Cisco Systems Inc (CSCO) — Q1 2020 Earnings Call Transcript

Thanks, Michelle. Welcome everyone to Cisco's First Quarter Fiscal 2020 Quarterly Earnings Conference Call. This is Marilyn Mora, Head of Investor Relations. And I'm joined by Chuck Robbins, our Chairman and CEO and Kelly Kramer, our CFO. By now, you should have seen our earnings press release. A corresponding webcast with slides, including supplemental information, will be made available on our website in the Investor Relations section following the call. As discussed in early in Q1, we have made certain reclassifications to prior period amounts to conform to the current period presentation. Income statements, full GAAP to non-GAAP reconciliation information, balance sheets, cash flow statements and other financial information can also be found in the financial information section of our Investor Relations website. Throughout this conference call, we will be referencing both GAAP and non-GAAP financial results, and we will discuss product results in terms of revenue and geographic and customer results in terms of product orders unless stated otherwise. All comparisons made throughout this call will be made on a year-over-year basis. The matters we will be discussing today include forward-looking statements, including the guidance we will be providing for the second quarter of fiscal 2020. They are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent reports on Forms 10-K, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. With respect to guidance, please also see the slides and press release that accompany this call for further details. Cisco will not comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. In Q2 of fiscal 2019, we completed the sale of our SPVSS business and accordingly had no revenue or expense from that business in Q1 fiscal 2020. As such, all of the revenue, non-GAAP and product orders information we will be discussing today is normalized to exclude the SPVSS business from our historical results. We have provided historical financial information for the SPVSS business in the slides that accompany this call and on our website to help understand these impacts. The guidance we provided during our Q4 earnings call has been normalized in the same way. I will now turn it over to Chuck.

Thanks Marilyn. We delivered a solid quarter against a challenging macro environment. While we're pleased with this performance, we're most focused on the environment as we move forward. We'll discuss this more in a moment. What's happening inside Cisco regardless of the macro is an unrelenting focus on driving innovation, transforming our business, and exceeding our customers' expectations. In Q1, as you've seen, we have revenue growth of 2% and double digit non-GAAP earnings per share growth. We also delivered strong non-GAAP gross margins and non-GAAP operating margins along with solid operating cash flow. We continued to invest in innovation and expand our market opportunities, while maintaining our commitment to maximizing shareholder return. Over the last year, many of you have heard me talk about the resilience of the global macro environment. However, on our last earnings call, we indicated that we had begun to see some weakness, and that weakness continued throughout Q1 and was more broad-based. While the main challenges continue to be service provider in emerging markets, this quarter we also saw relative weakness in enterprise and commercial. Despite these headwinds and because of key decisions we made four years ago to change our business model, we remain well positioned to capitalize on the tremendous opportunities across cloud, automation, 5G, security, and collaboration. Our transition to software continues to progress, and we are on track with where we said we would be at the end of fiscal year 2020. This transition to software not only aligns to how our customers want to consume our technology, but we also believe it will lessen the impact of macroeconomic shifts in the future. Despite the current uncertainty, our innovation pipeline remains strong. At our annual partner summit last week, we announced several exciting additions to our portfolio, including network automation and analytics, cloud-based networking, collaboration, as well as new security capabilities. Over the next couple of months, you will see us deliver even more innovation to help our customers achieve their business objectives. Now, I'd like to share some recent highlights across the business. Our enterprise networking portfolio continued to grow as customers increasingly adopt our intent-based networking portfolio, spanning our Catalyst 9000 family of switches, Meraki cloud-based platforms, and next-generation data center solutions. Our customers today are running applications across multiple cloud environments, and this shift requires a fundamental change in how they build their networks and their security architectures. To help them achieve this, we are automating connectivity across any cloud. A good example of this is our recently announced partnership with Microsoft to help our customers improve network connectivity with the highest level of security from branch offices to cloud-based applications by integrating Cisco's SD-WAN solution with Azure’s virtual WAN. To further extend our enterprise networking leadership, we continue to expand our cloud-managed network and security offerings. Last week, we also announced an expansion of our Meraki portfolio, including continued integration between Meraki's dashboard and Cisco's switching portfolio, as well as innovative new LTE based WAN connectivity solutions. We believe our planned acquisition of Acacia will also play a critical role in building upon the strength of our switching, routing, and optical networking portfolio. By utilizing our innovations across silicon, software, and optics, we are enabling our customers to transform their networks. Now let's turn to security, which is always at the heart of everything we do. It's deeply integrated into the fabric of our entire portfolio to help secure our customers' data and address their modern application and multi-cloud environments. Cybersecurity continues to be a top concern for our customers as they evolve their enterprise architectures to address the challenges of an ever-changing threat environment. We have the most comprehensive integrated cybersecurity platform in the market designed to enable our customers to securely connect any application running on any cloud and deliver to any device. We've been building an expansive zero trust framework for securing access across the workforce, the workplace, and the workload. As the leader in zero trust, our customers are increasingly turning to us to help them extend simple and trusted access to their users in hybrid and multi-cloud environments. This is leading to strong uptake of Duo, our identity access management solution, which provides continuous authentication, ensuring the right people are able to access the right applications. To further reduce complexity in our customers' environments, we recently announced new enhanced capabilities in our firewall, breach defense, endpoint protection, and Talos incident response solutions. These innovations are designed to provide greater threat protection and enhance the benefits of our platform. We also continue to leverage AI and ML capabilities through our industry-leading threat intelligence platform Talos, along with Stealthwatch and Umbrella to bring our customers simplicity, visibility, and insight that no other company can deliver. Moving to applications, we are rapidly becoming the center of our customer strategy for empowering teams and increasing productivity, as 95% of the Fortune 500 use our collaboration portfolio. This is leading to solid performance in our businesses as a growing number of customers adopt our unique solutions. During the quarter, we expanded our offerings to empower our customers for the modern workplace, protecting data from ever-increasing cyber threats and delivering highly secure productivity and collaboration solutions. A good example of this is our next-generation WebEx, our cloud-based team collaboration platform, enabling better teamwork while helping users stay secure with integrated end-to-end encryption. We also launched Single Platform Advantage, delivering all collaboration workloads, including calling, messaging, meeting, and contact center from a single platform. In addition, we announced our new Cisco WebEx Edge for devices, as well as hardware-as-a-service options for phones, desks, and room-based video systems. We're raising the bar for the industry by continuing to drive innovation in our expanding family of cognitive collaboration offers with AI and ML integrated capabilities. During the quarter, we acquired CloudCherry, a market-leading customer experience management solution to augment our contact center portfolio with cloud analytics and AI to increase productivity and enhance user experiences. We also achieved a strong quarter in our App Dynamics business with yet another quarter of double-digit growth. Our investments in App Dynamics have made Cisco the leader in application monitoring and analytics. We're helping our customers transform their digital businesses through our comprehensive portfolio of solutions that turns data into actionable real-time insights by linking application performance to business outcomes. To summarize, while we remain in a challenging macroeconomic environment, I'm proud of our progress, both in our own continued transformation and in how we are empowering customers to drive their own transformation and shift to the cloud. We have a clear vision and strategy and are executing well against it to capture the many opportunities ahead. I feel great about our portfolio and I believe fully in our customers' commitment to our technology solutions. We will also continue to invest in organic and inorganic innovation to position Cisco for the long term. We also remain committed to managing our business to ensure we drive the greatest long-term value for our customers, employees, partners, and shareholders. Now, let me turn it over to Kelly.

Thanks, Chuck. I'll start with a summary of our financial results for the quarter, followed by the guidance for Q2. Our overall Q1 results were solid. We executed well with revenue growth and strong margins, net income, and EPS. Total Revenue was $13.2 billion, up 2%. Our non-GAAP operating margin rate was 33.6%, up 1.3 points; non-GAAP net income was $3.6 billion, up 5%; and non-GAAP EPS was $0.84, up 12%. Let me provide some more detail on our Q1 revenue. Total product revenue was up 1% to $9.9 billion. Infrastructure platform was down 1%. All of the businesses were up except for routing. Switching had growth in both campus and data center with the continued ramp of the Catalyst 9000 and strength of the Nexus 9000. Wireless grew driven by Meraki. Data center had solid growth, led by HyperFlex. Routing declined due to weakness in service providers. Applications were up 6% with growth across all the businesses, including double-digit growth in App Dynamics. Security was up 22% with strong performance in Identity Access, advanced threat, unified threat, and web security. Service revenue was up 4%, driven by software and solution support. And we continue to transform our business delivering more software offerings and driving more subscriptions. Software subscriptions were 71% of total software revenue, up 12 points year-over-year. When we look at the impact of acquisitions on our Q1 results year-over-year, there was a 50 basis point positive impact on revenue. In terms of orders in Q1, total product orders were down 4%. Looking at the geographies, Americas and EMEA were each down 3% and APJC was down 5%. Total emerging markets were down 13% with the BRICS plus Mexico down 26%. In our customer segments, public sector was up 6%, enterprise and commercial were each down 5% and service provider was down 13%. Remaining performance obligations, or RPO, at the end of Q1 were $24.9 billion, up 11%. RPO is our total deferred revenue plus unbilled deferred and represents total committed non-cancelable future revenue. From a non-GAAP profitability perspective, total Q1 gross margin was 65.9%, up 1.7 points. Product gross margin was 66.1%, up 2.5 points and service gross margin was 65.4%, down 0.4 points. In terms of the bottom line from a GAAP perspective, Q1 net income was $2.9 billion and EPS was $0.68. We ended Q1 with total cash, cash equivalents, and investments of $28 billion. Operating cash flow was $3.6 billion, down 5%. Normalized for the $400 million legal settlement we received from a risk debt in Q1 of fiscal '19, operating cash flow was up 7%. From a capital allocation perspective, we returned $2.3 billion to shareholders during the quarter that was comprised of $0.8 billion of share repurchases and $1.5 billion for our quarterly dividend. We continue to invest organically and inorganically in our innovation pipeline. During Q1, we closed four acquisitions all in the applications area. These moves are consistent with our strategy of increasing investment in innovation and R&D for our growth areas. To summarize, we had a solid Q1. We executed well with top line growth and strong profitability. We're seeing the returns on the investments we're making in innovation, and driving the shift to more software and subscription, delivering long-term growth and shareholder value. Let me reiterate our guidance for the second quarter of fiscal '20. This guidance includes the type of forward-looking information that Marilyn referred to earlier; we expect revenues to decline in the range of minus 3% to minus 5% year-over-year; we anticipate the non-GAAP gross margin rate to be in the range of 64.5% to 65.5%; the non-GAAP operating margin rate is expected to be in the range of 32.5% to 33.5%, and the non-GAAP tax provision rate is expected to be 20%; non-GAAP earnings per share is expected to range from $0.75 to $0.77. I'll now turn it back to Marilyn so we can move into the Q&A.

Thanks, Kelly. Michelle, let's go ahead and open the line for questions. And while Michelle is doing that, I'd like to ask the audience to address one question only, so that we have plenty of time for the others. Michelle, I'll turn it over to you.

Chuck, maybe you can kind of walk us through a little bit kind of how the quarter evolved as far as the demand pattern. You're talked about weakness became, first of all, more broad based but also started into the enterprise and commercial. Any more color you can give us there, either from a product or regional standpoint. And with regards to your working assumptions into the next quarter, into the January quarter, is it your assumption that the intensity of the softness you're seeing right now will just stay as is, or getting worse? Help us think about the framework you have in mind when you give the guidance.

If you remember from the last earnings call, I mentioned that we started to notice some early signs of macro impact towards the end of Q4. This trend continued throughout the quarter, and overall, it was worse than we expected at the outset. The downturn was quite widespread, evident from the regional order numbers reported by Kelly. We saw declines of negative 3, negative 3, and negative 5 in the Americas, EMEA, and Asia, respectively. In terms of technology, the weakness was pretty consistent across the board. The public sector remained strong, but enterprise commercial weakened. Service providers and emerging markets, which were under pressure last quarter, remained about the same. We previously managed to offset this with strength in commercial, enterprise, and public sector, but with their weakening, it affected our ability to do so this quarter. While this may sound like an excuse, it coincided with a quarter where we faced an extremely challenging comparison. This was likely the most difficult quarter we could have encountered. Looking ahead, we have assumed that the current situation will remain unchanged. We haven't projected any significant further deterioration or improvement beyond what we've outlined today.

Chuck, thanks for the detail on the last question. I just wanted to get a sense of what you're hearing from your customers in terms of are you hearing that if some of the trade aspects of that are depressing the macro get resolved. Do you expect some of them to come back in terms of spending, what are you hearing from your customers? And if you can give us an update on the order trends in China as well that would be helpful?

It seems that our customers are not expressing much noise or urgency right now. There appears to be a slight pause in activity. We've noticed that conversion rates in our pipeline are lower than usual, indicating that deals haven't closed as they typically do. There weren't any significant loss ratios; rather, it was a matter of deals slipping away. We did see some large deals complete, but they ended up being smaller than expected. Both Kelly and I experienced this with a few clients; discussions began on larger transactions, but they finalized at a smaller scale. Additionally, we observed some deals that were delayed, resulting in a mix of factors affecting our performance. Our teams have also mentioned that the approval processes at several clients in various industries are changing, often requiring additional signatures and scrutiny on expenditures. These trends are familiar to me, and I recognize them from past experiences, which is essentially what we encountered this quarter.

China continued to experience a decline, with a drop of 31% compared to last quarter's decrease of 26%. This trend indicates that the decline in China is accelerating.

Kelly, if you could tell us pricing, I know we're going to see in the Q. But if you could tell us the rate of price erosion, if there has been a change. And then if I did the math correctly on OpEx, it looks like your guidance would suggest around $3.8 billion for the January quarter, that'd be down $400 million sequentially and $150 million year-over-year. Do I have that right? Is that the way you're thinking about it? And related to that, how should we think about OpEx going forward throughout the year? How do you plan on managing expenses given the less than expected revenue outlook?

We had an exceptionally strong quarter in terms of pricing with the least amount of price erosion we’ve seen in a while, which impacted our product gross margin rate by only 40 basis points. We've made significant strides in pricing strategies; for instance, where we notice price elasticity, we are implementing price increases effectively while transitioning products. Although we didn't feel the effects this quarter, we are beginning to notice pricing pressure in the server market, which we expect to become more pronounced next quarter as reflected in our forecasts. Overall, Q1 was a notably strong quarter for pricing. Regarding operating expenses, as per the ranges I mentioned, it indicates a decrease, and we are managing expenses as we typically do—balancing our investments while also looking for cost-saving opportunities. Your assessment is correct, and that is our approach moving forward.

Kelly, the real question is, can operating margin go up with revenue being slightly down, could you drive higher operating margin…

Let me explain the overall margins, as I believe that is the main point of interest. Our margins are improving, and you can see that reflected in our guidance. On the positive side, the software mix is certainly enhancing our margins, leading to a significant benefit due to the increased software content we are offering and selling. However, I anticipate some pricing pressures moving forward, particularly in the server market as DRAM prices decline, which may have a slight negative impact next quarter. That said, we are still experiencing positive effects from the earlier DRAM price decrease related to the server market, which we began to notice a couple of quarters ago. This quarter, this has had a substantial favorable impact, which I expect to continue next quarter. After that, as you may recall, the benefits we noted in Q3 of '19 will become a smaller advantage for year-over-year comparisons. We will need to monitor pricing developments in this area. So, overall, I don't expect our margins to stay at the record level we achieved in Q1, but the fundamental trends are positive, with the software mix contributing beneficially and effective product management helping us tackle pricing elasticity.

I'm wondering, Chuck, or Kelly or maybe both of you. Can you talk a little bit about the order of growth versus your current expectations for economic development? Clearly, Chuck, as you pointed out and Kelly, we saw weakness kind of across the board in orders. But if we think about kind of a relatively flat environment from here going forward, as you said you're forecasting on. How long does it take us to start to get to more of a flattish and then even recovering order book in that kind of scenario and environment? Thanks a lot.

Kelly, I'll let you handle that.

James, that's a challenging question. I would say that the current headwinds are likely to persist in the short term. I don't see any factors that could change the current momentum given the uncertainty and business confidence in the macro environment, as Chuck mentioned. However, from a portfolio standpoint, we remain confident, and we are continuing to make improvements on the software metrics despite the macro challenges. As we move into the second half of the year, we will have easier comparisons, which may not be a major victory but is still a reality. We will continue to execute regardless of the macro conditions. Chuck, would you like to add anything?

James, I would say that if you look around the world right now, there are significant issues such as the situation in Hong Kong, the China-U.S. trade relations, developments in Washington, Brexit, and uncertainty in Latin America. If any of these major issues are resolved, some of the uncertainty could be lifted, and business confidence often declines when there is a lack of clarity. This lack of clarity has persisted for a long time, and I believe it has finally started to affect things. You can likely guess, just as we can, that these larger issues need to reach some sort of conclusion. Additionally, we have the upcoming elections next year that we will need to monitor. However, I want to reiterate what Kelly mentioned. Despite fluctuations in order growth, our software transition is progressing as planned. This quarter continued to show positive results in our software portfolio. We are on track to meet the targets we set for ourselves at our analyst conference by the end of 2020, which is encouraging. We are committed to maintaining our focus and execution. The teams have done an excellent job preparing our portfolio for its current position. Therefore, I am confident that our customers remain dedicated to these technologies. Just because there is a pause and we experience a slowdown in one quarter does not mean we aren't set up well for the future. I feel good about where we stand long-term.

I wanted to inquire about the decline in the commercial order rate. It seems that last quarter you hadn't noticed much deterioration towards the end, and I assume it's worsened this quarter. Could you provide insights into what you're observing in that specific market? Additionally, is the weakness confined mainly to the U.S., or are you seeing it in other regions as well? Any additional information you could share would be appreciated.

Rod, that was a good question. It was one of the significant signals to us that something is happening because the commercial business is typically quite resilient, and the decline was widespread across all regions globally. I believe all three regions experienced negativity, indicating it was a broad issue. However, I think that this segment will also be among the first to recover once we start to see improvements, which is a positive sign.

I wonder if you could provide more color on what you're seeing in the U.S. service provider business and also more broadly, how you're thinking about the service provider vertical going forward. Obviously, it's been weak for a while, but assuming that that environment stays that way. Are there product refreshes and so forth coming down the pipe that can better the year-over-year trends? Thank you.

In the U.S., it's quite apparent what's happening with the major players. They are currently focused on expanding their trials and developing their broader consumer-based 5G services. Most of the traffic will likely run over their existing networks for now. Once they start building the more extensive enterprise service delivery 5G networks, that's when we can step in to assist with re-engineering backbones for greater capacity and increased traffic. I expect they might begin some of this in the second half of 2021, depending on their pace. We also have some announcements in the coming months that align with their goals. Globally, the situation has weakened significantly in Europe, while it remained about the same in the U.S., with some areas in Asia performing well, particularly Japan. This business heavily relies on significant deals. For now, that's the current outlook.

So if I take a five quarter view, six quarter view, on your results, not just this quarter on the guidance, I see constant deterioration in the growth rate, organically from about 4.5% now we're getting to minus 5%, or I have to look exactly at the guidance where we are. And the question I have is, not about the environment but rather about the portfolio. If you ignore the environment as much as we can, what can you do with the portfolio in order to change the trend line and reaccelerate the growth? Maybe even start with, can you identify what are the weak areas versus what are the strong areas and then what's in your power to change versus something that may take longer? Thanks.

That's a great question and something we focus on every day. We've seen continued strength in the campus refresh within our portfolio. Over the last couple of years, we've transitioned our entire enterprise networking portfolio to a mandatory subscription model, and those new products are growing very strongly as customers continue to deploy them. One of our main goals is to keep moving towards the software model. After 30 years of operating under a net 30 CapEx model, we are currently in the middle of this transition and are making progress according to our timeline. This is our most significant strategic move. Looking at our portfolio, we made several new announcements last week and have more coming up. We have many customers who are still buying from us. Although there’s a slowdown, our technology still provides meaningful value to our customers, and we will work diligently to find the areas that resonate best with them. We notice this value particularly with security technology, and we are also developing some other initiatives that have not yet been announced. We will continue to pursue the strategies you mentioned.

Obviously, you laid out a lot of the details about the challenges. When we look back historically over Cisco, their history, the last time we kind of saw such negative trends, were kind of July 2017. There was kind of about a fourth quarter pause before recovery. Is there anything different about it this time? And some people will say, well, white boxes starting to hurt you a lot. Is it white boxes? Is it generally macro? Or why wouldn't it be, like four quarters, like what we saw last year in 2017? Thank you.

First of all, I think that given the broad based and the rapid change that we saw, I don't believe it's anything like white box or anything like that. It's broad across the portfolio. It's broad across geographies. And we're, as Kelly said, obviously, in the second half. We don't like to talk about comps. But the math is different in the second half of the year. But we also have all the things that I just talked about with Tal. We also have this Wi-Fi 6 transition. At some point, we will have some spinning going on around the 5G backbone transitions. We got 400 gig coming next year. So there are a lot of things. And I also believe that our customers, they will pause for a while. But technology is so absolutely core to their fundamental strategies that it just seems to me that the time that they're going to be able to pause is going to be shorter than what you would have seen in the past. I mean, they worry about their competitors' investments, they worry about falling behind. So I think they'll hit the pause button because of all the uncertainty. I think we have to just see how long it lasts in today's world, given the strategic value of all the technology. And frankly, everything that we're building is incredibly important to them as they deal with this new cloud world and re-architecting their traffic flows and their security architecture. And there's only so long they're going to build a pause on doing that. But we'll see how it turns out.

I want to revisit the earlier comments regarding the software expansion and the progress outlined at previous analyst days. If I remember correctly, it suggested that about 20% of your total product revenue would come from software. As we consider the product portfolio and the shift toward subscription models, is this the right trajectory? Furthermore, looking ahead, do you expect an even higher proportion of your business to be recurring? I'm trying to understand what additional opportunities exist for expanding the product portfolio around this subscription approach for the company.

I'd say what we laid out is we said by the end of '20, we should have 30% of our revenue be software, and software and services be 50%. So that's the metric we are pacing towards. And your 20% number, we are already past. So we are driving to be at that 30% by the end of this year. So like Jeff mentioned, we are pacing well with that. This transition that we're driving has greatly increased the amount of software we are selling with our system. So that is all going well.

Yes, I think Kelly mentioned that by the end of 2020, our goal was for 30% of our revenue to come from software. Additionally, in Q1, 71% of our software revenue was derived from subscription and SaaS, compared to about a third or less four years ago. This illustrates the success of the transition we have been implementing.

Yes, it’s a good point. Actually, the target for the end of '20 for that was to be 66%, so we've passed that metric already.

I just hoping to get more color on sort of the campus switching cycles with the Catalyst 9000, and just kind of where you think we are, especially with large enterprises as that really drives, it seems like more of the growth of the business anyways and just trying to understand that. And then just make sure that we're thinking about it correct. When you're talking subscription within this business line, you're talking more of a term license than kind of recurring monthly, correct?

Yes, on that one, subscription meaning. Yes. So if I sell a Catalyst 9000 switch now, it's sold with a subscription that gets renewed three or five years since putting on the term from now. So that's what we're talking about. So of all the software we're selling is based on a term based value that gets renewed.

And Jim, to give you an update on our progress, we're experiencing very strong year-over-year growth on those platforms. The transition from the old to the new is proceeding as we expected. We discussed yesterday how to address the question of our current position in this process. I mentioned last time that we were in the second inning, and we joked that we might now be in the bottom of the second inning. However, we're still in the early stages of this transition, and it is going very well. Our entire enterprise networking portfolio is now in refresh mode with Wi-Fi 6 access points and the new Catalyst 9000. Additionally, last week we announced the capability to manage the Catalyst 9000 under the Meraki platform, enabling customers to benefit from it, and we will continue to expand this offering across our other products. Everything is progressing well, and it's still early. Thank you, Jim. So let me just wrap up and say that, obviously, it's a complicated world right now. And we certainly felt the continuing impact that we talked about at the end of our last quarter. That being said, I have great confidence in where we are with the portfolio. We shared some metrics today on the software transition that I think is going incredibly well. And notwithstanding, you know, the short term challenges, we feel really good about the future. And so thank you all for being with us today. And I'll kick it back to Marilyn.

Thanks, Chuck. Cisco's next quarterly earnings conference call, which will reflect our fiscal 2020 second quarter results, will be on Wednesday, February 12, 2020, at 1:30 PM Pacific Time, 4:30 PM Eastern Time. Again, I'd like to remind the audience that in light of regulation FD, Cisco's policy is not to comment on its financial guidance during the quarter unless it is done through an explicit public disclosure. We now plan to close the call. If you have any further questions, please feel free to contact the Cisco Investor Relations Department. And we thank you very much for joining the call today.