American Outdoor Brands Inc (AOUT) 2022 Q3 法說會逐字稿

Good day, everyone, and welcome to American Outdoor Brands, Inc. Third Quarter Fiscal 2022 Financial Results Conference Call. This call is being recorded.

At this time, I would like to turn the call over to Liz Sharp, Vice President of Investor Relations, for some information about today's call. Please go ahead.

Thank you, and good afternoon. Our comments today may contain predictions, estimates and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, should, indicate, suggest, believe and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development, focus, objectives, strategies and vision; our strategic evolution; our market share and market demand for our products; market and inventory conditions related to our products and in our industry in general; and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different, are described in our securities filings. You can find those documents, as well as a replay of today's call on our website at aob.com.

Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today.

I have a few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures. Our non-GAAP results exclude amortization of acquired intangible assets, stock compensation, transition costs, COVID-19 expenses, technology implementation, related party interest income, other costs and the tax effect related to all those adjustments. The reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they are discussed on today's call, can be found in our filings as well as today's earnings press release, which are posted on our website. Also, when we reference EPS, we are always referencing fully diluted EPS.

Joining us on today's call is Brian Murphy, President and CEO; and Andy Fulmer, CFO. And with that, I'll turn the call over to Brian.

Thanks, Liz, and thanks, everyone, for joining us. Today, I'm excited to bring you up-to-date on our recent achievements, which include progress in a number of key areas that are the focus of our shareholder value-creation strategy, organic growth, M&A and returning capital to shareholders.

First, we have grown our company organically by 62% on a 2-year basis, driven by our Dock & Unlock strategy. Second, we are announcing our entry into the $7 billion outdoor cooking market with our acquisition of Grilla Grills. And third, we returned capital to shareholders by completing the share buyback that our Board approved in December.

Now let's dig into the details. For the past 2 years, many consumers have discovered for the first time or rediscovered a passion for Outdoor Lifestyle activities, as well as for Shooting Sports and personal protection. This new larger base of consumer participation has helped drive significant growth in our business over the past 2 years, and should fuel our future growth as well. During the third quarter, net sales of products in our Outdoor Lifestyle category, which consists of products primarily related to hunting, fishing, camping and rugged outdoor activities, grew by more than 80% versus the pre-pandemic third quarter of fiscal 2020. And net sales of products in our Shooting Sports category, which includes shooting accessories and products related to personal protection, grew by approximately 45% versus the third quarter of fiscal 2020.

We believe that some of the gains experienced by us and throughout the industry over the past 2 years, were propelled by the pandemic, resulting in outsized growth last year. As a result, total net sales in our third quarter declined approximately 15% and as we lapped a very strong growth of more than 90% in the comparable period last year. The decline was driven by lower net sales of products within our Shooting Sports category, particularly those products related to personal protection, but were partially offset by growth of products in our Outdoor Lifestyle category.

We moved quickly to adjust to this change in the post-pandemic environment and worked closely with our firearm-related OEM customers and retailers, as they address the shift in consumer firearm purchasing activity. That shift is reflected in recent NICS background checks, and it became visible in our incoming POS data, which reversed course in mid-December and took a sudden downward turn. Despite year-over-year declines in NICS, this market has delivered tremendous growth over the past 2 years, creating opportunities for our business. Since the pandemic began, 14 million firearm owners have entered the market, creating, we believe, a new, large and long-term consumer base for our products in our Shooting Sports category.

Before highlighting some of the progress we've made on our strategic growth initiatives this quarter, I want to provide a bit more background on how we talk about our business. We have added a discussion of our products in 2 categories; Shooting Sports and Outdoor Lifestyle, let me explain why. Shooting Sports category includes, our Shooting Sports accessories and products related to personal protection. We view these products to be most correlated with the actual purchase of a firearm. Even though it's important to note, we do not make firearms.

The Outdoor Lifestyle category includes our products related to hunting, fishing, camping and diverse outdoor activities. It's important to understand that this distinction between Shooting Sports and Outdoor Lifestyle is by products, not by brand. While the brand typically will belong to one category or the other, that's not always the case. Some brands represent products that fall into both categories, such as our licensed M&P products, which include both gun cases, Shooting Sports and knives, outdoor lifestyle. In addition, some of our brands are expanding their product offering into new markets, such as our Wheeler brand, which includes precision tools used by armors, Shooting Sports, that we are now marketing to off-roaders, outdoor lifestyle.

So you might ask why we are sorting our products this way? The answer is that we believe these categories represent unique markets, which are 2 very different sizes. We believe the market for Outdoor Lifestyle products is significantly larger than the market for our Shooting Sports products.

Second, we believe growth in each category is fueled by different drivers. Our Shooting Sports product sales tend to be driven by consumer firearm ownership, which can be more susceptible to macro events. Our Outdoor Lifestyle product sales tend to be driven by longer-term trends, such as increased participation in the outdoors, as well as a focus on active and healthy living. Growth in both categories remains our focus. Historically, the bulk of our revenue has come from sales of our Shooting Sports products, but over time, our Outdoor Lifestyle product sales have been delivering impressive growth. In fact, in the third quarter, our Outdoor Lifestyle products delivered record revenue and became more than 50% of our net sales. A milestone we want to build upon, as we continue to execute a number of exciting initiatives that support our long-term growth.

Growth, both organic and through acquisitions, is an important part of our long-term strategic plan. Our Dock & Unlock process continues to fuel innovation and support our plan to deliver compound annual growth of 8% to 10% over the next 4 to 5 years.

During the third quarter, we returned to in-person trade shows, giving us the opportunity to show customers a number of new and upcoming products, including Claymore, a truly innovative clay target launcher, that was a tremendous hit at SHOT Show. The Claymore is a direct result of our Dock & Unlock strategy, which identified at Caldwell, our brand that eliminates the variables that make you miss, have permission to play in shotgun sports. The Claymore is unlike any other product in the market. This foot-operated device provides all of the benefits of an electric clay thrower, without requiring a battery. The Claymore is our first meaningful product introduction into shotgun sports, representing a new and exciting opportunity for us.

Our popular Crimson Trace products were also at SHOT Show, where we were honored to receive the American Rifleman Golden Bullseye Award for Object of the Year for our Crimson Trace Brush Line Scope launched in 2021. In the third quarter, we also introduced new products from MEAT! Your Maker, our direct-to-consumer organically developed brand of meat processing equipment that has delivered trailing 12-month sales growth of over 215%. New products for meat include 2 new grinders and a foot pedal accessory, all engineered to serve the year-round processing needs of hunters, anglers, butchers and chefs.

Many of our new products reflect our intent to continue growing our Outdoor Lifestyle category, while sharpening our focus in Shooting Sports on areas that represent large, long-term and more stable markets, such as shotgun sports, targets and scopes.

I've just highlighted our achievements on the organic component of our strategic growth plan. So let me update you on the plan to grow through acquisitions. We have long stated our desire to supplement organic growth with acquisitions that fit our strict criteria, which require a target to, one, be Dock & Unlock friendly; two, offer a runway for future growth; three, serve large, addressable markets; four, have low complexity; and five, further diversify our supply chain. After carefully searching for acquisitions that meet those criteria, I am pleased to share an exciting development, and an important milestone for our company.

Today, we announced that we will acquire Grilla Grills, a Michigan-based direct-to-consumer provider of high-quality grills, smokers and accessories for $27 million in cash or approximately $24 million, after factoring in the future tax benefit resulting from the asset purchase. Grilla is a clear strategic fit for American Outdoor Brands, that provides us immediate access to the $7 billion U.S. barbecue grill market. With an estimated 9 million grills sold in the U.S. each year, the grill market has benefited from recent trends towards outdoor cooking, and provides plenty of runway for future growth.

Founded in 2015, Grilla has generated net sales growth of over 161% in the past 2 years, with a compound annual growth rate of about 50% over the past 5 years, and calendar 2021 net sales of over $15 million. Along the way, Grilla has developed an impressive strong brand authenticity among the loyal consumer base and has done so with the concentrated portfolio of innovative products. By plugging Grilla into our venture brand lane and employing our Dock & Unlock strategy, we see great opportunities to broaden its product offering. We also believe Grilla is very complementary with our other brands in our portfolio, such as MEAT! Your Maker. After all, once our meat consumers have processed their harvest, the next natural step is a Grilla Grill that delivers that same high-quality performance. We believe there is a tremendous opportunity here to leverage our e-commerce platform and brand lane teams to cultivate those relationships.

Importantly, Grilla significantly expands our direct-to-consumer revenue base. In fact, both Grilla and MEAT! Your Maker are 100% direct-to-consumer brands that, when combined, would have generated about 8% of our trailing 12-month net sales on a pro forma basis.

Lastly, but importantly, the addition of Grilla will drive our revenue mix further toward our Outdoor Lifestyle category, a key initiative in our long-term growth strategy. We are excited to welcome Grilla Grills into the American Outdoor family of brands.

With a robust new product pipeline in place, a portfolio of authentic outdoor brands in hand, and an energized outdoor consumer market, we remain excited about the future, and we look forward to sharing our progress, as we take our brands from niche to known.

With that, I'll turn it over to Andy to discuss our financial results.

Thanks, Brian. Net sales for Q3 were $70.1 million compared to $82.6 million in the prior year, a decrease of 15.2% following last year's 90% record growth. As Brian explained, we are beginning to talk about our products in 2 distinct categories, Shooting Sports and Outdoor Lifestyle. Our decrease in total net sales for Q3 was driven entirely by a decline in sales of products in our Shooting Sports category, a decline that occurred primarily in our brick-and-mortar channel and was consistent with the decline in NICS checks for the same period. Despite that decline, we believe the Shooting Sports market has grown over the long term. Adjusted NICS checks are up 32% in the trailing 12-month period compared to 2 years ago, and that has translated to growth in our business as well.

Sales in our Shooting Sports category grew almost 45% over Q3 of fiscal '20. The Outdoor Lifestyle category, partially offset the 1-year decline in Shooting Sports, with product sales growing by 7% during the third quarter. We believe this market has also grown on a long-term basis, evidenced by increased participation trends in outdoor activities, and we certainly benefited from that.

Our third quarter product sales in the Outdoor Lifestyle category have grown 81% versus 2 years ago. As Brian indicated, growth in our Outdoor Lifestyle brands is an important element in our long-term strategies. We are pleased that in Q3, the Outdoor Lifestyle category accounted for over 52% of total net sales, while our Shooting Sports category was just over 47%. In Q3 last year, that split was about 41% for Outdoor Lifestyle and 59% for Shooting Sports.

Turning now to e-commerce; as you know, our e-commerce platform is a key element in our strategy to place our brands, wherever consumers decide to shop for them, whether online or in a physical retail store. This approach is important in our current environment, when consumers have the ability to alternate between in-store shopping and online options. Our e-commerce sales have grown over 122% in the past 2 years, delivering a CAGR of over 49% and demonstrating the positive impact of this strategy. On a 1-year basis, Q3 net sales in e-commerce decreased by 2.9%, as we faced a difficult comparison due to a significant onetime sale on the prior period. That sale was to clear out slower moving inventory to make room in the channel for our Crimson Trace scopes, including the new award-winning Brushline. Excluding that onetime sale, e-commerce net sales grew by over 2% compared to the prior year.

Gross margins in the third quarter came in slightly above our expectations at 45.8%, an increase of 60 basis points from last year. GAAP operating expenses for the quarter were $27.4 million compared to $27.2 million in Q3 of last year. We attended the Archery Trade Association Show and SHOT Show for the first time since 2020. These shows were very successful, as we showcased a number of exciting new products and have the opportunity to reconnect in-person with customers. As a result, show-related expenses have returned to our OpEx, after their absence last year. Also embedded in OpEx are costs related to our strategic initiative to stand up our own IT platform, and a decrease in intangible amortization and variable costs, resulting from lower sales volumes.

Non-GAAP operating expenses in the quarter were $22.5 million compared to $22.2 million in Q3 of last year. Non-GAAP operating expenses exclude intangible amortization, stock compensation and certain non-recurring expenses as they occur. GAAP EPS for Q3 was $0.27 as compared with $0.56 last year, and non-GAAP EPS for Q3 was $0.52 compared to $0.82 last year. Our fiscal '22 figures are based on our fully diluted share count of approximately 14.2 million shares.

Adjusted EBITDA for the quarter was $10.5 million, at a margin of 15% compared to $15.8 million or a margin of 19.1% for the prior year. Adjusted EBITDA for the first 9 months of fiscal 2022 was $31.8 million or 15.8%, and was consistent with our expectations.

Now turning to the balance sheet and cash flow. We maintained a strong balance sheet at the end of Q3, which allowed us to follow through on all of our capital allocation priorities. We ended Q3 with $22.8 million of cash and no borrowings on our line of credit. Cash declined by roughly $10 million during the quarter, which included $7 million in share repurchases, as well as the net impact of increased inventory offset by lower accounts receivable.

We've outlined on previous calls, our strategy to accelerate purchases of high-volume items, in order to mitigate risks in our supply chain and to support our new products. This strategy has helped us capture demand for our Shooting Sports products in the past, a category that can experience sudden shifts in POS and order patterns, like those we saw develop in the middle of our third quarter. Those shifts were the primary driver of our inventory increase in Q3. But despite that increase, we believe this is inventory that will move through the channel, within a reasonable amount of time. And the higher inventory levels allow us to be prepared for changes in demand, which can happen very quickly in that part of the business. We believe we are well positioned to support orders in both Shooting Sports and Outdoor Lifestyle categories in the coming quarters.

Our spending for CapEx and patent costs of $1.9 million in the quarter, included $1.1 million for our IT integration as expected. We are now planning total capital expenditures in fiscal '22 of between 7 and $7.5 million. We continue to operate portions of our IT environment under a transition services agreement with our former parent company, as we stand up our own independent platform by August of 2022. There are 2 components to our IT implementation, infrastructure and ERP. We successfully completed the infrastructure component in November, and our ERP integration remains on track for go-live this summer. Our total cost estimate for the IT project remains at roughly $8 million over the course of fiscal '22 and '23.

Before I give you the breakdown, it's worth noting that we have shifted about $400,000 of the $8 million from fiscal '22 over to fiscal '23. $200,000 of this was in onetime OpEx and the other $200,000 was in duplicative expenses. In fiscal '22, we expect CapEx of about $3.5 million and onetime operating expenses of about $1.4 million. We also expect to record $1 million of duplicative expenses in fiscal '22. These are the costs of operating both our existing and our new platforms in parallel, during the system changeover period. We will treat both the $1.4 million and the $1 million as technology implementation costs in G&A, when calculating our non-GAAP operating expenses and adjusted EBITDAS.

We ended Q3 with no outstanding bank debt and the full capacity available on our $50 million line of credit. In addition, we are very happy to announce that TD Bank has recently approved an amendment to our credit agreement, that increases our borrowing capacity to $75 million, without changing the $15 million accordion feature. This expansion means that effectively, we were able to put together the Grilla transaction with zero impact to our dry powder. We expect to close on this amendment within the next 2 weeks.

Since our spin-off, we have outlined our capital allocation strategy, which is: first, to invest in organic growth; second, to seek complementary acquisitions; and third, to return capital to shareholders. This quarter, we clearly demonstrated progress on all 3 priorities.

In organic growth, new products accounted for 28.8% of our total net sales in Q3 and 26% of our net sales year-to-date. In acquisitions, we are very excited to bring Grilla into the AOB family of brands. While we plan to integrate that business starting in Q4, we remain on the hunt for additional brands that fit our criteria. We continue to see a healthy amount of M&A activity, and we intend to remain disciplined in our approach. Our increased line of credit gives us additional flexibility, as we seek out opportunities and in returning capital to shareholders.

In December, our Board authorized a share repurchase program of up to $15 million. Leveraging the strength of our balance sheet, we bought $7 million of shares in our third quarter, and have since then completed the remaining $8 million. As a result, we have purchased nearly 6% of our outstanding shares at an average price of $17.92 per share. Please note that based on timing of shares purchased, the buyback has little effect on our share count for Q3. In Q4, we expect our diluted share count to be roughly 13.6 million shares. The full impact of the program will be reflected in our share count in fiscal 2023, beginning in May.

Now turning to our guidance; as we discussed today, we plan to continue expanding the Outdoor Lifestyle category, and as a result, we believe product sales from this category will remain above 50% of our total net sales in the long term. That said, sales of Shooting Sports products comprise a significant portion of our business today, and those sales are more impacted by consumer firearm purchasing trends, which have been declining recently, according to NICS background checks. As a result, we are lowering our guidance for the balance of fiscal 2022.

We estimate that net sales for fiscal '22 will be in the range of $245 million to $250 million, which at the midpoint, would represent a year-over-year decline of 10.6% and growth of nearly 48% over fiscal 2020. With net sales in that range, we expect full year GAAP EPS in the range of $0.61 to $0.74, non-GAAP EPS in the range of $1.65 to $1.78 and adjusted EBITDAS margins of about 14%.

For the fourth quarter, we expect gross margin to be roughly 44%, slightly down sequentially from Q3, but consistent with last year, despite a year-over-year net sales decline, as we lapped last year's extremely strong growth of nearly 50%. We are carefully managing our expenses, and as such, we expect Q4 operating expenses, both variable and fixed, to be lower in terms of dollars than Q4 last year. Lastly, we expect our effective tax rate will be approximately 25% in Q4 and our fully diluted share count for the year will be about 14.2 million shares.

With that, operator, please open the call for questions from our analysts.

(Operator Instructions) Our first question coming from the line of John Kernan with Cowen.

This is John Cardoso on for John Kernan. I was hoping, we could dive into trends by outdoor activity. You mentioned that Shooting Sports and Personal Protection are seeing some softness. But can you give us some more granularity about the consumer trends you're seeing across either other outdoor activities or end markets?

Sure, John. This is Brian Murphy. So as you pointed out, Shooting Sports and Personal Protection, we are seeing some softening in demand. Actually, POS is coming up just slightly here as of late, but still down relative to where they were at. And then on the Outdoor Lifestyle side, which is how -- what we're referring to is, we're seeing continued strength across the board. So hunting, fishing, camping, rugged outdoor, which is largely our cutlery and tools products. So across each of those categories, we're seeing tremendous strength right now.

Great. Just one follow-up here. You mentioned some of the gains the last 2 years were attributable to outsized pandemic-driven consumption. Is Q4's rebased or implied guide seeing any other material headwinds or drivers that we should be contemplating? I guess just really is, Q4's addressable level, how we should be thinking about the business on a go-forward basis, given today's ongoing macro and industry trends? Really, any color there would be appreciated.

Yes. This is Brian again. Look, I'd say for Q4, kind of what we guided for the rest of the year is based on the trends we're seeing right now, in the Shooting Sports side, and the trends that we're seeing in Outdoor Lifestyle, which we would expect to continue to grow. But as it relates to next year, we just -- I think it's just too soon for us to come out and say what that looks like.

Our next question coming from the line of Ryan Meyers from Lake Street Capital.

First one for me. So when you look at the decline in the shooting sports business, was this all demand-related or was there any sort of inventory sourcing problems or supply chain issues with that?

Yes. Hey Ryan, it's Brian. It's mostly due to the demand side. So we feel -- as you know, we have invested in our inventory. We made that decision a long time ago, just given some of the supply chain constraints. The inventory that we have, the inventory that's in the channel, it's all really good inventory. I think right now, what we're seeing is, especially at the dealer and distributor level, is perhaps a shifting of open-to-buy dollars towards ammo, as those 14 million new firearm owners that entered the market, just hadn't had a chance to get their ammo yet, because it wasn't on shelves.

So just like I said, I think we're seeing -- POS has bounced back a little bit for the Shooting Sports side. But yes, the answer your question is, it's what we're seeing on the demand side and again, partially contributed to the open to buy at the dealer and distributor level.

Okay. That's helpful. And then I was wondering if you could highlight the margin difference between Shooting Sports and the Outdoor Lifestyle category?

Yes, great question. This is Andy. We don't really break out the margins between the 2 categories. I would say overall, they're not all that much different, but we don't really have that detail broken out.

Okay. That's helpful. And then last one for me. If I'm looking at this the right way, it looks like the guidance implied for the fourth quarter is kind of looking for a decline in profitability, compared to the previous guidance. I wonder if you could just sort of walk us through what the puts and takes here are of this?

Yes. This is Andy again. So we're expecting -- as we talked about in the comments, we're expecting a little bit of a sequential margin decline, nothing out of the ordinary. If you look at last Q4, it's kind of right in line with that. And then kind of offset with some savings, both fixed and variable, especially if you compare that to Q4 last year.

(Operator Instructions) Our next question coming from the line of Scott Stember with CL King Associates.

I missed the -- some of the breakout that you had about Shooting Sports versus Outdoor Living. Can you just give that again on a 2-year stack for each one, and maybe on a year-over-year, how each one performed?

Yes, Scott, this is Andy. So Shooting Sports year-over-year in the quarter was down 31%. Outdoor Lifestyle was up 7% on a 2-year stack, and again, that's kind of what we look at, as a long-term trend. Shooting Sports was up 81% Outdoor Lifestyle is up 62%. I'm sorry, Scott, let me back up -- sorry, that was in total. Shooting Sports was 45%, Outdoor Lifestyle 81%, so 62% total.

Okay. Got it. All right. And just tying back into your -- I guess, your organic growth guidance, I guess, 5 years is intact. I think it was $8 million to $10 million, I think it was the number you put out there, but it also, I guess, it includes this year, right, which would be close to, I guess, on the high end of sales down by 9% or 10%. So could you give us a bridge of how we get back to that range? I mean, obviously, things have picked back up in the out year. I know that you're not guiding for 2023. But maybe just walk us through that ladder of how we get there again?

Sure. Hey Scott, this is Brian. So what I'd tell you is let's talk about Outdoor Lifestyle first. Outdoor Lifestyle is becoming a greater share of the business, and we are seeing continued growth in Outdoor Lifestyle. That's going to continue to move up over time. It's also in bigger markets, and we've been talking about like -- most of our Dock & Unlock examples that we've given over the last 18 months or so, have been brands like Bubba, brands like Hooyman, MEAT! Your Maker.

So I would say, they're the farthest along when it comes to the unlock phase, and so we're seeing increased distribution, increased number of new products, getting into new bigger, larger addressable markets. I mean MEAT! Your Maker went from zero to, I think, we said $6.4 million, [taking this] most recent. So -- and we've got plans to do the same thing with Grilla.

And then on the Shooting Sports side, you may be asking, okay, what -- you're seeing some softness right now? What does that look like over the long term? Well, there is, without a doubt, a higher level of participation that has entered the market, as those people begin to go to the ranges and they get their ammunition that's still somewhat constrained. They're going to need gearing and eye protection. They're going to need shooting reps. They're going to need gun cleaning equipment. So we have all of that to help them progress them down into that Shooting Sports enthusiast lifestyle as well. And we are seeing that. If you look at the products that performed the best in this last quarter, it was mostly the products that helped sustain that long-term Shooting Sports lifestyle, the pieces that really were under a little bit more pressure, were the personal protection side, which obviously, after last year, we didn't see as much of that.

And then we're also planning to -- in Shooting Sports and we teased that at the SHOT Show. Now they are moving further along to that unlock phase of Dock & Unlock, is getting into categories like shotgun sports. So we just used a new product called the Claymore. It's a fully mechanical clay thrower that we think is totally a game changer. The people that saw it at the show, including our customers loved it. And so we see a product like that, continuing to get us into these more stable markets within Shooting Sports, and we've got other things planned there. But that's how we get there over time. Once you stack those, we have a plan to get there.

Got it. And the last question on margins, the adjusted EBITDA margins. We're looking, I guess, around 14%, 14.5% for this year in the latest guidance. I know you're not guiding for next year, but just trying to get a sense, as we attach profitability to that 8% to 10%, what is a normalized range that we should be thinking about? I'm not sure if you guys have given that in the past or not, but just if you did, just remind us?

Yes, Scott, this is Andy. So we're still targeting the mid- to high teens along with that 8% to 10% growth.

And I'm not showing any further questions at this time. I would now like to turn the call back over to Mr. Brian Murphy for any closing remarks.

Thank you, operator. Before we close, I want to thank our employees for their contributions and their dedication to our growing family of brands. I also want to thank everyone on the AOB team and the Grilla team for bringing on -- bringing our acquisition across the finish line. Great job. For our investors, please note that we'll be attending the ROTH conference next week in California and hope to see some of you there.

Thank you, everyone, for joining us today. We look forward to speaking with you again next quarter.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.