CBAK Energy Technology, Inc. (CBAT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to CBAK Energy Technologies Second Quarter and First Half of 2021 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I'll turn the call over to Thierry Li, Investor Relations Director of CBAK Energy. Mr. Li, please proceed.

Thank you, operator, and hello, everyone. Welcome to CBAK Energy's Second Quarter and First Half of 2021 Earnings Conference Call. We released results earlier today. The press release is available on the company's IR website at ir.cbak.com.cn as well as from newswire services. A relay of this call will also be available in a few hours on our IR website. On the call with me today are Yunfei Li, who is our Chief Executive Officer; Mrs. Xiangyu Pei, who is our Chief Financial Officer; Mr. Xiujun Tian, our General Engineer; and Mr. [ Ding ], our interpreter. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company doesn't assume any obligation to update any forward-looking statements except as required under applicable laws. Also, please note that, unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Mr. Yunfei Li. Mr. Li will speak in Chinese, and I will translate comments in English. Go ahead, Mr. Li.

[Foreign Language]

[Interpreted] Thank you, and hello, everyone. Thank you for joining our earnings conference call today.

[Foreign Language]

[Interpreted] We are very pleased with our solid financial performance for the first half of 2021 thanks to the robust sales growth for uninterruptable power supply batteries. Net revenues grew to $5.9 million in the second quarter and $15.3 million in the first half of 2021, up 27% and 33% year-over-year, respectively, reflecting the strong market [indiscernible] for our industry-leading battery products and our effective business strategy execution. Our gross margin increased by 16.6% from the prior year to 19.2% in the first half of this year.

[Foreign Language]

[Interpreted] During the first half of 2021, we continued to leverage our advanced research and development capabilities to innovate our products, which then help us broaden product applications. With additional capital raised from new financing, we are well-positioned to execute our business plans, such as capacity expansion. Moreover, we made a strategic consolidation across the supply chain for great synergies. I would like now to share with you more information on these recent developments, which have furthered our mission to become a leading innovative energy storage solution provider in lithium-ion battery producer in China.

[Foreign Language]

[Interpreted] First, let me dive into the remarkable strides that we have made for product innovations during this period and our future development plans.

[Foreign Language]

[Interpreted] We have successfully developed the special 26650 battery, especially for ultralow-temperature applications. This new battery is designed to operate in temperatures as low as minus 40 to minus 50 degrees Celsius and discharge a maximum C-rate of 60C at room temperature. On top of positive test performance results, the special 26650 battery is highly attractive for products used in extremely low-temperature conditions such as in China's Northern region harsh weather conditions as well as for the aviation and aerospace industries. At this point, our clients have all given very positive initial responses, and we are anticipating mass production of the special 26650 battery at the end of this year as well as expecting its meaningful contribution to production volume in coming years.

[Foreign Language]

[Interpreted] Meanwhile, we are actively developing a series of large cylindrical batteries for the LEV market. The batteries for light electric vehicles have a capacity of nearly 4x that of regular batteries and 20% lower in cost, making this product a perfect solution for the LEV market. We aim to be a major battery supplier for top LEV manufacturers and expect growing traction among an expanding customer base with our high price to performance ratios and strong ability to adapt to customer needs.

[Foreign Language]

[Interpreted] We were capable of broadening use scenarios by the support of our high-quality and dependable battery products. Earlier this year, we started cooperating with Chengdu Raja New Energy Automotive Technology Corporation to jointly develop a battery swapping project for food delivery and the logistics industries as well as an uninterruptable power supply project for traffic lights. As delivery services are becoming an increasingly indispensable part of life, the batteries ramping project aims to provide solutions for delivery riders that suffer from more battery weight as well as inconveniences and risks in charging. The UPS project for traffic lights, on the other hand, keeps roads safe by ensuring the traffic light stays on during power outages. So far, our cooperation with Raja went well, and we will provide updates in the following quarters, should there be any new programs.

[Foreign Language]

[Interpreted] In addition, we'll also focus our R&D efforts on developing next-generation batteries to enable EVs faster acceleration and longer ranges in driving. The batteries will have lower loss rates and lower costs and present a huge opportunity in EV market. Our strong research and development capabilities are driven by continuous product innovation. Our product development road map is led by the new generation of technologies and market potential in the clean energy sector. We have established partnerships to develop hydrogen fuel cell and solid-state batteries. And these initiatives will allow us to maintain the mid-, long-term industry advantages through technological innovation.

[Foreign Language]

[Interpreted] Going ahead, we will continue expanding our operations in China and establish our foothold in the global market through an increase in investment in R&D and the companies' technical advantages in cylindrical batteries.

[Foreign Language]

[Interpreted] Second, a strategic capacity expansion in the growing addressable market with continued new product developments and increasing customer demand and orders, we are ramping up our production capacities, 2 major projects underway, the first being the target that's expansion mainly for products used in energy storage sector. We plan to invest RMB 50 million, which is equivalent to USD 7.4 million to add the additional product line in our Dalian plant. The new production line has an annual capacity of 0.4 gigawatt hour and is expected to be completed by the end of 2021. The total annual capacity in Dalian plant will increase to 2 gigawatt hour in 2021. This expansion allows the plant to produce an additional 100,000 units of Model 26650 batteries per day. Secondly, Nanjing plant will be established in 2 phases to mainly produce products for the EV and LEV markets. In Phase 1, we plan to invest a total of RMB 70 million, which is around USD 11 million, in a 10,000 square meter space to develop a production line with an initial capacity of 0.7 gigawatt hour. Both projects are on the right track of expansion, and we are pleased with the progress. The USD 70 million we raised in February supports our business expansion strategies and accelerates the product to go to the market.

[Foreign Language]

[Interpreted] Next. Through a strategic consolidation across the industry supply chain, we are pursuing remarkable synergies which will further drive the company's future growth and expansion. As a part of this strategy, we decided to buy 81.56% of Hitrans equity interest via our subsidiary, Dalian CBAK Power Battery Corporation. Hitrans is a leading developer and manufacturer of ternary precursors and cathode materials in China and is one of CBAK Energy's key suppliers. In the production of lithium-ion batteries, the cost of cathode materials accounts for about 40% of the total cost. So we believe this acquisition for a reliable raw material supply will place Hitrans as a strategic and complementary addition to fuel the continuous expansion of CBAK's production and unlock potential for cost control. It will complete then CBAK Energy's business portfolio, forming an innovative ecosystem across all our businesses. This move will also advance the company in diversifying product strategy and support continued improvement iterations to maintain our market competitiveness. This transaction is still subject to certain closing conditions and is expected to complete in the third quarter of 2021.

[Foreign Language]

[Interpreted] Above all, our goal is to build an innovative ecosystem-based solution to power electric storage facilities and electric vehicles. We are moving forward to drive profitable growth as we increase our investment in expanding our capacities and R&D capabilities. Our innovation further strengthen our existing product portfolio and drives growth in our addressable market with new products. We are confident in taking our business into new areas that will better serve our customers. By leveraging our core competencies and deploying new products, we are well positioned to ensure rapid growth in the battery market.

[Foreign Language]

[Interpreted] Now let me turn the call over to our CFO, Xiangyu Pei, who will provide details on our financial performance.

Thank you. Thank you, Mr. Yunfei Li and Thierry. And thank you, everyone, for joining our call today. I will now go over our key financial results for the second quarter and first half of 2021. For the full details of our financial results, please refer to our earnings press release. Our solid financial performance demonstrated strong market revenues to our high-quality and reliable batteries. Compared to the same period of last year, our net revenues increased 27% year-over-year to USD 5.9 million in the second quarter of 2021 and the [indiscernible] represent to USD 15.3 million primarily driven by growing demand in batteries and our ability for uninterruptible supplies. Fueled by the increase in the sales volume, our cost of revenues grew to USD 4.8 million in the second quarter and USD 0.4 million in the first half, up 6% and 10% year-over-year, respectively. Compared to the revenue growth, we still generated positive operating leverage of 21% and 23%, respectively, reinforcing our confidence in our growth strategy. Driven by higher sales volume and cost management efforts, our profitability also increased. Gross profit was USD 1.1 million in the second quarter and USD 2.9 million in the first half, an increase of 1,148% and 899% year-over-year, respectively. Also, on a year-over-year basis, our gross margin also increased by 1,670 basis points to 18.6% in the second quarter and 1,660 basis points to 19.2% in the first half of the year. The margin increase is primarily driven by higher utilization of plant capacity and optimization of manufacturing engineering. Total operating expenses were USD 3.8 million in the second quarter and USD 5.7 million in the first half of the year increased 283% and 79% from the previous year, respectively. We increased our research and development expenses by 171% year-over-year to USD 1 million in the second quarter and 124% to USD 1.5 million in the first half of the year. The increase was primarily related to the expiration of the Chinese government, COVID-19-related policy aimed to avail to corporation social insurance burden and increase in talent in R&D. In addition to that, the company increased the research expenditure into new model established for light electric vehicles, electric vehicles and batteries for ultralow-temperature environment. The sales and marketing expenses were USD 0.5 million in the second quarter, again, USD 0.8 million in the first half, an increase of 435% and 288% year-over-year, respectively. Our general and administrative expenses were USD 2.3 million in the second quarter and USD 3.7 million in the first half, up 209% and 96%, respectively. Apart from the format and the exploration of Chinese government COVID-19 relief policy, the increase in G&A expenses will also result increased employees of the new plant construction in 19. [indiscernible] projects and additional product line in Dalian will be completed and in production by Q4 of 2021. We expect to ramp up the production with customer orders and generated [indiscernible] values. We continue to manage and improve customer relationship and the quality of our customers. Our recovery of doubtful accounts was 0.1 million in the second quarter of 2021 compared to 0.2 million in the same period year of 2020. In the first half of 2021, the recovery of doubtful accounts was 0.3 million compared with a provision from doubtful accounts of 0.4 million in the previous year. Our change with our value of warrants was USD 5.8 million in the second quarter and USD 34.2 million in the first half year compared to both nil in the prior year. Support of [ bilateral ] growth in revenue improved the gross margin with positive change in fair value of warrants, we were able to generate net income of USD 2.7 million in the second quarter and USD 32.3 million in the first half compared to a net loss of USD 1.2 million and USD 3.6 million in the same period of 2020. As [ Yunfei Li ] mentioned earlier, in February, we successfully bid a USD 70 million in direct offering of ordinary shares to finance our business plan and working capital. As of June 30, 2021, our cash and cash equivalents reached USD 33.3 million compared to USD 11.7 million as of December 31, 2020. With strong cash position and an improvement in financial results, we remain confident that we are on the right path for accelerated growth. We now conclude our prepared remarks. Let's now open the call for questions. Operator, please go ahead.

[Operator Instructions] Our first question comes from the line of Karl Birkenfeld from American Trust.

Does CBAK business involve sensitive technology that might cause the Chinese government to terminate its [ exports ] listing status in the U.S. And I have a few more questions to ask.

And I'm translating your question to our management [indiscernible] at this moment. [Foreign Language]

[Foreign Language]

[Interpreted] Thanks very much for the -- answering. And actually, as the Director mentioned, actually, the new -- what we are dealing with is the industry of the new energy. In this term, all the relevant technologies are open to the public around the world. And actually, there is nothing related to the sensitive technologies. And also, on the other hand, the Chinese government is giving the largest support to the development of the new energy and the relevant development of the business globally. So we don't have to worry about any activities in terms of technology. Thank you. And we will have another director to also add some more information for a reference. Thank you.

Thank you for putting all my investors at ease. I have other questions here.

Just a moment because we have another manager to add more information for -- in this term.

[Foreign Language]

[Interpreted] And also additional information for your kind of reference, actually, in August 11, the Chinese Central Committee or the central government issued a very important file. In this file, there are some several key points are taken into the key considerations and monitories in terms of the cross-border business. They are like big data, fine tech, [indiscernible] for computing and the relevant business. And we have to save the new energy. What we are dealing with now is not included in those businesses which are under very strict monitoring of the Chinese central government. So that's also additional information for a kind of reference to -- we could totally be relieved from any government-level monitoring or sensation. Thank you.

Thank you very much for putting us at ease here. Who are CBAK's direct competitors, peers in each business segment, the battery materials, electric [indiscernible] LEV and batteries for ultralow temperature applications [indiscernible] domestic and foreign.

[Foreign Language]

[Foreign Language]

[Interpreted] And thanks very much for your question. And our Director is going to give you the answers from the 3 main aspects. The first one is the storage energy as one of the key pathways for our business. The other one is also the transportation, and the third one is the ultralow temperature. And our director just gave the answer for the first point, that is the storing energy. In terms of storing energy, domestically or globally, there are 2 competitors. The 2 competitors are both from China. The one -- first one is [ Shandong Dingo ]. The other one is [ Dongguan Lila ], and though we have the 2 main competitors, but our output, which means while multiple shipment is larger than them in terms of quantity. And also, our business, the CBAK's business, is largely connected to the global market, and we have many Fortune 500 partners and customers and key accounts, for example, Schneider. So with the solid foundation of the global key accounts. We are surpassing the 2 main competitors, as I just mentioned, in terms of output and business. This is for the first one in terms of storage -- energy storage. And we are going to share with you about point 2.

[Foreign Language]

[Interpreted] And for the second one, that is about the power or electric power-driven transportation. That is mainly actually EV as we shared before. And in this term, globally or domestically, there are 2 main competitors. The first one is Shenzhen. The other one is [indiscernible] and also the 2 are actually local of their business in China. And comparing to them, our more main competitiveness is that first one, our products is more easy to use or to be in stored because we are producing the cylindrical battery that is the lithium iron phosphate. And comparing to the competitors' prismatic batteries, it is more easier to use or to being stored. And because we are using the lithium iron phosphate and also the -- its design, we are safer than the competitors' products. So our main competitiveness is flexibility and safety. And we are moving on to the third point. [Foreign Language]

Okay. [Foreign Language]

[Interpreted] And the third one is the ultralow temperature application. And our main or key markets is first one is the extreme cold areas in America -- in American area and also in European area. And also the other key market is in the north part of China, which is really cold, especially in the winter. So we are facing these main markets, and also, our technology develop ourselves. We could say currently has no fierce competitors in this term, domestically or globally.

Great. Now my next question and my last question is -- actually, my next to last question is the CBAK has announced numerous business partnerships and investments in factories and new products. What is the capital expenditure required to meet the commitments in 2021? How much has CBAK invested so far? And how much does it plan to invest? What are the expected sales or revenues that they expect to get from this additional investment in their world.

[Foreign Language]

[Foreign Language]

[Foreign Language] [Interpreted] Thanks very much for the explanation. And as you may already heard from the previous introduction that we have put into the construction, the plant in engine at plants in Dalian cities. And now we have invested almost RMB 100 million. And we plan in this year to invest another around RMB 50 million to RMB 100 million. And we expected the 2 factories are going to be put into the operation in the third or at least in the fourth quarter of this year. And we expect to generate the revenue or profits in the next year in 2022 when 2 factories' capacity are put into the full usage during a certain time of operation. Thank you.

Okay. My final question is, does the company have a plan to raise capital again? And what's the estimated size of the raise? And when will it be used and for what purpose?

[Foreign Language]

[Foreign Language]

[Foreign Language] [Interpreted] Thanks very much for the detailed explanation. In terms of the final question. And actually, as we mentioned, the Nanjing and Dalian plants is going to be put into the operation around third and the fourth quarter of this year. That is going to be the Phase 1 plants. And with the phase plants in Nanjing and Dalian are going to be put into the operation, and we could say currently, according to our calculation, they found and raised it before have been enough to cover our Phase 2 construction and operation in both Nanjing and Dalian. And we expect to do more analysis about the quality of product's capacities and also the acceptance of the market of our products manufactured from the new -- 2 new factories in Nanjing and Dalian. And with all this data to be collected, the 2 factories putting into the operation, we could understand that how the Phase 2 in Nanjing's factory is going to be expanded and how much fund need to be raised. And so basically, we will need the 2 factories to be put into operation and collect more information through the operation and give you all this data you are interested in.

Our next question comes from the line of [ Howard Yu from Aliden Capital ].

[Foreign Language]

[Interpreted] Thanks very much for your question. And we have a question about that when bringing the report issued that the CBAK have cooperation partnership with JAC by signing agreement. And according to this agreement, it's going to be a 3 year's partnership to develop new products. And the question is about how much revenue could be generated through this cooperation? And also, if there's any further commitment in this agreement for the partnership like the financial commitment. And third one is that, in terms of the IP for the codesigned or developer products, who is going to be the owner of the IP.

[Foreign Language]

[Foreign Language]

[Foreign Language] [Interpreted] Thanks very much for the directness answer for this question. And we first -- we have to mention that this cooperation with the JAC by CBAK is now on the right track of the R&D or dev stage. And -- but one thing we'd like to point out is that this cooperation is focusing on the development of a vehicle. And a vehicle, it is -- it generally needs at least 2 years for the R&D to be finished. And now we are on the right track in the process of the R&D development. And also from the current progress with JAC is very satisfied with it. And also the product we are codeveloping is also a hot product that is the 4680. And this product is -- its IP is owned by us. And also, this product is not going to be only to be supplied to JAC. It is also only going to be provided to other vehicle manufacturers and producers. And I believe that it will help us to generate the profits in the long run. And currently, we could see, in conclusion, the development or the partnership is on right track.

[Foreign Language]

[Interpreted] Thanks very much for your question. And also from the previous introduction, we come to notice that CBAK is going to acquire a company called Hitrans, which is an app stream manufacturer for the lithium batteries. So would you like to share with us, if available, the scale or the revenue of this company, the Hitrans that we are going to be -- to acquire. And after acquisition -- merger and acquisition, if Hitrans is going to be integrated into CBAK's true business map, or it is going to operate on its own here.

[Foreign Language]

[Foreign Language]

[Interpreted] And thanks very much for Ms. Pei's very detailed explanation in this time for this question. First, that after merger and acquisitions be finished in terms of the general management and the finance and also the risk management of the Hitrans is going to be integrated into the CBAK's [ who ] management and operation management scheme. But on the other hand, we are going to lift the Hitrans after equity -- merger and acquisition or certain independence in terms of the business development and the business operation that is going to be many [indiscernible] by their previous technology team and management team for business and business operations. So that is going to be a good complementary of our support and also their long years experience and technology accumulation. On the other hand, in terms of the financial and finance data, and, because we are still in progress of finishing the exchange and the transaction with them. So I think we are going to share with you the detailed data and information in the next times meeting at a conference for your reference. Thank you.

Our next question comes from the line of Laura Liu from Stone Street Group.

So my question is about the revenue growth for different business segments. So can you tell us more about the strategy for the growth going forward? And also, what's the rationale behind it? Is it going to be a merger or launching technologies.

[Foreign Language] Sorry, can I confirm with the last point? You mean the rationale of the strategy, and we call a single issue. I'm not quite catch up all information. It's best to last [indiscernible].

Yes. Sorry about that. Yes. So what's the rationale behind that -- the growth strategy? Because I saw the company will do some mergers and maybe potentially launching some new technology. So what is the major one between them and also behind the growth.

Thank you. Thanks for your clarification. Thank you. [Foreign Language]

[Foreign Language]

First, that because we will have another director to also answer your question and first, Director Tian share his answer to your question is that in the long run, that is definitely CBAK is going to be focusing on the technology-driven business and especially for the batteries, new technologies update and development with like the merger and acquisition as kind of support. So this is our main strategy and the rationale. And of course, we will have some niche markets, but because time limit, I do not expand upon here. [Foreign Language]

[Foreign Language]

Thanks very much for the further explanation and the added information. And also, the course -- as we mentioned before, we are a technology-driven company, and it is also our mainstream for the development. And also the merchant acquisition, for example, the Hitrans case is also of course, they are ones to help us to provide stable supply of the key materials for our batteries. It is of great importance strategically, so that's why we issued this merchant acquisition case. And so we could say this is not just the merchant acquisition. We are not just taking it as a driving force for our business. It is because it could add up to our technology-driven strategies to further strengthen our foundation in technology. Thank you.

Your next question comes from [ Lucy Liu from Galuba Capital ].

I had a question about the EV and LEV market. At present, all major battery manufacturers sustain of their production capacity expansion, while CBAK just decided to return to the EV and LEV market. Isn't this sort of late?

[Foreign Language] Yes, we can hear you. We heard that you're talking about the EV, and there are also a lot of the players have been expanding their capacity. But on the other hand, maybe CBAK is just entering into this business and then the signal was lost.

Okay. Let me repeat the question again. I expressed all major battery manufacturers are speeding up their production capacity expansion, while CBAK just decided to return to EV and LEV market. Isn't it sort of late?

[Foreign Language]

It looks like you disconnected from the call.

Hello?

Sorry, sorry for the signal issue.

Okay. Let me ask the question again. Sorry, maybe the signal is not good.

No problem.

At present, all major battery manufacturers are speeding up their production capacity expansion while CBAK just decided to return to the EV and LED market. Isn't this sort of late?

[Foreign Language]

This is the audio operator. Maybe I can repeat the question is about whether is it too late to enter LEV market.

[Foreign Language]

[Foreign Language]

[Interpreted] And thanks very much for the detailed explanation further enter. And actually, one thing we'd like to clarify that we are not a newcomer to EV and LEV market. Actually, we are back just like the very famous quote we are back from this market because, years before, we strategically decided to exit the EV and LEV market because, at that time, we analyzed the policies of the government and also timing. We thought that it was not quite supportive for us to develop our business or generate profits in EV and LEV. And that's why at that time, we decided to put more energy into the development of the storage -- energy storage market, which do generate profits for us to sustain our development. But on the other hand, now with the continuous understanding of the market, we see it is a good time for us to reenter or back to the EV and LEV market. So we say we already have the accumulation no matter of the technology or the experience in this term. Thank you.

[Foreign Language]

[Interpreted] And also one thing I would like to emphasize is that now we are back to this market. It is because we have the strategic understanding about the market. So first, we'd like to share with you some additional information. Actually, previously, years before, before we exit the EV, we are the -- we were ones taking part into the standard making up for the EV and LEV. But at that time, this was only a -- that we only have the standard for the industry, but now we have China's national level standard, and we are also one part of it of the standard making up -- And also years before, we saw that EV and LEV though grew very fast, the industry is hard to make profit. So that's why we decided to temporarily exit from that market but focusing on business that can generate profits and sustain our long-term demand. So that is our actual policy or for development, that is find the right business or industry to generate profit. With the profit, we can take steady steps to move forward. And following these policies, we now see the home market of the year's development has been more mature. And so that's why we decided to go back. Also, we're not just back to a market to compete with those top-level players focused on A/B, a big player, but they are more focusing on the A model cars, but we choose another niche market that is A00 model and also the ROE [ many ] to 2 wheels vehicles, which means we'll focus more onto the light and the light type and model vehicles. We focus on different niche markets comparing to other key players.

Ms. Liu, Do you have any follow-up questions?

I have a second question. Is the company received gains in subsidies, and what the regulation and the incentive for battery space?

Sorry, the signal is not quite good. Would you like to repeat it again?

Yes. That the company received from government for the city, and what's the regulation and the incentive for battery space?

[Foreign Language]

[Foreign Language]

[Interpreted] And first, I think -- thanks very much for your question. I think maybe because we are in the new energy market, so we are currently affected or impacted by the general image, the Chinese government is given a lot of subsidiaries or incentives for the new energy business. And actually, there is no incentive or subsidiaries in China on the government level to battery manufacturers. This is one thing I'd like to clarify. But on the other hand, we are provincial-level high-tech enterprise, so we do receive some incentives from the local provincial gamut. This is one thing I'd like to clarify. [Foreign Language]

[Foreign Language]

[Interpreted] And also, as we mentioned before that we are the provincial-level high-tech company, and we do see -- receive incentive from them. For example, that the local gamut give us the -- found that it could only be especially used for the upgrading and expansion of our production lines and our capacities. So we do receive some subsidiary incentives from the government for the special purpose. This is also one thing we'd like to clarify with you. Thank you.

Seeing no more questions in the queue, let me turn the call back to Mr. Yunfei Li for closing remarks.

[Foreign Language]

[Interpreted] Thank you, operator, and thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our next -- on our progress.

Thank you all again. This concludes the call. You may now disconnect.