Barrett Business Services Inc (BBSI) 2015 Q2 法說會逐字稿

Good morning, everyone, and thank you for participating in today's conference call to discuss BBSI's financial results for the second quarter ended June 30, 2015. Joining us today are BBSI's President and CEO, Mr. Michael Elich, and the Company's CFO, Mr. Jim Miller. Following their remarks, we will 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's remarks during today's conference call may include forward-looking statements. These statements, along with other information presented that are not historical fact, 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 and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ.

I would like to remind everyone this call will be available for replay through August 29, 2015 starting at 3 PM Eastern time this afternoon. A webcast 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, Eric. And depending upon where you are dialing in from, good morning or afternoon, everyone.

As you saw at the close of the market yesterday, we issued a press release announcing our financial results for the second quarter ended June 30, 2015. Our strong 2Q results continue to be driven by record organic sales and strong new client additions. Same-store sales grew 9.2%, and we experienced a net build of 201 new clients. We also continue to experience favorable workers' compensation claim closures following the progress in each of the -- our last two quarters, which supports the results we expected by the claims-strengthening process we initiated in late 2013.

Before taking you through our financial results, 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, or GAAP. Most of our comments today, however, will be based upon gross revenues and various relationships to gross revenues because we believe 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 to a net revenue basis of reporting have no effect on gross margin dollars, SG&A expenses, or net income.

Now turning to the second-quarter results, total gross revenues increased 22% to $971.9 million over the second quarter of 2014, primarily due to the continued build in our coal employed client count and same-store sales growth coupled with a 10% increase in staffing revenues.

Overall PEO gross revenues increased 22% over the second quarter of last year to $929.5 million, due primarily to the continued build in our client count and same-store sales. Our PEO revenues from existing customers increased approximately 9.2% year over year due to increases in both headcount and hours worked. This compares to a 7.6% increase last quarter and a 9.3% increase in the second quarter of 2014.

Staffing revenues for the second quarter of 2015 increased 10% to $42.3 million primarily due to an increase in new business and an increase from existing customers. On a percentage basis, gross margin for the second quarter was 3.7%, unchanged compared to the second quarter of 2014.

The key components of this quarter's gross margin are as follows. Direct payroll cost as a percentage of gross revenues declined 24 basis points from the second quarter of 2014 to 83.9%, which reflects an increase in the overall average customer market percentage on a year-over-year basis. We evaluate pricing on an as-needed basis to account for operational demands and market trends, and we have thus far been able to offset various incremental costs and keep gross margin unchanged.

In the second quarter, payroll taxes and benefits as a percentage of gross revenues declined 23 basis points to 7.4%. The lower effective payroll tax rate for the 2015 second quarter resulted from a decline in overall state unemployment tax rates where BBSI does business and to a small horizon in overall average wage rates, which allow the tax ceilings to be reached sooner in the year for 2015 as compared to 2014.

Workers' compensation expense as a percentage of gross revenues was 4.9%, which compares to 4.4% in the same quarter a year ago. As expected and consistent with the 2015 first quarter, the year-over-year percentage increase is due to an increase in the loss accrual rate, increased cost from the full incremental expense associated with the ACE-fronted program, and the surety lines and letters of credit costs related to satisfying the security requirement for our California self-insurance program which expired December 31, 2014.

Looking at the remainder of 2015, we anticipate the level of workers' comp expense to range between 4.8% and 5% of gross revenues.

During the second quarter, we closed an additional 65 claims from years 2012 and prior, resulting in approximately $1.1 million of credits. This follows the progress we reported at December 31, 2014 and March 31, 2015, and also supports the results we expected of the claims-strengthening process initiated in late 2013. To date, this brings the closure of 650 claims, or approximately 50% of the total strength in claims, from 2012 and prior, yielding $7.8 million in total credits.

Specifically, we are seeing a continued trend of clients from the years 2012 and prior closing for less than the amount put up on these specific claims. As a reminder, the significance of the 2012 and older claims is that as they are now well-seasoned and having been fully strengthened provide us with a solid basis for analyzing the development of claim years 2013, 2014, and now 2015. The number of total open claims from 2012 and prior is now less than 900.

SG&A expenses increased 18% to $21.3 million, compared to $18 million in the second quarter of 2014, primarily due to higher management payroll and incentive bonus paid to the field, and increases in other variable expense components within SG&A to support continued business growth. It is important that we prudently invest to stay in front of our expansion. However, we continue to target the rate of SG&A to grow in line or less than our gross revenue growth.

Income from operations for the second quarter of 2015 increased 26% to $14.2 million and represents the leverage we would expect in our bottom line once we repay our outstanding debt. The provision for income taxes in the second quarter was $5 million, which represented a tax rate of approximately 36.2%. We expect the tax rate for the balance of 2015 to remain in the mid- to upper 30s. Net income for the second quarter of 2015 increased 20% to $8.7 million, compared to $7.3 million for the second quarter of 2014. Diluted income per share for the second quarter of 2015 increased 21% to $1.19 compared to $0.98 for the second quarter of 2014.

Now turning to the balance sheet, our cash, cash equivalents, and marketable securities, as well as restricted securities, totaled $248 million at June 30, 2015, compared to $239.1 million at December 31, 2014. At June 30, 2015, we had approximately $3.2 million drawn on our $14 million revolving line of credit.

During the second quarter, we fronted approximately $31.4 million of cash in the ACE trust account to supplement the $28 million funded in the first quarter of 2015 and our $50.1 million of deposits at December 31, 2014. These funds are included as a component of restricted marketable securities and workers' compensation deposits and long-term assets, with a portion representing an estimate of injury claims to be paid out in the next 12 months, which are included in current assets on our balance sheet.

The balance in the ACE trust account is expected to build for the foreseeable future as growth into the program continues. We project that most of the funding will come from the expense we accrue into the workers' compensation line item. The $88.3 million of restricted certificates of deposit within long-term assets represents cash-secured letters of credit to satisfy collateral requirements associated with purity deposits for workers' compensation purposes in the state of California related to our expired self-insurance program. The state of California recently reduced our security requirement, which has resulted in approximately $26 million of the previously long-term restricted certificates of deposit being reclassified to a current asset at June 30, 2015.

Following the process of reducing the corresponding surety lines and letters of credit, the current portion will revert to an unrestricted status. Going forward, we expect to experience semi-annual decreases to the security requirement. As the outstanding California self-insured liability, these deposits secure continues to be in a runoff mode.

Additionally during July, we received approximately half of our expected $10 million federal and state income tax refunds resulting from the carry-back of the 2014 tax loss to prior year's taxable income. And we anticipate receiving the remaining income tax refunds during the third quarter or early fourth quarter of this year.

As I mentioned on last quarter's call, I believe it is important to note that while the optics of our current ratio do not appear strong, the cash generated from operations the business is sufficient to fund the daily needs of the Company. Additionally, most of the current portion of long-term debt does not come due until the end of 2015, which will be funded primarily by the income tax refunds and cash flow generated from operations throughout the remainder of 2015.

We generated approximately $12.6 million in operating cash flow during the first six months of 2015 as compared to $8.7 million in the same period last year. During the second quarter of 2015, we made a $3 million payment on a term note with Wells Fargo representing the first installment of the scheduled debt repayment. Now I would like to provide an update on the SEC investigation and the shareholder lawsuits that we disclosed in our March 31 quarterly filing.

Regarding the SEC formal investigation, we have now provided the SEC with thousands of documents and emails and have maintained an open dialogue with their representatives. While there is no timetable communicated for a resolution, we strongly believe that our financial statements and accounting practices are and have been in full compliance with US GAAP.

Regarding the shareholder class-action lawsuit, on June 12 we filed a motion to dismiss on the basis that the plaintiffs have failed to meet the pleading standards applicable to prior actions under the federal securities laws. A hearing on the motion is scheduled for early September. We believe the claims in this litigation are baseless. If the court does not grant our motion to dismiss, we intend to file a motion for summary judgment as soon as appropriate.

We have also disclosed in the first quarter a shareholder who had threatened a derivative lawsuit based upon the same facts as those alleged in the shareholder class-action has now filed such an action. All of the directors and three executive officers are named as defendants in the new case. The first response is due September 21, 2015. As with the class-action lawsuit, we believe the claims in this suit are also without merit.

As we introduced the last year, in order to provide our investors with a more appropriate forward-looking view of our business, we initiated a rolling 12-month outlook for gross revenues which we plan to update on a quarterly basis. As such, we continue to expect gross revenues for the next 12-month period to increase approximately 18%. Included in this expectation is a high single-digit contribution from same-store sales growth through new business, consistent with current trends.

I look forward to addressing you again on our third-quarter earnings call. Now I would like to turn the call over to the President and CEO of BBSI, Mike Elich, who will comment further on the recently completed 2015 second quarter as well as our outlook for the remainder of 2015. Mike?

Good morning, and thank you for taking time to be on the call. Very pleased with the results of the quarter. We continue to make significant progress in all areas. We saw progress through the maturation of our brand, as measured by the level of growth we see across all markets. We continued the progress -- the process of maturing our organizational structure and process by which we attract, develop, and retain people.

Based on a rate of new client adds and organizational bench, we believe we have about 18 months of runway in our organizational structure today. We also continue to mature systems and internal resources designed to support predictability in the model while bringing increased efficiencies to operations.

In looking at the quarter, we added 261 new PEO clients. We lost 60 clients: 8 were due to accounts receivable or collection issues; 16 were canceled for non-AR or lack of tier progression; 10 were sold or closed; 26 left to either pricing competition or have moved away from the outsourced model to take payroll inside. This represents an approximate net build in the quarter of 201 new clients. We saw same-store sales increase 9.2%. This specifically measures hiring, increased, and hours worked, annual wage inflation.

Measured sequentially, quarter -- Q1 2015 versus Q2 2015, we saw 48% of our clients added headcount, 27% of our clients reduced headcount, and 25% of our clients were unchanged.

Related to pipeline and regional growth, we continue to see momentum and maturation of our brand, as evidenced the continued strong pipeline and ongoing interest in our offering. Our general market outlook is strong, with consistent build across all regions. We see increased momentum across the East -- from the East Coast, Northwest and Mountain states as well as consistent momentum that we've seen in the past through the California and other West Coast markets.

Our new -- our key factor to growth is our retention and clients, which remains north of 90%. Related to structural and organizational build, we continue to build and expand business units to support current and future organizational needs and to meet market demands. Currently, we have 39 business units supported by 54 branches. We have two business units being built and forecasted an additional 7 business units to be built by the end of 2015 for approximately 48 business units.

Increases -- included in the number is 4 business units -- 4 emerging branches that are forecasted to add business units in the next six months. This is a great sign of our -- of the momentum in new markets. We also continue to see positive momentum within new markets opened in recent quarters. We continue to see the potential to open 2 additional markets in 2015 or early 2016. Markets may range from additional expansion on the East Coast to future tuck-ins in the Western third of the United States.

Related to systems, we continue to focus on the integration and adoption of systems developed over the past 18 months to complement our brand as well as to bring efficiencies to operations. We will continue to invest in systems through 2015 and into 2016 to scale and support the future growth of the Organization.

Related to workers' compensation and underwriting of risk, in the quarter, we saw a relative frequency of claims as the percentage of payroll remained flat compared to the second quarter of 2014 and a decrease of 5% compared to the second quarter of 2013.

Also in the quarter, we continue to see positive claim closures, as evidenced by the continued increase in the percentage of claim closed over the past three claim years. We have also continued to see a decrease in severity, as evidenced by improved trends in ultimate severity for claim years 2013, 2014, and now 2015.

Moving forward, we will continue to monitor trends to maintain proactive -- a proactive position related to workers' compensation. We expect this to result in greater predictability within the model.

As I look at the Company today, I am pleased with the ongoing maturation of the organization and the continued progress we see in our approach to the market. Today, we believe we have a fairly long runway in front of us with respect to the organizational structure, bench strengths, and the ability to grow our client base. The basis of our business is our organizational structure, and we continue to elevate the talent in the organization to develop our bench strength. We also continue to see progress in the adoption of systems and progress that will allow us to strengthen engagement with our clients based on the improved efficiency -- improved efficiencies over time.

As our teams mature and share best practices across markets, we continue to see more consistency in the brand and greater contributions from the entire organization. I look forward to seeing the Company's maturation over the next several years.

With that, I will open it to questions. Thank you. Is the operator there?

(Operator Instructions) Jeff Martin, ROTH Capital Partners.

Could you give us a sense -- you gave a workers' compensation percentage of gross revenue expectation range for the balance of the year, 4.8% to 5%. What are some of the things that could swing that to the lower or the high end? Basically came in the middle of that in the second quarter, and that was down 14 basis points from the first quarter. So what are some of the big swing factors there?

The real swing factors are not really so much in the loss-accrual portion, but more the -- I guess what I would call more the administrative side of things. There's the state assessment component of that, that I think we'll actually perhaps see some benefit from the decline in the surety requirements, which should give us a little bit of savings going forward on that front.

There are other costs, though, such as risk management, broker commissions, and our program with ACE. And so while we say 4.8% to 5%, if we had to pick a specific number, probably 4.9% of the midpoint is probably the best guess at this point. As we don't -- I don't think we'll anticipate a lot of movement within that number.

Right. Okay. With $26 million coming back to CDs you've classified as a current asset, is that cash you can use to repay debt?

Not really to repay debt. But what it does help is it provides cash to continue to pay off the existing claims from back years in California where, with that cash previously tied up in collateral, over time it starts to create a little bit of a pinch point as most of our cash generated now is either going to pay back debt or it's going into the ACE trust. So this just provides a little more flexibility to us for paying off those claims.

Okay, okay. And then walk me through the process of this fall's actuarial review. With claims closing out more quickly than they have historically and with accrual coming back into IBNR, help me understand what the process is going to be this year. Obviously it's not going to be -- it's going to be a positive process, I would take it.

Yes, I think it will be positive. I'm working with our actuaries. So as we continue to discuss the reserve, we are still only about nine months out from -- with our new actuary and with the fully strengthened reserves. And so they are still working through the process, and it's really one of time more than anything of reaching a new normal of that data. And so, again, we are probably looking out another 12 to 18 months before that is clear enough to really be able to tell definitively where that reserve will end up landing. But certainly everything we've seen to date is very positive on that journey.

Okay, okay. And then Mike, can you give some perspective on the net client adds? I've got roughly 780 client adds on a trailing 12-month basis. I know in the past you've alluded to ballpark roughly $1 million of gross revenue per client. Do you feel like that's tracking to that sort of level? And what's your outlook for the pace of client additions in the future?

Yes, I would say that the size seems to be tracking pretty consistent. The challenge is in realizing new revenues, is how you are stacking new clients in. So you really have to break it down into three buckets. You have to look at your same-store sales block, which is all clients have been on board more than 12 months. And that's the real driver, and that's where we measure same-store sales off of. And then you have clients that are contributing to new revenue that were added in the previous three quarters is adding, and they also have a same-store sales component in it. But because of the way they are maturing into our structure, there's little more movement in that. And then, equally, you have the number of clients that were stacked in the current quarter.

So you have a little bit of a lag effect as you are stacking in. But if you take that same formula, 700 clients -- million of clients, $700 million, if you look at -- we finished last year a little over $3.3 billion top-line revenue. If you were just to stack that on top, that gets you right around that $4 billion mark -- $4 billion to $4.1 billion, which supports our current run rate as of growth.

So, yes, it's simple back-of-the-napkin math, but if you are going to back-test it, that's how you would look at it.

Okay, okay. And then one more question before I clear the line here. In the past, you have alluded to tier progression from your clients. And if I recall, about 18 months ago, you had a certain group of clients that weren't progressing, and you made a pretty swift move all at once. Could you give us an update on tier progression in general across your client base?

I think what was going on back then is we were moving towards getting the model where we knew we could run it with more predictability. We were putting pressure against the organization to get us -- clean the base and really clear the deck so we could move forward consistently and have the predictability primarily for the utilization of internal capacity. I have no interest in building more structure into the organization to manage the dysfunction of clients that we are not making progress with. So that was really the process we went through.

Since then, if you look at the end of 2013 and into 2014, our -- that rate is really normalized. And even what we're seeing today as reasons for cancellation are much more in line with just that. Clients that aren't progressing the way we would hope -- we are ensuring that we are priced effectively, so we know we are making money with each client that we are doing business with.

We are putting pressure where we need to. Sometimes being a good partner with your client isn't about telling them everything they want to hear, but also having those hard conversations. And so as our base has been tested over a period of time, I think that where you are seeing that normalization of, call it, 50 to 80 new clients leaving a quarter, that seems to be the new normal. And over time, that will probably narrow itself to being a cleaner -- like the last two quarters it's been right around 60. So give yourself plus or minus 10 clients in any given quarter, and it should -- that seems to be where we are at today as a percentage of the overall base.

Great. Thanks for your time.

Matt Blazei, Lake Street Capital Markets.

A couple of technical questions here. You mentioned, Jim, that you get the $10 million tax refund in July. Could you remind us again what further tax refunds you are planning to get here before the end of the year?

Well, the $10 million is really what the total amount of the tax refunds we expect to get. Now what we will see though is as we get into 4Q is a lessening of taxes that would normally be do on the 2015 tax year, as we still have some loss carry-forward as well as some tax credits that we are not able to carry back.

I see. So you will be accruing at you said the mid-30s -- mid- to high 30s, but it may not necessarily be cash taxes.

Correct.

Okay. And are you still on your target to repay I think it was $25 million on the Wells Fargo line this year?

We paid $3 million of that June 30, and then $7 million is due at the end of September, and then $15 million is due December 31.

Got it, okay. And then Mike, real quick again, can you walk through the -- your planned progression in the new business units and new branches again year over the next year? I'm sorry; I just got complicated there.

No worries. So as we look at how we're looking at infrastructure -- so we're measuring that up against pipeline momentum. Right now, we are seeing a lot of consistency coming across our entire base as far as how we are adding to our overall base. One of the things we focus within both branches and in business units is for consistent adds. We're not looking for home runs; we're looking for a lot of base hits.

And so two things are happening. One of the things that we see is that our business units and emerging branches are reaching a level where we are seeing consistent performance of adds of new business and consistent retention of those clients, which is step number one.

Step number two is that as you do that, your brand matures; it starts to tip; your pipelines accelerate. And as that happens as well, you now put strain on capacity. So we look at capacity utilization of the organization, realizing that we can achieve certain levels depending on where the progression and development of the business unit is. So we look at how fast capacity is being stripped out of the business unit based on how fast we are adding clients, which is the overall formula where we back-test to capacity build.

So within existing branches, that's going on consistently. We are seeing progression on the West Coast. We're seeing a lot of progression in the mountain states right now where structure is pretty good shape, but we're looking at rate of build, which is burning capacity which creates demand for us to add infrastructure. That's step one.

Step two is where we look at new markets for opportunity. There's two things that create that pull as it would be. One is where we are starting to see clients or our pipelines pulling us around, away from our ultimate base of operations. So if we are trying to stay within 50 miles of any one of our clients, over time we're getting pulled to new markets, and it simply just makes sense to add more infrastructure at some point rather than stretch an existing branch. So right now, we see a couple markets where we could do tuck-ins on the Western third of the United States, but we are not seeing enough stress to be able to say which markets those are. We will just continue to keep those under advisement and watch them close.

And then on the East Coast as well, we opened up a couple different markets here as at the first of the year, and we are going to continue to look at where we want to make investments there, as we do have fairly strong momentum on the East Coast as well.

So you've opened 2 branches so far this year and you plan to open 4 more in the next six months. Is that --

Two more. We open 2 more -- we open one on the East Coast and one in San Mateo, which -- San Mateo was actually a spinoff of our San Jose branch, where we spun out a business unit and we opened a new market. On the East Coast, we went through a similar process in Charlotte. And so now we have 2 additional markets identified that we're looking at that we expect may possibly come in online around the end of the year or at least in the first quarter of next year.

And the number of business units is going from 39, you said, to 48 over the next 12 months, you think?

Probably over the next six, eight months.

Okay. That's great, you guys. Thanks. Great quarter.

(Operator Instructions) Bill Dezellem, Titan Capital Management.

I'd like to circle back to your PEO revs. You mentioned that 9.2% was the -- came from existing customers. Would you split out for us that break between employee growth, hours-worked growth, and waste growth?

Well, yes, certainly those are the three components of any increase there. But really, I guess what we see it as is in headcount and hours worked. There's a little bit of wage inflation that we see. But, again, the primary factors there are going to be, at least for us, for this quarter were increase in hours worked and headcount added.

Yes, probably --

Please go ahead.

Just look, they're broad bucket, so it's hard to really nail down specifically where the most. But when we look at just overall increase to payroll, it was 71%, but that's also represented in a 48 -- that 48% of our clients increased headcount, while 27% of our clients reduced headcount. So you are having a net build there, and that's affecting payroll. I don't -- we don't really see that much evidence of wage inflation in the model at this point, but it's more from a client growth standpoint we believe.

Great. Thank you, and congratulations on a nice quarter.

Rich Murphy, Cross River.

Yes, Mike, you talked about -- I guess Mike asked this question, but the capacity utilization of your (inaudible), you have 39 now. How would you describe utilization in terms of -- are they 50% capacity? 75%? And what is the leverage we get at the model as we build out in terms of G&A?

One of the things that we see in large branches is once a branch reaches a certain point, be it -- call it [$100 million], [$120 million] of operations, we start to see where your incremental add to business units is not very dilutive in the overall flow-through because, on a relative basis, the size of the branch is diluting it.

We are starting to see -- and we believe probably in the next two years, we will see that start to happen in the overall Company. But we're still in a build mode of the structure to support that larger critical mass. So as we look at capacity utilization today, we are probably still running right around 50% of utilization of the existing infrastructure. As we continue to see the maturity that's consistent with where we've been in the last couple of quarters and what we really see in the next turn of 12 months, it's a good chance that that capacity utilization -- the cap yield will probably tick up. And as we see that happen, you're getting more with every labor dollar and all the infrastructure you have flowing through, and that ultimately results in earnings leverage.

The second part, too, to watch is as we have consistency within the build across the board, you're going to see a great deal. A couple -- a great -- more leverage as well. If you go back a few years ago, we were probably getting 80% or 90% of our real business growth that's coming from 10% of our operations. Today we probably have -- of 100% of the growth of operations, we are probably seeing contribution from close to 60% to 80% of the organization. So as we see broader contribution, you're getting better cap utilization, and that's what you're going to see operational -- operating leverage.

And is that drive what your outlook for -- you have a glide path of 18 months out. Is that what's giving you confidence in the growth?

Yes, yes, yes. And just looking at who's coming in, we're seeing just the maturity level of people that are coming through the door today. As long as we have been doing this, I would say that we've improved substantially how we bring in mature and just develop our internal bench to support growth in our client needs, and that's what gives me confidence about the 18 months.

And just one other question. You're starting to move out East. Is there any risk in that move? What gives you confidence? You mentioned Charlotte. What are your plans for the East Coast? Is it to replicate the West Coast, have about 35, 39 offices?

I think in time. We have been on the East Coast for probably 25, 30 years. It's just in the last probably five years that we are really seeing it come online and doing well. We have very strong teams there. One of the things that we see is they are functioning as a region, as a collective unit, which has a lot to do with -- of continuity and your ability to scale. Because of the progress we've made on the West Coast, we have more energy and resources to apply there compared to where we might have been a couple of years ago when we were going through a rather significant retooling process even throughout the Organization.

I think the other thing, too, that supports the sustainability of building growth on the East Coast will be is that we've learned a lot of the lessons. We've got a lot of the algorithms written and locked down. We know we have to do to be able to be successful. And one of the things that I feel -- gives me a lot of comfort is that we are seeing tremendous consistency in the product offering, structure, just in how we go to market across the entire organization, which proves that it works in all markets.

Excellent. Well, congratulations on the quarter, Mike.

Thank you. Thank you.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Elich for closing remarks.

Again, thank you for taking time to stay in touch. We are -- it's been an interesting road for us, but I continue to say most things worth doing aren't necessarily always easy. And we've made tremendous progress, and I'm very, very pleased with where we're at. I'm very proud of the Organization as a whole. We've got a lot of great people that show up every day and grow in the same direction. And we will continue to build and mature ourselves into a great Company, and hopefully you'll stand touch and continue to watch the story unfold. Thank you.

Thank you for your participation. We look forward to talking to you again in our third-quarter earnings call. Thank you.