Intrinsic value of Adtalem Global Education - ATGE

Previous Close

$57.02

  Intrinsic Value

$11.49

stock screener

  Rating & Target

str. sell

-80%

Previous close

$57.02

 
Intrinsic value

$11.49

 
Up/down potential

-80%

 
Rating

str. sell

We calculate the intrinsic value of ATGE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  1,862
  1,920
  1,984
  2,052
  2,127
  2,207
  2,292
  2,384
  2,482
  2,586
  2,696
  2,813
  2,937
  3,068
  3,207
  3,353
  3,508
  3,671
  3,843
  4,024
  4,215
  4,416
  4,628
  4,850
  5,085
  5,331
  5,591
  5,864
  6,150
  6,452
Variable operating expenses, $m
  1,872
  1,926
  1,986
  2,050
  2,120
  2,195
  2,275
  2,361
  2,453
  2,550
  2,530
  2,640
  2,756
  2,879
  3,009
  3,147
  3,292
  3,445
  3,606
  3,776
  3,955
  4,144
  4,343
  4,552
  4,772
  5,003
  5,246
  5,502
  5,771
  6,054
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,872
  1,926
  1,986
  2,050
  2,120
  2,195
  2,275
  2,361
  2,453
  2,550
  2,530
  2,640
  2,756
  2,879
  3,009
  3,147
  3,292
  3,445
  3,606
  3,776
  3,955
  4,144
  4,343
  4,552
  4,772
  5,003
  5,246
  5,502
  5,771
  6,054
Operating income, $m
  -9
  -6
  -2
  2
  7
  12
  17
  23
  29
  35
  166
  173
  181
  189
  197
  207
  216
  226
  237
  248
  260
  272
  285
  299
  313
  328
  344
  361
  379
  397
EBITDA, $m
  172
  177
  183
  189
  196
  203
  211
  220
  229
  238
  249
  259
  271
  283
  296
  309
  323
  339
  354
  371
  389
  407
  427
  447
  469
  492
  516
  541
  567
  595
Interest expense (income), $m
  7
  9
  10
  11
  13
  14
  16
  18
  20
  22
  25
  27
  30
  33
  36
  39
  42
  46
  50
  54
  58
  62
  67
  72
  77
  82
  88
  94
  100
  107
  114
Earnings before tax, $m
  -18
  -16
  -13
  -10
  -8
  -4
  -1
  2
  6
  10
  139
  143
  148
  153
  158
  164
  170
  176
  183
  190
  197
  205
  213
  222
  231
  240
  250
  261
  272
  283
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  37
  39
  40
  41
  43
  44
  46
  48
  49
  51
  53
  55
  58
  60
  62
  65
  68
  70
  73
  77
Net income, $m
  -18
  -16
  -13
  -10
  -8
  -4
  -1
  2
  5
  7
  101
  105
  108
  112
  116
  120
  124
  129
  134
  139
  144
  150
  156
  162
  169
  175
  183
  190
  198
  207

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  2,381
  2,456
  2,537
  2,625
  2,720
  2,822
  2,931
  3,049
  3,173
  3,306
  3,447
  3,597
  3,756
  3,923
  4,101
  4,288
  4,486
  4,694
  4,914
  5,146
  5,390
  5,647
  5,918
  6,203
  6,502
  6,818
  7,149
  7,498
  7,865
  8,250
Adjusted assets (=assets-cash), $m
  2,381
  2,456
  2,537
  2,625
  2,720
  2,822
  2,931
  3,049
  3,173
  3,306
  3,447
  3,597
  3,756
  3,923
  4,101
  4,288
  4,486
  4,694
  4,914
  5,146
  5,390
  5,647
  5,918
  6,203
  6,502
  6,818
  7,149
  7,498
  7,865
  8,250
Revenue / Adjusted assets
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
Average production assets, $m
  1,078
  1,112
  1,148
  1,188
  1,231
  1,278
  1,327
  1,380
  1,437
  1,497
  1,561
  1,629
  1,700
  1,776
  1,857
  1,941
  2,031
  2,125
  2,225
  2,330
  2,440
  2,557
  2,679
  2,808
  2,944
  3,087
  3,237
  3,395
  3,561
  3,736
Working capital, $m
  -160
  -165
  -171
  -177
  -183
  -190
  -197
  -205
  -213
  -222
  -232
  -242
  -253
  -264
  -276
  -288
  -302
  -316
  -330
  -346
  -362
  -380
  -398
  -417
  -437
  -459
  -481
  -504
  -529
  -555
Total debt, $m
  144
  165
  188
  212
  239
  267
  298
  331
  365
  402
  442
  484
  528
  575
  624
  676
  731
  790
  851
  916
  984
  1,056
  1,131
  1,211
  1,294
  1,382
  1,475
  1,572
  1,674
  1,782
Total liabilities, $m
  664
  685
  708
  732
  759
  787
  818
  851
  885
  922
  962
  1,004
  1,048
  1,095
  1,144
  1,196
  1,251
  1,310
  1,371
  1,436
  1,504
  1,576
  1,651
  1,731
  1,814
  1,902
  1,995
  2,092
  2,194
  2,302
Total equity, $m
  1,717
  1,770
  1,829
  1,892
  1,961
  2,035
  2,114
  2,198
  2,288
  2,384
  2,486
  2,593
  2,708
  2,829
  2,957
  3,092
  3,234
  3,384
  3,543
  3,710
  3,886
  4,072
  4,267
  4,472
  4,688
  4,916
  5,155
  5,406
  5,670
  5,948
Total liabilities and equity, $m
  2,381
  2,455
  2,537
  2,624
  2,720
  2,822
  2,932
  3,049
  3,173
  3,306
  3,448
  3,597
  3,756
  3,924
  4,101
  4,288
  4,485
  4,694
  4,914
  5,146
  5,390
  5,648
  5,918
  6,203
  6,502
  6,818
  7,150
  7,498
  7,864
  8,250
Debt-to-equity ratio
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
Adjusted equity ratio
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -18
  -16
  -13
  -10
  -8
  -4
  -1
  2
  5
  7
  101
  105
  108
  112
  116
  120
  124
  129
  134
  139
  144
  150
  156
  162
  169
  175
  183
  190
  198
  207
Depreciation, amort., depletion, $m
  181
  183
  185
  187
  189
  192
  194
  197
  200
  203
  83
  86
  90
  94
  98
  103
  107
  112
  118
  123
  129
  135
  142
  149
  156
  163
  171
  180
  188
  198
Funds from operations, $m
  163
  167
  172
  177
  182
  187
  193
  199
  205
  211
  184
  191
  198
  206
  214
  222
  232
  241
  251
  262
  273
  285
  297
  311
  324
  339
  354
  370
  387
  405
Change in working capital, $m
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
Cash from operations, $m
  168
  172
  177
  182
  188
  194
  201
  207
  213
  220
  193
  201
  209
  217
  226
  235
  245
  255
  266
  278
  290
  302
  316
  330
  344
  360
  376
  393
  412
  431
Maintenance CAPEX, $m
  -55
  -57
  -59
  -61
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -83
  -86
  -90
  -94
  -98
  -103
  -107
  -112
  -118
  -123
  -129
  -135
  -142
  -149
  -156
  -163
  -171
  -180
  -188
New CAPEX, $m
  -30
  -34
  -37
  -40
  -43
  -46
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -90
  -94
  -100
  -105
  -111
  -116
  -123
  -129
  -136
  -143
  -150
  -158
  -166
  -175
Cash from investing activities, $m
  -85
  -91
  -96
  -101
  -106
  -111
  -118
  -123
  -130
  -136
  -143
  -151
  -158
  -166
  -174
  -183
  -193
  -201
  -212
  -223
  -234
  -245
  -258
  -271
  -285
  -299
  -313
  -329
  -346
  -363
Free cash flow, $m
  82
  82
  82
  82
  82
  83
  83
  84
  84
  84
  50
  50
  51
  51
  52
  52
  53
  53
  54
  55
  56
  57
  58
  59
  60
  61
  63
  64
  66
  68
Issuance/(repayment) of debt, $m
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  58
  61
  65
  68
  72
  76
  79
  84
  88
  93
  97
  102
  108
Issuance/(repurchase) of shares, $m
  66
  69
  72
  74
  76
  78
  80
  83
  85
  88
  1
  3
  6
  9
  12
  15
  18
  22
  25
  28
  32
  36
  40
  43
  48
  52
  56
  61
  66
  71
Cash from financing (excl. dividends), $m  
  85
  90
  95
  99
  103
  107
  111
  116
  120
  125
  40
  45
  50
  56
  61
  67
  73
  80
  86
  93
  100
  108
  116
  122
  132
  140
  149
  158
  168
  179
Total cash flow (excl. dividends), $m
  168
  171
  176
  180
  185
  189
  194
  199
  204
  209
  90
  96
  101
  107
  113
  120
  126
  133
  140
  148
  156
  164
  173
  182
  191
  201
  212
  223
  234
  246
Retained Cash Flow (-), $m
  -66
  -69
  -72
  -74
  -76
  -78
  -80
  -84
  -90
  -96
  -102
  -108
  -114
  -121
  -128
  -135
  -143
  -150
  -159
  -167
  -176
  -185
  -195
  -205
  -216
  -227
  -239
  -251
  -264
  -278
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  102
  102
  104
  106
  109
  111
  114
  114
  114
  113
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  98
  94
  91
  88
  84
  81
  77
  72
  65
  59
  -6
  -5
  -5
  -5
  -4
  -4
  -4
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  98.1
  96.2
  94.4
  92.6
  90.8
  89.1
  87.4
  85.8
  84.2
  82.6
  82.6
  82.6
  82.5
  82.3
  82.1
  81.9
  81.7
  81.4
  81.1
  80.8
  80.5
  80.1
  79.8
  79.4
  79.0
  78.5
  78.1
  77.7
  77.2
  76.7

Adtalem Global Education Inc., formerly DeVry Education Group Inc. (DeVry Group) is a global provider of educational services. DeVry Group's focuses on empowering its students to achieve their educational and career goals. DeVry Group's institutions offer a range of programs in healthcare, technology, business, accounting, finance and law. The Company operates in three segments: Medical and Healthcare; International and Professional Education, and Business, Technology and Management. Medical and Healthcare includes DeVry Medical International, Chamberlain College of Nursing (Chamberlain) and Carrington College. International and Professional Education consists of DeVry Brasil and Becker Professional Education. Business, Technology and Management consists of DeVry University. As of June 30, 2016, DMI operated three institutions: American University of the Caribbean School of Medicine (AUC), Ross University School of Medicine (RUSM) and Ross University School of Veterinary Medicine.

FINANCIAL RATIOS  of  Adtalem Global Education (ATGE)

Valuation Ratios
P/E Ratio 28.9
Price to Sales 2
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 15.6
Price to Free Cash Flow 19.9
Growth Rates
Sales Growth Rate -1.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -29%
Cap. Spend. - 3 Yr. Gr. Rate -9.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 7.5%
Total Debt to Equity 7.5%
Interest Coverage 20
Management Effectiveness
Return On Assets 5.9%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 7.6%
Return On Equity - 3 Yr. Avg. 5.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 49.4%
Gross Margin - 3 Yr. Avg. 47.9%
EBITDA Margin 12.4%
EBITDA Margin - 3 Yr. Avg. 9.8%
Operating Margin 7.7%
Oper. Margin - 3 Yr. Avg. 5.1%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. 4.8%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 7.5%
Eff/ Tax Rate - 3 Yr. Avg. 34.1%
Payout Ratio 8.9%

ATGE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATGE stock intrinsic value calculation we used $1809.8 million for the last fiscal year's total revenue generated by Adtalem Global Education. The default revenue input number comes from 0001 income statement of Adtalem Global Education. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ATGE stock valuation model: a) initial revenue growth rate of 2.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ATGE is calculated based on our internal credit rating of Adtalem Global Education, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Adtalem Global Education.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ATGE stock the variable cost ratio is equal to 100.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ATGE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.8% for Adtalem Global Education.

Corporate tax rate of 27% is the nominal tax rate for Adtalem Global Education. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ATGE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ATGE are equal to 57.9%.

Life of production assets of 18.9 years is the average useful life of capital assets used in Adtalem Global Education operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ATGE is equal to -8.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1669.039 million for Adtalem Global Education - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 60.227 million for Adtalem Global Education is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Adtalem Global Education at the current share price and the inputted number of shares is $3.4 billion.

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COMPANY NEWS

▶ Adtalem: Fiscal 1Q Earnings Snapshot   [Nov-01-18 06:27PM  Associated Press]
▶ ACAMS Leads Panama AML Training Sessions   [Oct-08-18 09:00AM  Business Wire]
▶ Little scrutiny in DeVry sale, as DeVos targets protections   [Oct-01-18 01:41PM  Associated Press]
▶ What Makes Adtalem (ATGE) a Strong Sell?   [Aug-30-18 08:42AM  Zacks]
▶ Adtalem: Fiscal 4Q Earnings Snapshot   [04:26PM  Associated Press]
▶ Dr. Karen Cox Named President of Chamberlain University   [Jul-17-18 08:30AM  Business Wire]
▶ ACAMS 6th Annual AML Risk Management Conference   [May-18-18 08:00AM  Business Wire]
▶ Adtalem: Fiscal 3Q Earnings Snapshot   [May-03-18 06:11PM  Associated Press]
▶ Why it May be Time to Give Education Stocks Another Chance   [Apr-23-18 09:35AM  Insider Monkey]
▶ Adtalem Global Education Hosts Investor Day   [Apr-09-18 05:25PM  Business Wire]
▶ Adtalem reports 2Q loss   [Feb-06-18 05:47PM  Associated Press]
▶ ACAMS Reaches New Milestone 60,000 Members   [09:30AM  Business Wire]
▶ Stocks Flashing Renewed Technical Strength: Devry Education   [Dec-20-17 03:00AM  Investor's Business Daily]

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