistics projects that are potentially ramping? Thank you. When we look at these engineering investments, you know, in support of the CE business, can you explain maybe, is there much leverage there? I mean, is this, you know, add a field engineer, you know, per $X million of potential, or? I'm just maybe a little bit surprised that we can't leverage the investments we've made to date relative to our, you know, near-term outlook.
Robert Willett (CEO)
Right. Well, for some of our larger customers, particularly in consumer electronics, but also in logistics, their very sophisticated requirements, and they need to scale up quickly, right? And in order to do that, it does require significant engineering resources, and they look to our vision expertise to help them deploy that. So, you know, from our point of view, from engineering spend, that's a lot of where we're investing. And we're investing generally based on future opportunities that we see in those markets, right? And then there is a support factor, which is, you know, less sophisticated, but does involve new technologies that we're working with them to deploy.
And then there is a productivity gain on the back end, where we can deploy more systems with fewer people.
Robert Burleson (Md in the US Equity Research department)
Okay. And then also, the, you know, I did the math on the large customer as well, the 18% and the 16%. And what's somewhat curious is the dollar amounts, you know, you know, it just works to $81 million versus $68 million. And I'm maybe a little bit surprised at the dollar amount in 2015 exceeding 2014's. But was there any sizable amount of that revenue recognized in the fourth quarter? Because I think coming into the fourth quarter, the thought was there was some trailing, you know, service revenue that might be accounted for. But was there a substantial chunk of that large customer business that was recognized in Q4?
Robert Willett (CEO)
I, I don't think, I don't think we can comment on that specific quarter of revenue. Dick, did you wanna comment?
Richard Morin (CFO)
I, you know, we're limited as to what we can say about that particular. I can say this, that there was, you know, most of the significant revenue occurred in,... most of it was in Q2, and then following in Q3, but, no, no big tail in Q4.
Robert Burleson (Md in the US Equity Research department)
I see. Okay, okay. And just maybe two last questions. One is on China. Could you just maybe be a little bit more specific in terms of, you know, how did China perform in the fourth quarter in constant currency? And how did it perform, you know, for all of 2015? Just trying to gauge the slowdown there.
Robert Willett (CEO)
Yeah, yeah. Well, I, I think as I mentioned, you know, revenue from China was up more than 40% from 2014, but we definitely saw a slowing, you know, going on, in Q4. It's still, still growing, but slowing. If you look at our business in China, not just last year, but in any year, you know, generally Q1 and Q4 are slower, and Q2 and Q3 are stronger, right? So but I think if we look back year-on-year, we would have still seen - we did still see growth in our business in China in Q4, but at a slower rate. And we see that rate, you know, slowing.
Robert Burleson (Md in the US Equity Research department)
Okay. And just as the last question, what would be the forecast? Can you help us a little bit with the forecast for options expense in 2016 relative to 2015? What would be the increase, percent increase?
Robert Willett (CEO)
That's difficult to come up with at this particular point, since, you know, we haven't granted the annual options yet, and it'll depend a lot on what the price is on the date that the options are granted. I would essentially say that because the annual grant, the exercise price will be lower than it was last year, I would expect that it would be, you know, relatively flat with maybe a slight increase.
Robert Burleson (Md in the US Equity Research department)
Okay. All right, fair enough. Okay, thank you.
Operator (participant)
Okay, thank you. So we'll take our next question from Grace Lee from CLSA. Grace, your line is open.
Grace Lee (Equity Analyst)
Hi, thanks for taking my question. I was wondering whether you can give us an update on life science in terms of design wins and, if this is already a meaningful contributor to the revenue.
Robert Willett (CEO)
Yeah. Hi, Grace.
Grace Lee (Equity Analyst)
Hello.
Robert Willett (CEO)
So we've been focusing on this life science market for Cognex technology for a number of years now. And we think it's a very good market for Cognex because these machines generally stay in the market and are produced for 7 to 12 years, right? So but however, it's a long design cycle to get specified in. So we were pleased last year to see our first real major customer deploy product into the marketplace and purchase approximately $3 million. We do have other smaller customers in that space. The revenue in that market for us is still, you know, not very large, you know, certainly less than $10 million, but we do believe it will be a larger contributor in future years.
I think we can expect it to kind of ramp in terms of like an S curve, where we're still pretty early on, and we think we can see as more and more customers deploy our product and more and more have our engines in their machines, that we should see it kind of ramp nicely over the coming years. But it's still really not particularly significant.
Grace Lee (Equity Analyst)
Sure, thank you. Another question was on the gross margin. So, in light of potentially incoming larger orders from consumer electronics, how should we think about the gross margin trajectory over the rest of 2016?
Robert Willett (CEO)
Yeah, I mean, our gross margin target is in the mid- to high-70% range. And, you know, I think we've seen some dilution to gross margin, mostly around currency in the last quarter. But I think we're holding to that idea that over the balance of the year, we're still targeting the mid- to high-70% range. You shouldn't assume that large deployments dilute our gross margin. They don't necessarily do that. And sometimes when we're deploying, you know, more technology, we can see higher gross margins in some of those larger customers.
Grace Lee (Equity Analyst)
Sure, thank you.
Operator (participant)
Okay, thank you. So I did want to remind everyone, if there are any questions, you can press the star followed with the one key on your touchtone telephone to be placed into the question queue. So again, for questions, press the star followed with the one key. I'm showing one final question at the moment coming from Joe Giordano from Cowen and Company. Please go ahead, Joe.
Joseph Giordano (Md & Senior Equity Analyst)
Hey, guys. This is Tristan for Joe today. If I could just go back and ask one more question about your largest customer, how would you address the concern that some people may have regarding the increasing importance of that particular customer to your business?
Robert Willett (CEO)
Hi, Tristan. So your question is, how would we address the concern about the size of that customer?
Joseph Giordano (Md & Senior Equity Analyst)
Yes, like the relative importance that it is gaining,
Robert Willett (CEO)
Mm-hmm
Joseph Giordano (Md & Senior Equity Analyst)
... to your business.
Robert Willett (CEO)
Well, yeah, I would say, you know, as I mentioned, we work with some of the most sophisticated manufacturing companies in the world. We learn a great deal from working together with them, and so it certainly enhances our business to work with large customers. You know, I think we bring a lot of value, and, you know, we're not a component supplier, where it's important to understand that we're a supplier of enabling technology for automation. You know, I would say if one goes back over, you know, 10, 20 years with Cognex, we've had other large customers in the past, like, you know, famous companies in the smartphone space or in the semiconductor space, and we've been pretty successful in, you know, learning and leveraging from those customers.
And what if they've gone on to grow, we've been successful to grow with them, and when market share and other factors have changed in the industry, we've been able to find new customers. So I think that's a part of being a technology supplier in automation, and you know, I think that's something we understand and expect to be able to face successfully in the future.
Joseph Giordano (Md & Senior Equity Analyst)
Okay, this is helpful. And then, going back to the guidance for Q1 that you have on revenue, does this include any large orders, those over $2 million, or is it more of a run rate level?
Robert Willett (CEO)
I think you should think of it more like a run rate level. I mean, it's possible we may have some orders that turn into more than $2 million of revenue during that period. But when you think of our large quarters and where large orders have a, you know, have a significant impact on the quarter, that's more likely to happen in Q2 and Q3 at this point in the development of our business, and not meaningfully in Q1.
Joseph Giordano (Md & Senior Equity Analyst)
Okay, great. And then one last quick one. If you could just update us on the penetration of your displacement sensors.
Robert Willett (CEO)
Mm-hmm. Yeah. So, we see the 3D displacement sensor market division as one of significant potential for Cognex. So, you know, we see the market as a $200 million market, and we see ourselves as a very small player in that market. You know, we might have an approximately 5% share today, but growing very quickly. And, you know, we have some exciting plans in that space over time, but still very small.
Joseph Giordano (Md & Senior Equity Analyst)
Great. Thank you.
Operator (participant)
Okay, thank you. And I'm showing just one final question coming from Rick Eastman from Robert W. Baird. Rick, your line is open.
Richard Eastman (Md & Senior Equity Research Analyst)
Yeah. Robert, I just was just kind of sifting through your your commentary on, kind of your end market commentary, and there was just, you know, just you had made the comment about, you know, most of your end markets end markets slowing. And I'm trying to reconcile, is that a statement on the consumer electronics market as well as your other markets? I think you, you, you kind of lumped them together with auto, and I'm just trying to get a sense of, you know, the more the consumer-driven markets, are they still, you know, primed to grow some or?
Robert Willett (CEO)
Well, as I said, I, you know, I do expect Cognex to grow this year, and I think we can expect slower growth from some markets. Probably automotive, you know, is gonna grow but less quickly. I think consumer electronics, you know, it's kind of early in the year to say whether, you know, whether and how much that will grow, but I think we see a lot of potential for growth in consumer electronics. But I, I think my comment earlier really related to a declining rate of order growth that we saw through the back end of the year and into Q4. And I would say that kind of level of activity and spend is pretty muted at the moment.
Richard Eastman (Md & Senior Equity Research Analyst)
So the growth, the potential to grow in 2016, in theory, would come out of, you know, logistics, ID products and consumer electronics. Those would be the best prospects to drive growth for the year?
Robert Willett (CEO)
Yes, and in addition to that, you know, some of the new markets we've been getting into, such as, 3D, life sciences, also helping with growth. And then geographically, although growth has slowed down, you know, from the 40% growth we saw last year in China, you know, we do expect China to be a meaningful contributor to growth, even in its current economic state.
Richard Eastman (Md & Senior Equity Research Analyst)
I see. Very good. Okay, thank you.
Operator (participant)
Okay, thank you, ladies and gentlemen, that does conclude our Q&A session for today. I'd now like to turn it back to Dr. Shillman for any concluding remarks.
Robert Willett (CEO)
Dr. Bob, are you on mute? I'm wondering?
Robert Shillman (Chairman)
How about now?
Robert Willett (CEO)
Yeah, now we can hear you.
Robert Shillman (Chairman)
Yeah. Sorry about that, everyone. Yes, just to repeat, we had a very, very good quarter, record quarter in revenue and in earnings. But the growth has slowed down. Nevertheless, we've been here for a long time. We intend to continue to persevere. The company is 35 years old and still acting and performing like a young, agile company. We have many engineers working on very exciting projects that have not yet been announced, and we fully expect to continue to be the leader in this very important field and to continue to impress both our customers and our shareholders. We'll talk to you again and hopefully report to you better results than even we expect for Q1. That's it. Good night.
Operator (participant)
Okay, ladies and gentlemen, this does conclude your conference.