Barrett Business Services Inc (BBSI) 2011 Q3 法說會逐字稿

Please stand by for real time transcript. Good afternoon, everyone. Thank you for participating in today's conference call to discuss Barrett Business Services' financial results for the third quarter ending September 30, 2011. Joining us today are BBSI's President and CEO, Michael Elich, and the CFO, Mr. Jim Miller. Following the remarks we'll open the call for your questions.

Before we go further, I would like to take a moment to read the Company's Safe Harbor Statement. Within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. The Company remarks during today's conference call may include forward-looking statements. These statements, along with other information presented that are not historical facts, are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by these forward-looking statements.

Please refer to the Company's recent earnings release and to the Company's quarterly and annual reports filed with the Securities & Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ. I would now like to remind everyone that this call will be available for replay through November 2, 2011, starting at 3 PM Eastern, tonight. A web cast replay will also be available via the link provided in today's press release as well as available on the Company's website at www.barrettbusiness.com. Now I would like to turn the call over to the Chief Financial Officer of BBSI, Mr. Jim Miller. Sir, please go ahead.

Thank you, and good afternoon, everyone. As you saw at the close of market yesterday we issued a press release announcing our financial results for the third quarter ended September 30, 2011. Before I get into the financial results for the quarter, I would like to mention that yesterday's earnings release summarizes our revenues and cost of revenues on a net revenue basis as required by Generally Accepted Accounting Principles.

Most of our comments today, however, will be based upon gross revenues and various relationships to gross revenues as management believes such information is, one, more informative as to the level of our business activity, two, more useful in managing and analyzing our operations, and, three, adds more transparency to the trends within our business. Comments related to gross revenues as compared with net revenue basis of reporting have no effect on gross margin dollars, SG&A expenses or net income.

Turning now to the third quarter results, total gross revenues increased 22% to $406 million compared to the third quarter of 2010. California which comprised approximately 83% of our overall third quarter gross revenues increased 25% primarily due to continued growth in new PEO business. PEO gross revenues increased 24% to $371 million compared to the third quarter of last year principally due to the addition of new customers.

Our PEO revenues from existing customers experienced a 5.1% or $13.6 million increase compared to the year ago quarter. The increase in PEO revenues from existing customers represents the sixth consecutive quarter of existing customer growth. This increase was primarily driven by an increase in hours worked versus increases in head count.

Staffing revenues for the third quarter of 2011 increased 2% to $34.6 million compared to the third quarter of 2010 primarily due to a small net gain in new business as revenues from existing customers remain nearly flat. Gross margin dollars for the third quarter increased 15% to $16.2 million compared to the same quarter a year ago primarily due to the increase in revenues.

On a percentage basis gross margin declined to 4% for the third quarter of 2011 compared to 4.2% in the same quarter a year ago principally due to higher workers' compensation expenses and higher payroll taxes and benefits offset in part by lower direct payroll costs as a percentage of revenues.

Direct payroll costs as a percentage of gross revenues declined to 84.9% compared to 85.1% in the same quarter a year ago due to an increase in the PEO markup rates resulting from our ability to pass on price increases to customers following a period where mark-ups remained relatively flat through the recession despite cost increases absorbed by the Company.

Payroll taxes and benefits for the third quarter as a percentage of gross revenues was 7.5% versus 7.4% for the same quarter a year ago. The slight increase is due to higher state unemployment taxes in a majority of states the Company operates in. This trend is similar to the increases experienced in the first and second quarters of 2011.

Workers' compensation expense as a percentage of gross revenues was 3.6% which is up from 3.3% for the same quarter a year ago primarily due to an increase in the provision for prior year claim costs, higher safety incentive expenses which provide a hedge against the current year claim costs, and higher insurance broker commissions.

Selling and general and administrative expenses increased 7.9% over the 2010 third quarter. This increase is primarily due to increases in profit sharing, management payroll, and stock option compensation expenses.

The income tax rate for the third quarter of 2011 was 13.7% which included a favorable benefit from the effect of the $10 million life insurance proceeds on the annual effective tax rate for the Company and also to a California state income tax refund related to tax years 2003 through 2006.

BBSI may realize additional benefit in the future from the 2007 through 2009 tax years for California which are currently under review by the state.

As most of you are aware, the life insurance proceeds were realized during the first quarter of 2011 from the passing of Bill Sherertz, the Company's former President and CEO. We expect the effective tax rate of approximately 20% to continue through the fourth quarter 2011 and we anticipate our overall tax rate to return to the low to mid-30s percent range for the first quarter of 2012.

As reported, the Company earned $0.54 per diluted share in the 2011 third quarter compared to $0.36 per diluted share in the same quarter last year. Without the favorable benefit to the income tax rate and the California state income tax refund, the Company earned $0.42 per diluted share for the third quarter 2011.

Turning now to the balance sheet at September 30th, cash and current marketable securities totaled $68.2 million compared to $55.4 million at December 31, 2010. This increase is primarily due to operating income the first nine months of 2011 partially offset by the payment of quarterly cash dividends and share re-purchases during the first nine months of 2011.

We generated $23.9 million in free cash flow during the first nine months and continue to carry no bank debt. Trade accounts receivable at September 30th were $50.9 million, an increase of $13.3 million over December 31, 2010, primarily due to increases in revenues and accrued revenue at September 30, 2011.

Accrued payroll taxes and related benefits increased $15.2 million over December 31, 2010, to $52.7 million due to increases in accrued payroll and third quarter payroll taxes which are generally higher during the third quarter of the year as compared to the fourth quarter as taxable unemployment wage ceilings are reset each January 1st .

Stockholders equity increased approximately $8.1 million over December 31, 2010, to $103.5 million primarily due to net income of $14.4 million for 2011 partially offset by share re-purchases of $3.8 million and cash dividends paid of $2.7 million.

Turning to our outlook for the fourth quarter of 2011, we are expecting gross revenues to range from $405 million to $410 million. This projection represents the likely midpoint increase of 18.4% over the $344.2 million in gross revenues for the fourth quarter of 2010.

The projected increase of 2011 fourth quarter gross revenues is based upon a recent revenue trend. Based upon the foregoing estimates for gross revenues we anticipate diluted earnings per share for the 2011 fourth quarter on a GAAP basis to range from $0.45 to $0.49 per share as compared to diluted earnings per share of $0.30 for the fourth quarter of 2010. The $0.45 to $0.49 range includes the favorable benefit from the effect of the life insurance proceeds resulting in an effective annual tax rate of approximately 20%.

Using more normalized income tax rate, we estimate diluted earnings per share for the fourth quarter of 2011 to range from $0.37 to $0.41.

At this time Mike Elich will comment further on the recently completed third quarter and our outlook for the fourth quarter of 2011.

Good morning. Good afternoon. Depending on where you might be in the country. Appreciate you taking time to join the call. Overall very pleased with the quarter. It is a record quarter as far as I know, both on the earnings side and revenue side.

We continue to see strong stability in our existing client base. I know with a lot of noise out in the economy people keep coming to me and asking what are we really seeing out there, but we continue to see stability and very much a forward-looking perspective from our client base. We continue to manage the same discipline as we have and widening our client base while maintaining a high retention level in our clients, and personally I am very pleased with the quality of our existing client base and as it grows the base continues to mature well and therefore creates operating leverage for us.

In the quarter we added 113 clients. We lost 38. Seven clients left for AR reasons, 10 were canceled due to non-AR or most likely risk and non-conforming standards. 15 businesses were sold. One left on their own due to pricing. Two took payroll in house, and three left to work with a competitor. Overall that was a net gain of 75 clients. That's an increase of roughly 15% over 3Q of 2010's build. I think we had 64, 63 or 64 at the time.

From an operational focus we continue to innovate to meet our market demand. Obviously as fast as we are growing we need to make sure we're continuing to stay out in front of that curve. We can continue to focus on organizational alignment both between how we're looking at the picture from a corporate perspective as well as from a field perspective from the ground up. We continue to build capacity to meet our growth curve as we see it continuing as it is trending currently.

From a business development standpoint, pipelines still remain very strong. We continue to be very picky about the quality of new clients that we see coming in and pipeline source avenues continue to mature. We acquire our business through three channels, one direct, two through network partners that bring us referrals as well as three customer referrals and we see all three of those channels continuing to develop and mature as we grow. Overall, very pleased with how the organization continues to adapt to new operational levels. One of the things as you grow as we have grown is it brings other variables into the equation. We continue to be very nimble and adapt to those changes, and overall I am very pleased with how the overall organization continues to look down the road.

Regional review, in the Southern California we continue to see strong momentum for growth as well, same thing in northern California. In past quarters I had mentioned that the Northwest and Mountain states were a little bit slower, sluggish. We're starting to see where we're gaining traction in those markets and showing growth. In the Mountain states we're really starting to see where things are thawing out even though the growth rate is not as robust as in California. We are seeing growth in seeing businesses that are starting to make forward-looking decisions. On the East Coast as well we continue to show consistent growth on an ongoing basis.

Tail winds for us on a go-forward basis, we see continued retention of our top talent while we continue to retain 90% of our current client base, 90% plus. Business owners continue to make forward-looking decisions. We don't see the fear in how they're looking at their business that you might think based on all the media and what you're hearing on Wall Street. Our pipelines remain very strong, and one of the things that we are seeing that is very favorable is that we're seeing an increase in hours worked in the quarter which typically is a precursor to hiring.

Head winds that we do see, though, as well as on a net-net hiring is flat. What we see is we see companies, or clients, that we work with adding people but then we see almost a counter balance to that where there are clients that still continue to either layoff or right size their organizations so that net basis tends to be, although up a little bit from a hiring standpoint, not very much.

Through BBSI through our overall trends, we continue to be cautious to the noise in the economy. We're in a great position to be able to respond to what might come at us. We're just trying to make sure we're looking out far enough to be able to adapt.

On a go-forward basis we'll continue to reinvest back into the organizational infrastructure to support our growth curve. We're continuing to mature our pipeline sources and add to those, looking at technology in different ways that we can understand the market better is one area where we're putting focus. We're well along in building and implementing our new payroll platform. That's been a project that's been under way roughly a year, year-and-a-half. It is starting to be implemented as we go, and we see an opportunity for us to gain market share as a result of that just because of the flexibility that it will give us.

We continue to look at opportunities to expand our footprint both in markets by building filler branches in markets that are maybe under served for us as well as in the quarter reviewed six new acquisition candidates that are pretty broad based throughout the country, and we continue to see a pipeline of acquisitions although not many of them are really worth typically a lot of them are broken.

Overall very pleased with the quarter, very pleased with how the Company is running, very proud of the organization as a whole, of how they continue to run and build and adapt and grow as we continue to grow overall, so at the end of the day I feel that the quality of earnings that we're generating are predictable and also are leading us down a path where we can continue on the same path. With that we'll open it up for questions.

(Operator Instructions). Our first question comes from the line of Josh Vogel with Sidoti.

Good morning, Josh.

Thank you, good morning, Mike and Jim. Just a couple questions here. We have obviously been seeing very robust growth in PEO, out pacing staffing for sure, and I know that staffing is a bit of a higher margin business, but can you give us a sense of maybe gross margin target or long-term gross margin targets you may have keeping in mind that PEOs going to be around I guess 90% of total gross revenue.

You know, Josh, I think I would probably reverse that question a little bit. In our model we don't typically have a gross margin target as it would be seen in the industry. What we're typically looking at is operational leverage. Our intent is in a business unit is to reinvest back in 50% of what we're generating in margin back into our clients, so it is really more of a matter of what we're able to bring to the bottom line. So if we go in and look at a client that might be dysfunctional, we may not be able to charge them enough to be able to operate with them.

The other side of that equation though, is if we find a good, clean, good looking business, we'll look at what it costs us to be in that business or to move into that market while at the same time looking at where the market is and we'll make our decisions on those two factors. But our focus is from an operational stand point to dilute our operating over head down to at least 50% and many cases where our branches are growing and maturing we're finding a stronger operating leverage than that.

Okay. I guess just building off those comments, you said earlier that there is a markup in the PEO business on the direct payroll cost line, and can you talk a little bit about that and are you seeing any push back with the markup there?

No. Actually in the last year we, about a year ago, we recognized that the recession for us was kind of winding down, and we looked back at some of the costs that we had taken on. Back in 2007 and 2008 when companies were coming apart and tax rates were increasing, it was very difficult to pass those costs back onto your client because you're just going to push them out of business or you're going to push them away from you. So we took those charges back to us, and kind of rode the wave a little bit.

For new clients coming on we normalize those costs and continue to build the adequate costs in, but about a year ago we looked at the market strength and have gone back in now and made adjustments where it was appropriate and passed, where it was necessary, cost back onto our clients, and we have not had any flow back on that. We have actually found that we have been able to increase mark ups where it is appropriate and have not lost clients because of it.

Okay. Great, and I guess in a similar vein there, Jim, you talked about workers comp expense coming in a little bit higher year-over-year and you said that insurance broker commissions were up. Is this something that you could pass along at some point?

Well, the insurance broker commission part of the component to workers comp, you know, is actually part of us gaining new business, and I guess in some ways that's actually a very good expense to have, and in part the increase is due to increased business, but also in part to a higher workers comp rate component that has happened, particularly in California, over the last couple of years, so it is due to that rate increase as well as to increased business.

I would say, Josh, over the long haul we are passing that on because as that rate increases it is a reflection. It's a percentage of what we're charging, so as that rate increases it becomes a factor in the increased markup to our customer as well.

Okay. And just one last one if you don't mind and I will hop back in. I guess this is more for Jim. With the accounts receivable balance dropped sequentially, I was just curious if that was more of a timing thing or maybe a function of better collection terms?

Yes, it's really more of a function of timing. As we internally manage the Company, we're typically on with most customers either a weekly or a biweekly cycle, and as the quarter ended on a Friday, that is probably 90% or better for our customers as being the common pay date to the employees and also the invoice date to our PEO customers, and so collections, when it is a Friday, since it is kind of the old check for check idea of we pay the employees the same day we get paid by the customers, that resulted in increased collections at September 30th.

Okay. Makes sense. Thanks a lot.

Thank you.

(Operator Instructions). Your next question comes from the line of Jeff Martin from Roth Capital.

Good morning, Jeff.

Good morning, guys. Good morning, Mike. Good morning, Jim. Was wondering if we can get a little more insight into you mentioned three different components to the higher workers comp costs in the quarter. How does that break down between safety incentives, insurance broker and prior year claims?

The breakdown, the insurance broker piece was about 500,000 higher. Safety incentives were about 700,000 higher, and then the provision for back year claim development was about 900.

Okay. And does that provision for prior claims tie and does that dovetail into the current unemployment rate and not necessarily robust state of the economy?

Yes, I think it definitely does have an impact on that, and as we go forward and build our own internal models that we base guidance off, we're looking at that potential for each quarter and kind of factoring that in to make sure we're that booking workers comp on a conservative basis and making sure that we're not getting surprised either, but definitely the economy has an impact on that.

Okay. And does that safety incentive in third quarter mean there is likely less to be less safety incentive in the fourth quarter and therefore workers comp as a percentage of gross payroll comes down?

Well, it could from the standpoint that losses that would be incurred in the fourth quarter could go against that safety incentive liability that's being generated throughout the year, so certainly provides a hedge against losses.

Okay. And then in terms of the price increases that you did, those were kind of set across the board or were those strictly on renewals and new business? Can you help us understand how that was implemented?

What we did, Jeff, is in charging ourselves internally a bigger number from just on the comp side for California on the accrual basis and then it cut into manager's margins and so intuitively they went back to look at clients across the board that said, all right, where are you out of whack, where do we need to pass that on, so it was done on a client by client basis upon renewal, where it was necessary. It is more a matter of riding the ship. You have to think, too, other factors in that equation is you might have had a client that had 50 employees in 2007 and in 2009 they had 15, and so it was really bringing a lot of those clients back into alignment as we felt now that the base was solid enough and we knew what we were looking at and we wouldn't put the overall business at risk by just throwing a bigger markup at our client base.

Okay. Now, is there more right sizing to do or riding the ship to do with respect to pricing?

I think it on an ongoing basis we're watching it a lot closer, but I would say right now it is in pretty good shape. It is just a matter on a go-forward basis of a little bit of what might happen market wise as things continue to improve. We're seeing from California stand point and just insurance in general I think it is going to see a very hard market over the next few years where in the last five years it has been a very soft market which will benefit us. I think it is an ongoing basis. I don't see any sweeping changes. I think what we're doing is working but at the same time I think that we're continuing to make adjustments.

Okay. And then could you give us insight into what kind of businesses you're looking at acquiring? Are they purely staffing? Are they also PEO, and are they completely new territories or existing territories?

You know, again, we see opportunities come across our desk. We're not actively pursuing them. As they come across we'll take a look at them from a number of characteristics. First of all, it is going to be organizational culture and how well would they align with us. Secondly, it would be what does that business model look like compared to ours and how much would we have to move that to incorporate that into our fold.

Staffing tends to be easier to move and get there where PEO it seems like for every PEO company that is out there there is a different model they're running, so the one thing we do know with the new payroll system that we have coming on board, is it gives us much more flexibility as far as converting a PEO client to our system if we were to go that route. And in many cases there is a lot of PEOs out there using that system already, so that simplifies things a bit, too. I think the bigger focus is going to be what's accretive? Is it, one, going to make money? Two, does it give us geographic advantage? And, does it help us broaden our footprint so three or four or five years down the road we're wide enough to continue our pace of growth.

Okay. And then could you contrast what you are hearing from your branch managers and/or your clients in October versus say August and September in terms of the overall sentiment?

I would say it is pretty much the same. I think from the branch level they continue to see clients looking forward, making forward-looking decisions. I don't hear that that is really changed. If anything, it is probably even gotten a little bit better. I think that there is enough pent-up demand from their customers that they're expanding to meet the demand of the market.

Finally, can you touch on the competitive landscape? Are you up against the same competitors you always have been? Are you seeing new competitors come in and namely some of the larger players like Insperity, Paychecks, ADP, are you seeing them or are you still pretty much out there targeting a unique set of blue collar clients?

You know, we're all in the blue collar business. They can say whatever they want. They're doing as much blue collar as anybody is. At the end of the day, though, we're not seeing them. Maybe it is just by route that we get our clients. You have to think, California only probably has about maybe a 3% to maybe 5% top penetration on the PEO side, so given that we do a lot of business in California, we are not seeing that we bump into our competitors that much. In the quarter we lost three clients to a competitor. On our base that's a pretty small percentage. In markets maybe in the mountain states we see a little bit more competitive pressure, but still no real direct competitor that we find ourselves going head to head with.

Great. Thanks, Mike. Good luck, guys.

Thank you.

Our next question comes from the line of Michael Prouting with 10k Capital.

Good morning. Thanks for taking my questions.

Good morning.

First question I had was on workers comp. Can you remind me when you next have a third party review of your workers comp provision?

We actually go through a quarterly review with our actuary, and are in contact with them more than quarterly, so a review each quarter and an update of their projection of costs, so we're in constant contact with them each quarter.

Okay. So is there a more significant review at fiscal year end or is that any different from any other quarter?

There is an annual more detailed analysis that they put together that we'll see in the fourth quarter, but they're close enough to the data on a quarterly basis that there shouldn't be any surprises when they issue that report to us.

Okay. All right. Great. Second question I had, you mentioned that you are seeing clients increase their hours. Just wondering what your expectations might be in terms of clients starting to hire again and then I guess also related to that, I am wondering the more positive outlook you are getting from your clients seemingly, than we're hearing in the rest of the economy. Is that because we're just listening to Wall Street too much or do you think that's a function of the quality of your client base?

If I had the answer to that one I don't think any of us would be here. The challenge of it is that, yeah, there is a lot of noise and you look at what you are hearing on Wall Street, but I think there are some true macro structural issues out there. I personally believe that the small business owner has reached a point, though, where the business was cut in half, they're stable, they're making money, we continue to see probably a better churn on even our AR than we have ever had meaning that the Companies we're working with are well financed. They're solid, so I guess they have kind of turned their eye a little bit to the noise and saying we have to move forward and take care of our customers and as they're doing that, they're finding demand.

My worry will be the day I am driving down the freeway and I am the only one on the freeway. As far as the the increase in hours go, we can only monitor that stuff. The one thing we do in our business model is we work with companies to help them become more efficient with the labor they have. So we kind of work against ourselves a little bit in the short run because we're trying to help our clients not on have to hire people initially, but because they run a better business model they capture more business, they do hire people at increased wages because of that.

I guess the catch 22 is that, yes, there is a lot of things out there that are under a state of correction in the macro economy that maybe we're just not big enough yet that we're affected by that because our clients are moving forward, they're continuing to add hours, although they're not hiring a lot of people. Once you add hours, eventually you reach a point of capacity of each individual and you have to add individual head counts to expand that.

Okay, thanks for the color there. As far as acquisitions are concerned, I am just wondering what you're thinking in terms of using either cash or stock and then I am also wondering related to that and I know this is a difficult thing to put parameters around, but I am wondering if you look out over, lets say for argument sake, let's say the next twelve months, what kind of capital potentially do you think you could put to work there?

One of the things that you have to be careful of when you are going into a harder insurance market is that capital becomes a real pivotal piece for making, because we're in the insurance business, making states comfortable with your balance sheet and making all your business partners. So we carry maybe on a non-restricted basis, but we feel that we need roughly 40 to 45 million on our balance sheet dedicated to just that. Beyond that, it is working capital, and it also becomes cash that we might use for acquisitions or cash in stock combination if we found the right one. The real challenge is finding the right one. The strategy behind it is that if we can meet a few companies and I can interface and we as a company can get to know them a little bit, we're not going in on the unknown, and so if we find one that matches up well to our cultural needs or our cultural alignment as a company and we feel that it can be accretive, then that's kind of how the deal will structure, but we probably would be more inclined to use cash than stock given what we do. Then remember, we still buy a lot of stock back, and we also pay a dividend. We were kind of sorting through this over the last five years we have actually pushed back into shareholders through dividend and/or stock buy back about $40 million, so that actually is a strategy as well.

Okay. And then final question related to that and forgive me for asking the same question every quarter, quarter after quarter. Accepting that although cash isn't available for use in stock repurchase, but if you just take cash out of your market cap, you're trading roughly five times trailing EBITDA at this point which for recurring revenue services businesses just seems frankly ridiculous. I know one potential catalyst is resolution that stock over hang from the trust, et cetera. Just wondering if you can provide us with any update on that.

You know, it is a challenge that we faced related to the over hang that might be out there. We continue to have an interface with the state over the last nine months, and we'll continue to support the best interests of resolving that for all shareholders, but while keeping the interest of all shareholders in mind. The other side is that we continue to tell the story out on the street, and continue to expand the interest in the stock, and find and I think that we have a story that still is maturing in the eyes of the market, and I continue to be very aggressive in helping people understand what we're really made up of. We're a very unique company in that we don't directly compete with our competitors but we continue to take market share from them. So over time, my view is the view of Bill Sherertz, for many years if you build a good company, eventually that stuff takes care of itself.

Okay. Thanks for taking my questions, and I know it is trite, but congratulations on the continuing great execution.

Thank you very much.

Our next question comes from the line of BBSI.

Good morning, Nancy.

Good morning. Shifting directions just a little, in the article published in the Portland business journal regarding recent 13- D filings, one of the things we learned was that a strategy has been formulated to increase company revenues to about $3 billion, and I would appreciate you providing specifics other than the generality of, for example, acquisitions and a time frame, and also a comment on in addition to interfacing management's current relationships with shareholders. Thank you.

You know, I think the context of me saying we can get to $3 billion was made during our shareholders meeting back in May. That's what we're building towards. That's what we continue to see as a mark both in building operational infrastructure and operational capacity. If you go back to 2009, we have actually grown the business from roughly a little over a billion to a run of over 1.5 billion, and we don't see that slowing. I think we continue to manage certain disciplines that organically will allow us to continue on that pace as well as looking at opportunities to expand our footprint down the road.

As far as a time frame for that, the first year since Bill's passing has been a matter of aligning ourselves towards our future and then ensuring that we're not missing anything, so as we look at organizationally, we're continuing to invest back into resources that will help us achieve that and then as we get further down the road and we see that everything is running really well that we have, then we'll look for opportunities to expand. Then as far as shareholder relations, one, our door continues to always be open. I think our board is continued to maintain an open door to the estate, and I continue to be very engaged and actively involved in being in front of shareholders and like to believe I make myself available for anybody that would have a question or would like to learn a little bit more about what we're trying to accomplish.

Thank you.

At this time this concludes our Question and Answer Session and I would now like to turn the call back over to Mr. Elich for closing remarks.

Again, thank you for your time and participation. We will continue to execute, move forward, and keep you informed as we continue to execute. Thank you.

Thank you. This concludes today's conference call.