Cadence Design Systems Inc (CDNS) — Q2 2019 Earnings Call Transcript

Thank you, Erica, and I would like to welcome everyone to our second quarter 2019 earnings conference call. I am joined today by Lip-Bu Tan, CEO; and John Wall, Senior Vice President and CFO. The webcast of this call is available through our website, cadence.com and will be archived through September 13, 2019. A copy of today’s prepared remarks will also be made available on our website at the conclusion of today’s call. Please note that the discussion will contain forward-looking statements and that actual results may differ materially from those expectations. For information on the factors that could cause a difference in our results, please refer to our filings with the Securities and Exchange Commission. These include Cadence's most recent reports on Form 10-K and Form 10-Q, including the Company's future filings and the cautionary comments regarding forward-looking statements in the earnings press release that we issued today. In addition to financial results prepared in accordance with Generally Accepted Accounting Principles or GAAP, we will also present certain non-GAAP financial measures today. Cadence management believes that in addition to using GAAP results in evaluating our business, it can also be useful to review results using certain non-GAAP financial measures. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with their most direct comparable GAAP financial results. The reconciliations are available at the Investor Relations section of cadence.com. Copies of today's press release dated July 22, 2019 for the quarter ended June 29, 2019, related financial tables and the CFO Commentary are all available on our website. Now I will turn the call over to Lip-Bu.

Good afternoon, everyone. Thank you for joining us today. Cadence achieved strong operating results for the second quarter of 2019, delivering 12% year-over-year revenue growth on broad-based strength across our product line. Based on the strength of our business, we are raising our outlook for the year. John will provide more details shortly. While there is ongoing global economic and geopolitical uncertainty, we remain confident about the multiple long-term trends that continue to drive strong design activity, driven by trends such as Artificial Intelligence (AI), 5G, autonomous driving, and IoT. Design activity is being fueled by workload-specific computing, system companies building custom silicon, new silicon startups, and the digital transformation of industries such as automotive, aerospace, medical, and other industrial applications. Our Intelligent System Design strategy will enable us to provide more capabilities and value to our customers while also expanding our current total addressable market from about $10 billion to an estimated $30 billion over the next five years. The foundation of the strategy is design excellence, which is comprised of our core EDA and IP business. In addition, we are building upon our core competency in computational software to expand into two new areas. The first one is system innovation, where we are expanding into new system domains with products like Clarity, our new 3D EM Solver that was launched last quarter. Clarity has received considerable customer interest with numerous evaluations underway. The second new area is Pervasive Intelligence, where we are beginning to apply AI and our algorithmic knowledge to our core business and specific verticals. Now let us turn to our quarterly highlights for our core business. Our innovation engine continued to deliver as we introduced four significant new products in the quarter. We grew revenue in Digital and Signoff by double-digit year-over-year through both ongoing proliferation with market-shaping customers and adoption by new customers at advanced nodes. Samsung Austin R&D Center, a leader in high-performance design, has selected Cadence Digital Implementation Solution for a next-generation, high-end mobile CPU core design. Cadence's state-of-the-art Innovus-based flow delivered the best quality of results for that design, enabling Samsung Austin R&D Center to meet its advanced process node objectives. Innovium, a leading provider of innovative datacenter switching solutions, adopted Innovus for its highly scalable TERALYNX Ethernet switch design. There were more than 40 tapeouts at seven nanometers and below using our full digital flow in the first half of 2019. Innovus, our Digital Implementation Solution, has over 18 active customers for seven nanometers and below designs, including ten at five nanometers. Next, I want to discuss highlights of our system design and verification solutions for which revenue grew 7% year-over-year. Our hardware-assisted verification products, which are an integrated part of our verification suite, had another good quarter with the addition of Protium S1. We also provide comprehensive solutions across IP and SoC verification, hardware, software regressions, system validation, and earlier software developments. Palladium Z1, our flagship emulation platform, added six new customers and had nine repeat orders. Habana Labs, a leading AI processor startup, stated that Palladium was instrumental for the development of Gaudi, the industry’s first AI training processor that natively integrates Ethernet and RDMA, and for their GOYA Inferencing Chip. Fungible, a data-centric computing company, used a combination of Palladium Z1 and Protium S1 systems in the development of the DPU family of products. The DPU is a new type of microprocessor that will revolutionize the performance, reliability, and economics of datacenters at all scales. We introduced the Protium S1, an enterprise prototyping platform, which is the first datacenter optimized FPGA-based prototyping system and provides multi-megahertz speed for billion-gate designs, accelerating earlier software development and hardware-software convergence. Customer reception of Protium S1 has been very positive, with earlier adoption from some market-shaping customers, including NVIDIA. Protium S1 and X1 also added three new customers and received seven repeat orders. We also delivered the smart JasperGold Formal Verification Platform that delivers an average of 2X faster proofs out of the box and 5X faster regression runs by leveraging new machine learning enabled smart proof technology. STMicro has been able to significantly boost its verification productivity with Smart JasperGold. Custom Analog grew a strong 11% year-over-year. In the quarter, we introduced an important new product, Spectre X Simulator, which is a next-generation massively parallel circuit simulator designed to provide up to 10X performance gains while solving 5X larger designs while maintaining the golden accuracy customers expect from 25 years of Spectre's industry leadership in analog, mixed-signal, and RF applications. Spectre X was endorsed by MediaTek, Mellanox, Renesas, and Silicon Works. Now let me make a few comments on the geopolitical situation. We have and will continue to comply with the United States Department of Commerce Export Control Regulations. The situation is fluid and we will continue to closely monitor it. While there is ongoing uncertainty, thanks to our strategy, continued innovation, and operational execution, we are well positioned to capture growth opportunities arising from the longer-term trends driving strong design activity. While we do not provide details about any specific customer, I do want to emphasize that we have a very broad diversified and global customer base. With that, I would now turn the call over to John to review the financial results and provide our updated outlook.

Thanks, Lip-Bu, and good afternoon everyone. I am pleased with our Q2 results for Q2 and our updated outlook for fiscal 2019. Q2 was a little unusual due to the export limitations that were imposed during the quarter. The export limitations took effect on May 16 and June 24 in respect to certain customers and remain in place today. We are aware that this is a very fluid situation. So for the purpose of providing guidance for the second half of 2019, we have assumed that these current export limitations remain in effect for the remainder of the year. Now let me walk you through the key results for Q2 beginning with the P&L. Total revenue was $580 million. Non-GAAP operating margin was 33.6%. GAAP EPS was $0.38, and non-GAAP EPS was $0.57. Next, turning to the balance sheet and cash flow, at the end of the quarter, cash totaled $633 million while the principal value of debt outstanding was $350 million. Operating cash flow for Q2 was $246 million. DSOs were 38 days. During Q2, we repurchased $75 million of Cadence shares. Now, I will provide our updated guidance. For Q3, we expect the following results: Revenue in the range of $570 to $580 million; non-GAAP operating margin of approximately 30%; GAAP EPS in the range of $0.32 to $0.34; and non-GAAP EPS in the range of $0.50 to $0.52. Our updated guidance for fiscal 2019 is now as follows: Revenue in the range of $2.315 billion to $2.335 billion; non-GAAP operating margin in the range of 31% to 32%; GAAP EPS in the range of $1.44 to $1.50; non-GAAP EPS in the range of $2.11 to $2.17; operating cash flow in the range of $680 million to $720 million; and for the year, we continue to expect to use approximately 50% of free cash flow to repurchase Cadence stock. You will find guidance for additional items, as well as further analysis in the CFO Commentary available on our website. In summary, I’m pleased with our execution so far this year. We are living in uncertain times and I am proud of how we are adapting to a fluid environment. Our improved outlook speaks to the diversification of our customer base, the underlying strength of demand for our technology and solutions, and the continued focus of our employees throughout the company on achieving our key financial metrics. I would like to thank our customers, partners, and of course our employees. We look forward to updating you on our progress throughout the second half of 2019. And with that, operator, we’ll now take questions.

Yes, good afternoon. I was wondering if there is any way you could do more of a quantification of the impacts from the different export controls in China right now, kind of the relative size of that or the impact of earnings are? Maybe anything you can give would be great.

So, Tom, we wanted to provide clarity in relation to second half guidance and expectations without speculating on what may or may not happen with regard to current export limitations. While we don’t provide details on what that speculation might be, we do want to emphasize that we have a very broad diversified and global customer base.

Okay. So is there a way to size it in case it does come back to give us a sense of what the upside potential could be to your guidance?

It’s very hard to say. We don’t want to speculate.

Okay. And then moving on, maybe you could talk about the margins in the quarter versus the guided margins about 10% lower. Is it just mix or is more going on there?

Yes, certainly, Q2 was – there was more profitable mix in revenue. We were happy with the performance in Functional Verification. We continue to expect modest growth for 2019, and even considering the impact of those export limitations, we expect gross margins of course like Q2 was a little unusual to the export limitations. We’d expect the gross margins for the second half to return to more typical levels. We are investing in opportunities to expand our business with market-shaping customers and investing in TAM expansion opportunities. So that's why the operating margin is, for the second half, forecasted at approximately 30%.

Okay. And then finally, when you look at the growth in Intelligent System Design over the next several years, does that meaningfully change the model for either a margin or cost structure point of view versus Traditional EDA?

Well, we are not guiding out beyond 2019; everything we know is included in our guidance for 2019. We take a longer-term view over things again with a focus on any one quarter, I tend to – like to compare current results against our current midpoint of guidance against 2016, and I think I would expect the model to be pretty consistent.

Okay. Thank you.

Yes, good afternoon guys. Thanks for taking the question. John, just a follow-up on the gross margin. I want to make sure I understand what was unusual about the June quarter? I thought I heard you say from the last question, it had to do with the export tariffs, but then you're saying that the gross margin is to return back to normal in the back half of the year despite the fact that it looks like you are still excluding some business related to the tariff issues.

Well, Q2 was a little unusual in that the export limitations took effect on May 16 and again on June 24 in respect to certain customers, and like you say those remain in place today. And then, I mean, we had a few things in terms of hardware results; hardware results were more profitable than we expected. Services revenue was a little bit more profitable than we expected. And just generally like that wouldn’t – it was great; it was a profitable quarter for Q2. But I wouldn’t extrapolate that into any kind of future guidance that we expect non-GAAP gross margin to return to more typical levels in the second half of the year.

That's helpful and maybe as kind of a follow-up for Lip-Bu. Clearly, China is going to continue to be a long-term strategic customer for you. I am just kind of curious, given the heightened tension of the U.S.-China trade, is there any concern that we should have that China might try to do EDA on their own, or are there barriers to entry to that business just so high it would be difficult for them to generate domestic sources for what you provided? Any sort of longer term and that would be very helpful.

Sure. So I think, clearly to have a number of China-based EDA companies offering field point tool solutions. And clear we are not going to speculate in the broader hypothesis, but clearly we focus to be the best partner for our customers including China.

Thank you.

Hey guys. Thanks for taking my question. Can you hear me alright?

Yes.

Yes.

All right. Good. John, I want to ask you a question about your fiscal year 2020 outlook. I know you are not going to say anything with respect to revenue growth or margins or anything at all relating to 2020. But as you enter your budget meeting, whatever that is, are you still going to use the guiding principle of the rule of 40 in terms of looking at the revenue growth – some of the revenue growth in operating margin?

Yes, Gary. Certainly, I mean, the model we have we expect to apply consistently and we report you as being something we’ve looked at across the different business groups. But with that, we're guiding for 2019 and we are not guiding beyond.

Understood. Understood. And with respect to your market-shaping customer, I presume that you are still in the investment mode with this customer. Is it fair to assume that you haven’t recognized any revenue from the relationship at this point? And if that's the case when would you expect you to bring the product to full fruition and be able to recognize revenue?

Yes, so I think, Gary, we mentioned quite a few market-shaping customers. That’s quite a few important ones, the leader in the industry. And I think I assume that you refer to the marquee U.S. semiconductor company. Clearly, we have a breakthrough and wide-ranging win with this U.S.-based semiconductor company while we have a breakthrough and wide-ranging win. We are in the early stage of partnership while very heavily engaging with them across the product line, the breadth of our engagement. So we are excited about it. But we continue to stay close and focused.

Okay. Thank you for taking the questions.

Sure.

Thanks. Good evening. Lip-Bu, let me ask you a competitive question regarding Mentor. That is, it’s becoming recently apparent that since the acquisition two and a half years ago, they’ve been doing quite well with news well beyond what they last reported in 2016, and particularly in the areas for which they were always the market leader, including verification, TSP, and it looks most recently also in hardware. The question is, have you encountered that before? And have you had to make competitive adjustments, let’s say, to the fact that Mentor is in fact doing so much better than they were pre-acquisition? And then couple of follow-ups.

Yes, Jay, first of all, we respect Mentor tremendously and right now part of Siemens is a very big $100 billion company. So we don’t take them lightly and meanwhile we respect them a lot. Then clearly, there are some products that are competing with us. I think you mentioned earlier the hardware verification emulation side, and of course their caliber products. So, I think clearly, we continue to respect them, but we are effectively competing with them and so we treat their business as usual.

All right. And you’ve grown your headcount pretty substantially year-to-date and also in Q1. Could you talk specifically about how well you’ve been able to bring on applications engineers? We’ve talked about this that for, I believe, the last year, going back to this product, you’ve had a significant increase to open REX, your AEs particularly domestically. And we are now looking for AEs well beyond the number of good items - Mentor were looking for. So, I imagine you’ve been able to onboard some, but can you talk about how you are doing in terms of bringing those kinds of people on? And then, lastly for John, you’ve talked about the last number of years about deal quality, price optimization, and so forth. When you think about your base of customer contracts in cohort terms or aging of the cohort of the contracts, how do you think you’ve done so far in terms of optimizing to the base of contracts or how much is left to be done in terms of outstanding contracts at renewal you can optimize?

Yes, so, Jay, let me answer the first question and then John will answer the second question. So on the headcount issues, we are pretty much on plan in terms of how we are going to bring on board in terms of the talent and also the AEs and the engineering talent we continue to bring in. John and I are very thoughtfully trying to bring in the talent with our executive team to really drive our focus on customer success. Clearly, now we have many multiple market-shaping customers we are proliferating and we need to have AEs to support customer success. That’s something that we are very focused on. In terms of the AE resources increase, clearly not just domestically, also internationally to support our customer. So I think all in all, I think it’s pretty much on plan, and we continue to drive that, and as we always say, only when we see the green light from the customer in terms of commitment, in terms of proliferation with us, then we add the AE and engineering talent to support it.

Yes, and Jay, in respect to your questions about deal quality and optimizing pricing, I mean, we are very disciplined and value-driven, and we believe the best way to derive value for our products is to collaborate with customers and deliver innovative and clearly differentiated solutions. As Lip-Bu highlighted, we are investing in opportunities to expand our business with market-shaping customers and we are investing in TAM expansion opportunities, the result from our Intelligent System Design strategy. I mean, in the end, it’s all about innovation which means attracting, retaining, and incentivizing top talent.

Thank you.

Yes. Thanks. Hi guys. I want to start off by circling back to the export control, the quantification. I understand you don’t want to speculate on what might come back in, but is there a way to look backwards and just give us some quantification of how much contribution we got from these customers in the past?

I guess, Sterling, I mean..

So let me start first, I think, John.

Yes, go ahead.

First of all, I think, Sterling, we are clearly complying with the regulation and limit some of our relationships with some of the customers that may be on that entity list, and clearly we read all the product portfolio to determine which are the products and related support subject to the limitations. So I think this is something that we really focus on what are the maintenance and support we can provide, and we wanted the best customer and we want to do the best we can. But meanwhile, very importantly, it is to comply with the regulation.

Yes, we are not going to speculate on if and when either the regulations may change or our ability to service those customers under the existing regulations may change. That’s our allocated guidance for fiscal 2019 assumes no change either positive or negative to current export limitations. But we would want to highlight that and emphasize that we have a very broad diversified and global customer base.

Okay. And then on the margin guidance for the back half of the year, you talked about the gross margins, but is there anything out there that would kind of dictate why the operating margin would be – I mean the startup in operating margins should stand kind of down for the third quarter or even the second half since the beginning? Usually that's kind of counterintuitive when we think about when you cycle rolls-off and some other timing of investments; we’ve usually thought about you guys like most enterprise software is being more profitable in the back half than the front half. So, just looking at the margin guideline for next quarter. Other than gross margins, is there anything else that we can look to describe why the operating margins will be down sequentially?

Of course, Sterling, yes. And like you say, I’d like to point out most of that’s expectation of a reversion to me and kind of for the gross margins. But on the operating margin side, we are investing in opportunities with market-shaping customers and in our TAM expansion opportunities. We also have the annual pay increases for employees that are effective in July here at Cadence. So, that kicks in for the second half of the year. And that’s what’s taken us to an expectation of 30% for the second half.

It’s perfect. Thank you.

Thank you. Lip-Bu, you referenced geopolitical tension in your prepared remarks which I think most would agree has increased probably over the last quarter or so. And notwithstanding the fact that your business remains obviously very healthy, have you seen any change in any customer buying patterns or demand due to this increased tension or perhaps unexpected customer attrition?

Yes, so far, now we don’t see that. But clearly, the process is long, and then clearly we'll see some impact. But clearly, right now, so far we don’t see any impacts. And then we have a very broad-based customer base, as John mentioned, and we are happy in serving those customers.

Got it. And then, so custom analog was particularly strong this quarter, I think 11% was the growth rate that you provided. Is there anything you can point to to sort of justify why that was, I think, sort of above trend, and should we think of this as somewhat anomalous? Or do we think that this business might be growing at a faster rate than it has historically?

Yes, we are very delighted with that 11% growth with the big base we have. And then clearly, it reflects our leading products that we have and the tools that we have, and the customer really is calling on us to deliver the design. Meanwhile, a lot of applications that I mentioned earlier in the 5G and some of the IoT and autonomous driving, and they are all mixed signal. That is really a strong combination of our strength in analog and now a very strong portfolio that we have in digital, and then make it very compelling to grow that the mixed signal RF area.

And there is always, we’d encourage you not to focus on any one quarter, but you kind of have to look at the results over a longer period. And then certainly I wouldn’t focus on – if you are picking one quarter, I wouldn’t extrapolate Q2 given the unusual nature of the impact of export limitations imposed during the quarter.

Got it. And then, just a follow-up on the Q2 gross margins. Just a little confused, it sounds like you are suggesting that the export limitations bumped up the gross margins and just trying to understand why that would be? Did you ship less hardware than you expected to, and that helped your mix, or just if there's any color you could provide on why the export restrictions would actually help gross margins?

Certainly, it’s not just the export restrictions; essentially, it’s a combination of events in the quarter. Like you say, the quarter was a little bit unusual in that respect. But hardware is a little bit more profitable than we originally anticipated. Services revenue was a little bit more profitable than we originally anticipated. And then just Q2 was unusual in itself given the export limitations imposed during the quarter. That’s what I am saying; I wouldn’t focus on – I wouldn’t focus on extrapolating Q2, but focus on any one quarter, but you look at the year really.

Got it. Okay. Thank you.

Hey guys. Thanks for taking my question. So, if I look at your China revenue growth, you guys are up 20%, 21% sequentially. And then in your prepared remarks, you don't really say that you couldn't ship. So when you say that there is an anomaly in Q2, was that an actual negative in the quarter or did it not actually impact the revenue volume?

So, China is up, yes, of course, yes. Yes, China was up; it was up – it was 12% of our revenue in Q2 in comparison to 10% in Q1. But of course that’s down from 13% in Q4. The nature of hardware and IP is a bit lumpy in nature anyway. But like I say, we wouldn’t read into any one quarter. But, yes, our forecast for the second half of the year assumes that the export limitations that are in place today remain in effect for the rest of the year.

Sure, yes. It’s just to clarify that. So I realize that you are assuming a neutral environment as of today, but it was a negative for Q2 results?

Yes, I think our results would have been higher if there were no limitations.

Hey guys. Thanks for taking my question. Just to follow up on that China argument. So it’s up to 12% of our revenue today versus a year ago, 8%, it was kind of trending between 8% and 10% except for the Q4 which probably was hardware heavy. Can you just talk a bit more about the overall growth? Is it the big players that are driving it or is it a lot of the smaller players that are basically trying to ramp up their semi space? Where are you seeing demand there if we kind of ignore the trade restrictions for a particular customer for now?

Sure. Like you say, I mean, our China revenue mix over the past five quarters has ranged below 8% in Q2, 18% to high of 13% in Q4 2018. Well, I am not inclined to attribute motivation. Our China business has been strong over the past several quarters, but for now our ability to deliver products and services to certain customers that are on the BIS entity list is limited. So we’d expect the percentage of revenue in China to be lower for the second half of fiscal 2019 than the first half.

Okay. That makes sense. Thank you. And then, just as a follow-up, if I think about, without thinking about a particular number, but just for margin outlook in the future, recently we've had this bump in gross margin helping and the mix helping. But going forward, would you expect the gross margin to start contributing to the operating margin improvement as well, or do you think it’s mostly based on the continued operating leverage, the business you are thinking about?

Yes, I would expect non-GAAP gross margin to return to more typical levels in the second half of the year. And then the reason we expect operating margins to be 30% is because we are investing in new employees as we invest in opportunities to expand our business with market-shaping customers and the TAM expansion opportunities we have and also because the annual pay increases for employees were effective in July. That’s impacting our Q3 and Q4 op margins. But I wouldn’t – I expect gross margin to return to more typical levels in the second half of the year.

John, if you look maybe a year or two ahead, and now asking for the guidance we are just kind of trying to analyze, is there a potential in gross margins that contributes to operating margin improvement in the future? Is it mostly going to be from operating leverage?

Again, everything we know is in our guidance for 2019, and we are not guiding beyond 2019.

Okay. Thank you. Thanks guys.

Hey guys. Can you hear me okay?

Yes.

Yes. Thank you.

Yes. Just a quick one from me. So, I appreciate your comments around kind of investing in your market-shaping customers and your TAM expansion opportunities. But as you think about these investments, over the next second half and longer term, is there one area that you feel is going to be more investments near term and then one area assuming more investments long-term? Or is there going to be kind of equal?

We assess that regularly as part of our normal review of annual operating expenses. But really back to Gary’s comment earlier in terms of rule of 40, our approach is to invest in the areas where we think we have the highest revenue growth. I am not saying 40 is the right number because actually we're not guiding beyond 2019. But essentially, the whole premise of the rule of 40 is you add your operating margin to revenue growth. So, basically the – where we have areas of more revenue growth we will invest a little bit heavier there, where we have less revenue growth opportunities, we will look for more profitability.

Okay. Thank you.

Yes. Hi. Thanks for taking my question. I have two of them for either Lip-Bu or John. Number one is on your IP business, especially with your hyperscale customers, are you guys doing any more customized projects or is it all mostly done behind us at this point? And then the second question is, on the PCB business, have you seen any incremental design activity in PCB over the last few months; and if so, do you think is that just a short-term blip? Or do you think there is something else interesting on the horizon longer term on PCB? Thank you.

So, I would add, Krish, let me address these two topics, and then John will add some color. First of all, IP, that was a very lumpy business, and clearly, if you look at the first half, it’s a double-digit growth for us, and that we like that. And then secondly, we just announced our Tensilica Q7. We are very excited about that whole double vision and AI performance for automotive AI, VR, mobile, and surveillance applications, and so we just put a release on that. We have a couple of design wins in the datacenter, mobile, and automotive applications. The other part we like a lot is this high-speed 30, 112 gig at 7-nanometer. We have very strong customer demand, and we are working very intensely with them. So overall, we like the IP business and will continue to build that as part of our whole – we call it the design excellence in core EDA and IP. That is our strategy. In terms of the PCB, interconnect side, it’s also a very good and solid business, and clearly the whole system interconnect and system analysis side, we have double-digit growth in that area, and so clearly the whole system analysis that will increase our $4.5 billion TAM market. Our Clarity 3D Solver is very well received by customers, with numerous evaluations and a strong customer engagement and interest. So, all in all, I think we are pretty solid on that.

And I would just add that IP, as Lip-Bu says, can be lumpy in any single quarter. But looking at the first half of IP, we had double-digit growth there, and we are happy with that. But with regard to system interconnect, it was a strong quarter for our PCB, IC packaging, and security analysis products, and again, as Lip-Bu said, we had double-digit growth there. So, we are very pleased with the results there.

Okay. Thanks, Lip-Bu. Thanks, John.

Thank you.

Thanks.

Thank you all for joining us this afternoon. The next phase of our strategy, Intelligent System Design, brings new opportunities in design excellence, system innovation, and pervasive intelligence and expands the total addressable market. Of course, Cadence is complying with all export regulations and will continue to assess and adapt to the situation. In summary, we are capitalizing on the multiple technology waves and further proliferating our solutions with a broader base of our customers. In closing, I would like to thank all our shareholders, customers, and partners, the Board of Directors, and our hardworking employees for their continued support.