ACCO Brands Corp (ACCO) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ACCO Brands Second Quarter 2018 Earnings Conference Call. (Operator Instructions) I would now like to turn the call over to Jennifer Rice, Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to our second quarter 2018 conference call. Speaking on the call today are Boris Elisman, Chairman, President and Chief Executive Officer of ACCO Brands Corporation; and Neal Fenwick, Executive Vice President and Chief Financial Officer. Slides that accompany this call have been posted to the Investor Relations section of accobrands.com.

When speaking to quarterly results, we may refer to adjusted results. Adjusted results exclude transaction, integration and restructuring costs and apply a normalized effective tax rate of 28% in the quarter.

Schedules of adjusted results and other non-GAAP financial measures and a reconciliation of these measures to the most directly comparable GAAP measures are in this morning's earnings release and the slides that accompany this call.

Due to the inherent difficulty in forecasting and quantifying certain amounts, we do not reconcile our adjusted earnings per share or tax rate guidance. For more information, see this morning's press release.

Forward-looking statements made during the call are based on certain risks and uncertainties and our actual results could differ materially. Please refer to our press release and SEC filings for an explanation of certain of these risk factors and assumptions. Our forward-looking statements are made as of today's date, and we assume no obligation to update them going forward. Following our prepared remarks, we will hold a Q&A session.

Now it is my pleasure to turn the call over to Boris Elisman.

Thank you, Jennifer, and good morning, everyone. Overall I'm pleased with our performance in the second quarter despite some industry and macro challenges. We executed well against our strategy, particularly in Europe, where we benefited from broader distribution as well as integration synergies.

In North America our sales continued to shift away from traditional office channels into mass retail, e-commerce and independents. And we acquired GOBA Internacional, a school and craft products distributor in Mexico, which doubles our footprint in Mexico and will add 1% to our total revenues in 2018. GOBA's leading brands, such as Barrilito, and alternative sales channels, will significantly increase our penetration with wholesalers and retailers throughout Mexico and complement our existing distribution there.

Q2 company sales increased 2% on a reported basis. I'm especially pleased with the modest comparable sales growth from Q2 prior year. We're continuing to focus on growing product categories, brands and channels and our teams have done a nice job executing on this in Q2.

North American sales were up slightly. Great initial back-to-school shipments to mass and e-tail offset declines with office super stores and wholesalers. EMEA comparable sales were up 3%, accelerating from 2% growth in Q1. These two regions contributed 85% to our Q2 sales. Their growth was partially offset by a 5% comparable decline in International.

Reported earnings per share increased $0.03. Adjusted EPS were up $0.01 from last year, primarily due to a lower tax rate and share count.

I'll begin my color commentary with North America. Last quarter I mentioned that we expected back-to-school sales to be comparable to last year's season. That is still our view. The season started well with Q2 shipments to mass and e-tail channels up 13% versus last year. These channels are taking share in North America and I'm really pleased with our Q2 sales with those customers. Our key North American BTS brands of Five Star, Mead and Hilroy were up 11%, 10%, and 23% respectively. Growth in mass and e-tail channels was partially offset by a 10% decline in OSS and office wholesalers. These declines were expected, as OSS and wholesalers continue to revise their business strategies, close stores and take out inventory. Independent dealer channel sales were up approximately 8% in the quarter as more dealers bought directly from us rather than through wholesale.

We would like this trend to continue and have initiated programs to make it easier and less expensive for them to buy directly from us. Kensington sales were up 12% in North America due to growth in security cables and notebook docks.

North America gross margins were down versus prior year due to adverse mix, more sales to dollar stores and less to wholesalers, a difficult comp versus unusually high gross margin last Q2, as well as higher product and raw material costs. We expect cost inflation to accelerate in the second half in the U.S. due to the rising cost of uncoated paper and implementation of tariffs and plan a price increase on October 1 in the U.S. and another one early next year to offset rising costs.

In addition, to protect profitability, we are further consolidating manufacturing and distribution facilities in the U.S., accelerating ongoing cost-saving initiatives in North America, and reallocating sales and marketing assets from declining channels to those that are expanding. Historically, we have a strong track record of successfully flexing the business to meet industry and macro challenges and aligning our expenses to revenues.

EMEA had another great quarter. Comparable sales grew 3% with gains across most customers. We are continuing to see positive sales synergies in Europe with good growth of our legacy products in continental Europe. Sales were especially strong with Rexel, Kensington and Rapid Tools brands which were up 49%, 44%, and 6% respectively in the quarter. We are not seeing significant inflationary pressures in Europe and gross margins expanded due to acquisition synergies and improved productivity.

We have now integrated all of our distribution centers to ship combined products with a single order and bill with one invoice, making it easier to do business with ACCO Brands. I'm very pleased with our business in EMEA and believe strong performance will continue for the remainder of the year.

Our results in International continue to be mixed, but remember that Q2 is the smallest revenue quarter for this segment. While the sales trajectory improved versus Q1, declines in Australia and Mexico more than offset another good quarter in Brazil and growth in Asia. I expect continued sequential improvements in Q3 and Q4, but still some organic sales challenges in both Australia and Mexico in the second half.

On to our guidance. We're increasing our sales outlook for the year from 2% growth to now 3% growth, with GOBA adding 1% to sales. We are maintaining our adjusted earnings per share outlook for the year to $1.33 to $1.37 and expectations for free cash flow at approximately $180 million. GOBA should not have a meaningful impact on earnings in 2018. Strong first half sales in EMEA, cost reduction activities and fourth quarter price increases should offset pressures from North America channel mix, expected second half headwinds from commodity costs and tariffs in the U.S., and a negative foreign exchange environment.

Overall, the better balance of our businesses and geographies will enable us to deliver commercial success in the marketplace and value for our shareholders over the long term.

Now I'll ask Neal to give you a more detailed look at the quarter. Neal?

Thank you, Boris. Good morning, everyone. Second quarter sales increased 2%, primarily driven by FX. Comparable sales increased modestly driven by growth in Europe and North America. Net income was $25.7 million or $0.24 per share. This compared to net income of $23.5 million or $0.21 per share in the prior year. The increase was primarily due to lower charges in the current year period. Adjusted net income was $34.6 million compared to $35.2 million last year. The decline was primarily driven by lower gross profit. Adjusted EPS was $0.32 in the quarter, up from $0.31 in the prior year, and the increase was due to the lower tax rate and lower shares outstanding.

During the quarter we repurchased 3.3 million shares of stock at an average price of $12.59 per share.

Looking at the specifics. Reported and adjusted gross margin, as detailed on Slide 6, declined 180 basis points compared to an unusually high second quarter gross margin a year ago. Product and customer mix accounted for more than all of the decline as it was negative by 240 basis points.

Increased commodity costs, namely paper, steel and fuel drove a further 60 basis point reduction in gross margin year-over-year. We expect to offset these higher costs with price increases and cost reductions, but there will be a lag before pricing can catch up to the rapidly rising costs.

Cost savings and synergies improved gross margin by 110 basis points in the quarter. Adjusted SG&A was down both in dollars and as a percent to sales due to lower incentive compensation expense, cost reductions and synergy savings.

Turning to an overview of our segments for the quarter. In North America, sales increased 1% on a comparable basis. They were up slightly primarily due to increased back-to-school shipments compared to prior year. North America adjusted operating income and margin were both down due to mix and the comparison to a very strong prior year gross margin quarter where we had favorable customer mix and certain reserve releases. Margins were also impacted by higher product costs in the quarter, which were incurred ahead of price increases that will be implemented in October after the back-to-school season.

In our EMEA segment, sales increased 9% and on a comparable basis increased 3%. The increase was driven by expanding the distribution of legacy ACCO products to the Esselte customer base. EMEA adjusted operating income and margins increased primarily due to higher volume and cost synergies. Our major integration activities in Europe are largely complete as we have now consolidated our IT systems and distribution centers.

International sales decreased 7%, or 5% on a comparable basis. The decline was again primarily in Australia where our economic environment is weaker and large customers are in transition, and in Mexico where 1 large ACCO customer has been reducing inventory. Otherwise we saw growth in Brazil and Asia. International adjusted operating income and margin decreased due to the sales decline and lower gross margin.

Turning now to our cash flow and balance sheet. We had the expected seasonal outflow of cash in the quarter to support the North American inventory build for back-to-school. Our 6-month free cash flow is $19 million lower than prior year. $10 million of the delta is due to FX translation which reduced the value of the seasonal working capital inflow in Brazil. We expect the opposite effect in the second half of the year as we invest in working capital in Brazil. Another $8 million of the delta is due to higher CapEx and restructuring spend. Both items are timing related and do not impact our view of our full year forecast. We still expect 2018 free cash flow of approximately $180 million with our strongest cash generation in the third and fourth quarters.

During the quarter we used $40 million of cash for share repurchases and $25 million for repurchases of our 5.25% senior unsecured notes at par. Our cash balance was higher than normal at the end of the quarter as we borrowed $36 million on our revolver and positioned it in Mexico to fund the July 2 closing of the GOBA acquisition.

In terms of our revolver, we recently increased the size of the facility by $100 million to $500 million to allow for more availability to pursue incremental acquisitions and repurchases of our stock and unsecured notes.

Finally, some additional comments about our guidance. We expect the overall gross margin to be comparable in the third quarter to the second quarter and lower year over year, but in North America we expect third quarter gross margin to be both sequentially and year-over-year lower. In the fourth quarter we expect a higher overall gross margin year-over-year due to cost reductions and price increases. For the full year, we still expect total gross margin to be in our desired range of 33% to 34%, and we expect SG&A as a percent of sales to be lower than last year due to cost reduction initiatives and synergies.

Also, foreign currency was a $0.01 benefit in the quarter, and $0.02 benefit year to date, but due to the current strength of the US dollar FX is likely to be negative in Q3 and Q4. For the year in total the impact is now expected to be slightly negative on revenue and EPS, as opposed to our previous assumption of positive. As usual, we have included several modeling assumptions in our slide deck, those can be found on Page 10.

With that, I'll conclude my remarks and move on to Q&A where Boris and I will be happy to take your questions. Operator?

(Operator Instructions) Our first question is from Bill Chappell with SunTrust.

Boris, just trying to understand the, I guess, the growth especially in North America for the first -- I mean, for this quarter. And was there a benefit of timing of shipments? I mean was stuff sent ahead of, kind of, maybe a pull forward? Or is this just really reflecting kind of good market share gains and kind of maybe a little bit better outlook for the overall U.S. market?

It's hard to tell, Bill. We measure our back-to-school success on POS. And we're not going to see POS sellout until really starting next week and throughout August. We do believe that there maybe was some pull-in of some earlier shipments or for back-to-school in Q2 compared to last year, but it's hard to give you a factual answer until after we see how Q3 turns out.

Got it. But for Q3, you have actually, I guess, North America a much easier comparison with the OSS channel. Is that right? [Did it] just kind of the forward buying and then destocking that they did last year. So it should be a little bit more favorable trend as we go to Q3. Is that right?

Not with OSS. OSS continues to close stores and really continues to defocus from office supplies. So I don't think there's a change in trend with OSS, where we may see a change in trend is more on mass and e-tail. They are taking share in back-to-school. And I certainly anticipate continued good performance there, but not in OSS.

Got it. And then in terms of GOBA, you might have said this, does it not add anything to EPS this year or it's just 1% to the top line?

Yes. It's 1% of the top line this year, about $20 million. And then the EPS accretion will be really marginal. We missed the stronger selling season and then purchase accounting and amortization and taxes will pretty much take some of the rest. We do have to invest a little bit in public company compliance there. So we expect around $3 million in EBITDA -- incremental EBITDA associated with GOBA this year, but not much in terms of EPS.

Got it. And last one for me. Maybe, Neal, if you can help me up a little bit more on the mix issue in the quarter and I'm just trying to understand, I guess, both what it was and then does it have to do more with this year or did it have to do more with the mix last year that you were comping against?

Interestingly enough, both years. I think the right way to understand is last year was particularly high margin, both on a product and customer mix. And we also had reserve releases, which added to the gross margin [weekly round-offs] in inventory. And this year, we had the reverse. We had less rich customer mix, less rich product mix and we had actual reserve that we had to take. So it's both years are a little odd.

And just to be clear. That's kind of specific to 2Q, it's not something that is a long-term pressure on margins in terms of mix?

Yes. I think it's specific to Q2. I mean, the nature of what shipped out in Q2 was a weaker margin that we would anticipate. The thing that is more of an issue in Q3 is rising raw material costs, which as we pointed out will have a bit of a drag on Q3 margins, which is why I gave the guidance on where I was expecting gross margins to be for Q3. And we expect recovery of that in Q4.

Our next question is from Kevin Steinke with Barrington Research.

In terms of the higher material cost, can you just delve into that a little bit more in terms of the market trends you're seeing there. Obviously, you mentioned the tariffs, how that's impacting you and you also mentioned paper, so anymore color on -- [annual fuel] is obviously up too, so, I guess, just more color on the higher material costs that you're seeing and the drivers of that?

Sure. It's the things that you mentioned, Kevin. It's steel, aluminum due to tariffs. It's paper. We saw very high increases on paper compared to prior year. And it is the remaining tariffs that are still to be put in place, both the $16 billion that remains from the initial tranche of $50 billion and then the other $200 billion that will be implemented -- potentially implemented later this year. If you look at the amounts, there was about $2 million all-in in the first half of the year. And we expect another -- pressure of another $5 million to $7 million in the second half of the year.

That's all-in for the material cost pressures $5 million to $7 million in the second half?

That's right. Yes, if all the tariffs are implemented, that number will go up next year and that's why we need to do another price increase early next year as well.

Okay. Can you talk a little bit more about Australia and Mexico. You cited some ongoing customer challenges there. Do you expect those to -- I mean, I guess, you'll eventually anniversary those or is that something that you see as an ongoing issue or that's something that you'll eventually get past there?

I think Australian customer issues, there is 4 customers that are merging in pairs, 2 and 2 are merging. So it will have a drag on sales, as it always does when they consolidate and reduce inventories. I expect to see a drag for the remainder of the year on the top line. The bottom line should improve though. If you remember last year, we had inefficiencies in our distribution centers after we went from 11 to 4, after our integration with Pelikan Artline. And we're making good progress in optimizing our operations in our distribution. And I expect margin improvements [on all the] top sales for the remainder of the year in Australia.

Okay. The real great stride again was Europe. You mentioned selling more legacy ACCO products into continental Europe. I mean as -- so can you just sum up the sales synergies you're seeing there and further opportunities for synergies from the Esselte combination as you move forward?

Yes. Europe was the bright spot. We've accelerated our sales growth in the quarter from Q1. We did that by enabling our customers to easily purchase all of our products, both legacy ACCO and legacy Esselte. With one purchase order, we would ship it combined on one truck and then bill them with one invoice that makes it easy to do business with us. As a result of all that, we saw increased sales and actually accelerating momentum. So I anticipate and certainly hope that this momentum will continue in the second half. There is nothing that I'm aware of that gives me possible concern there.

Okay, great. And just lastly, I'm just curious about your repurchase of senior notes and you mentioned potentially doing more of that. Can you just talk about the thinking there versus share repurchases?

In terms of share repurchases, obviously we prioritize share repurchases. As you can see, we spent $50 million already this year repurchasing shares. We are capped at purchasing $75 million of shares in any one year under our bank indenture. And then, in terms of the notes, it's just interest arbitrage.

Our next question is from Hamed Khorsand with BWS Financial.

This is actually Vahid calling in for Hamed. The first question going back to the previous questioner, but could you clarify a little bit more what happened in Mexico?

Yes. In Mexico, there is one large customer that is changing their inventory management policy and is trying to do that very, very quickly. So they went from carrying 22 weeks of inventory to desiring to carry 8 weeks of inventory and that's a very big change in a short period of time. So we're going through that process right now. And we are done for most of it. So much of the pain has been incurred in the first and second quarters. We'll have still a little bit to go in Q3 and Q4. The sellout of the POS is still very, very good. But just as they've reduced inventory, they don't replenish from us, which means that we don't get the sales.

Okay. And then, you had made comments about independent dealers and moving them away from wholesalers. How does that impact your product mix and your gross margin?

It should be fairly neutral to our mix between the two. We are agnostic where the independent dealers buy from, but we want that -- we want to enable them to buy from us because we want them to be competitive in the marketplace. And we think buying from us makes them more competitive in the market place and allows them to compete against e-tail and OSS. If they choose to buy through wholesale, they can do that as well, but we want to make sure there are no barriers both from a distribution capability as well as price for them to buy from us directly.

So pricing wise you're charging them the same amount that the wholesaler would?

For the same quantity, there is minimum order quantities, there is economic order quantities that we ask them to buy in, but if we do that, yes, the price would be very, very similar. What has happened over a longer period of time is that the model -- the wholesale model kind of shifted. They used to buy in bulk, they used to buy in truckloads and got savings as a result. But now, their mix of products is not that much different than smaller independent dealers. So the pricing structure is fairly similar.

Okay. And then for back-to-school in the U.S., are you seeing anything different this year versus last year?

It's too early to tell right now. We're just beginning. We're in week 3 of a 13-week back-to-school. So it's very, very early. It's premature for me to make any specific comments. I think our placement is good. It's comparable or better than last year. We got incremental placement in Canada. We got incremental placement in dollar stores in the U.S. All the mass accounts look good. But it's too early to comment on specifically how this back-to-school is going compared to last year.

Our next question is from Chris McGinnis with Sidoti & Company.

I guess, just quickly, Neal, can you just go through the expectations for Q3 and Q4 again on the gross margin? It was a little quick for me, sorry, I apologize.

Will do. So overall, we expect the gross margin in the third quarter to be the same as the gross margin in the second quarter for the whole company. But within North America specifically, we expect the gross margin to be down versus the second quarter. And also down versus the prior year. And then in the fourth quarter, we expect gross margins to be up versus the prior year for both areas, both the whole company and for North America.

Okay. Great. And then can you just talk maybe a little bit about I know you have a lot of cost savings, but can you just maybe go through what you expect for dollar amount this year and maybe next year and just remind us where you're at?

On the cost savings side, we are still shooting for the $30 million number. That's our annual target goal. We have lots of projects that are aimed at us generating those savings and we're on track for that $30 million. In addition to that, we've done some incremental initiatives in North America to try reduce costs specifically in North America. And those include combining our global and North American supply chain organizations and getting some synergies as a result of that and include increasing span of control in our North American organization and we have some savings as a result of that. And also, we are closing our manufacturing and distribution facility in Wisconsin and using our existing facilities across the U.S. to manufacture and distribute the products that we're done there and that's going to generate savings for us as well in the U.S. So we have many different projects to try to align our cost to revenue.

Great. And then, just one last question. Just can you just maybe comment on growth on e-commerce in the quarter? If you did, I apologize if I missed it.

Yes, we didn't break out e-commerce separately. But both if I look at e-commerce as well as mass e-tail, they were up about 13%. E-commerce continues to do well. We continue to, I mentioned a quarter ago, that e-commerce is around 13% of our North American revenue. It was in the same ballpark in Q2 as well. So continues to do well, continues to grow and take share in the overall marketplace.

Our next question is from Joe Gomes with NOBLE Capital.

Most of them had been already asked. But maybe you can touch a little bit on what is producing the positive results there in Brazil and Asia?

In Brazil, for the last couple of years, we have been growing fairly significantly high single digits, low double digits in a difficult economy. We have reduced the price points of our products. We have reduced the cost of doing business in Brazil. Our competitors are having more difficult times in a hard economy. As a result, we were able to gain market share for our business in Brazil. Performance year-to-date is very, very good as well. We're continuing to grow and take share. And we're just in the low season. We're going to be beginning our high season in Brazil at the end of Q3. So Brazil has been a very, very bright story for us. And I expect that to continue. If I look at Asia, Asia, we have integrated the Esselte business, which was about a $7 million business in Asia with our ACCO Brands business. And now we're beginning to grow. We're beginning to grow in India. We're beginning to grow in China and Japan, which is our biggest market in Asia, continues to do well. So in Asia, I expect acceleration of growth for the remainder of the year as some of the benefits of combining the organizations get realized.

Okay, great. And anything new that you can talk about on the acquisition pipeline?

Nothing that I can talk about, but acquisitions are very, very important for us for our growth strategy. I do expect that we will be acquisitive in the marketplace, but beyond that I can't give you any additional details.

Our next question is from William Reuter with Bank of America.

Your -- the last question about acquisitions, you mentioned, you couldn't provide really much detail there. You did increase the size of your revolving credit facility by $100 million. I guess, are you at the point with the integration of Esselte where you're ready to take on larger acquisitions again?

We are ready for larger acquisitions, probably not in Europe yet. Although by second half of 2019, we will be ready in Europe. But if I look at other parts of the world, other than Mexico, where we just done the GOBA acquisition, we will be ready to do additional acquisitions.

Okay. And then, I think your leverage target has been 2 to 2.5x; we're currently somewhere in the 3x range. How should I think about that in the context of potentially buying additional businesses, which would probably push leverage up higher?

Bill, you should remember that our leverage is quite seasonal. And at this time of the year, it goes quite high because of the back-to-school funding that we have to do. You'll see it drop significantly as we get into the third and fourth quarter. And it will be lower at the end of this year than it was last year. So we would be back heading into our range.

Yes. I still expect us to be in that 2 to 2.5x range by the end of the year, Bill. And then we talked about if we do an acquisition, we would flex to go up a little bit to do the acquisition and then go back down to the 2 to 2.5x range. I'm very comfortable with our ability to do that.

I mean as we add more acquisitions, our cash flow naturally increases and so that's a tradeoff that you have to understand as well.

That makes sense. And then, when I look at your capital structure in the presentation materials, it looks like the amount of your senior unsecured bonds went down by $25 million. Did you do some bond repurchases in the quarter? I didn't hear about that in the prepared remarks.

We did. We made $25 million of bond repurchases at par.

Okay. And then, I guess, just lastly, how are you guys -- I guess, how did you make the determination to repurchase bonds in the quarter? What was the decision process like there?

It's a combination of issues. So it's the level of fixed versus variable debt that we have, which over time is getting more skewed to fix and it's also the interest rate arbitrage.

Our next question is from Hale Holden with Barclays.

I just had two. Neal, from your comments, it sounded like there was some potential to continue making open market bond repurchases kind of opportunistically over the next couple of quarters given the higher revolver. Is that the right interpretation?

It's an opportunistic thing, yes.

Okay. And then the second question I had was on the price increases the two that you're doing this year and the next year. Is your expectation that there could be any risk to volume or elasticity around that or that they'll get well accepted by the consumer?

I anticipate that they will be accepted. Remember our products are still very, very inexpensive. So when we talk about a price increase, it's typically in cents and not in dollars. But overall, there is a little bit of a risk to the overall economy if everybody who is incurring commodity cost increases and tariffs is passing through price increases -- that will have some impact on the overall economy, but I think that's a lower risk than just everybody accepting it.

Got it. And then just one -- sorry, one more. On the mix down on gross margins to dollar store sales this quarter, is that a different product that you're providing or kind of a new push in that sales channel?

It's an incremental push in that sales channel. It's a sales channel that is growing and winning in the marketplace. We feel we have to be there. We have to make it work profitably. We've more than doubled our sales through that channel in Q2 compared to the prior year, and it will continue to be an area of emphasis for us.

And just a thought. It was a contributor to the lower margins. It wasn't the driver. The real driver was the customer and product mix variance last year versus this year.

Our next question is from Karru Martinson with Jefferies.

Just with the upcoming price increases, does that pull forward some purchases into the third quarter?

It may, Karru. It's a -- we have a lot of debates and discussions on this. We don't really know. Previously, if you judge future behavior by the past behavior, yes. When we do a price increase, it typically has an impact on pull forwards by a couple of weeks.

Okay. And just in terms of cost inflation, I was wondering what you are seeing on the transport side?

We're seeing fuel costs are up. We're trying to mitigate that, but they're up and both in -- we're seeing that in the U.S. and Canada, a little bit in Europe. It's not a huge driver of inflation. We're seeing a lot more due to paper, due to steel, due to aluminum and due to tariffs.

Okay. And then just lastly on the acquisition front. You guys stated you're ready for a larger acquisition, it does seem like the industry every kind of -- every few years or so goes through a period of consolidation. Are there larger entities out there -- is this another wave of consolidation coming?

I wouldn't say there is anything on the horizon that we see that, that indicates any kind of a large consolidation. I think it is more likely, it will continue to be a series of smaller to midsize acquisition rather than something very, very large.

And I'm showing no further questions. I will now like to turn the call back to Boris Elisman, Chairman and CEO, for any further remarks.

Thank you, operator. To close, I'd like to thank all of you for participating with us this morning. Enjoy the rest of your summer. And we will speak again in October. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect. Everyone, have a great day.