達美樂 (DPZ) 2013 Q1 法說會逐字稿

Good morning.

My name is Tanisha, and I'll be your conference operator today.

At this time, I would like to welcome everyone to the quarter-one financial results earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you.

Ms. Liddle, you may begin your conference.

Thanks, Tanisha, and thank you, everybody, for joining us for our first-quarter results conference call.

We are excited to be here.

And with me today I have Patrick Doyle, our Chief Executive Officer; and Mike Lawton, our Chief Financial Officer, both of whom will speak today.

As always, we ask our friends from the media to remain in a listen-only mode today.

And, also, I direct all of your attention to our 8-K, where we have our Safe Harbor statement listed in the event that we make any forward-looking statements.

So, with that, I would like to turn the call over to Mike, who will start with prepared comments.

Thank you, Lynn, and good morning, everyone.

I'm pleased to report that we delivered solid results for our shareholders during the quarter.

Our international and domestic divisions posted strong same-store sales growth, our International division opened a significant number of new stores, and adjusted EPS grew 25% over the prior year.

So now let's go through the results for the first quarter, and I'll start by looking at our system-wide sales.

Global retail sales -- and those are the total retail sales at franchise and company-owned stores worldwide -- grew 10.5%, when excluding the impact of foreign currency.

When we include the impact of foreign currency in the quarter, our global retail sales grew by 9.4%.

The drivers of this growth included domestic same-store sales, which rose 6.2% in the quarter, lapping a positive 2% in the first quarter of 2012.

This was comprised of franchise same-store sales, which grew 6.3%, and company-owned stores, which were up 5.0%.

These increases were driven by our continued consumer offering of higher-quality food at value pricing, and increased advertising supporting Q1 promotions.

We also attribute approximately 1% of the same-store sales growth to the benefit of New Year's Eve and New Year's Day falling in the first quarter of fiscal 2013, as the dates of these holidays did not fall in the first quarter of 2012.

Although we do not provide specifics of order count and ticket, for competitive reasons, we did drive strong order count, again, in the quarter.

Value pricing, combined with the many other efforts we made to build our business in the quarter, can be a strong catalyst for order count, but can also lower tickets slightly, as it did in the case of Q1.

Clearly, the overall effect for us was a positive one.

We closed 5 net stores domestically in the quarter, consisting of 10 store openings and 15 closures.

As we mentioned previously, we expect to see modest positive domestic store openings for the full year.

Our international division had another solid quarter, as same-store sales grew 6.5%, lapping a strong 4.7% increase in the first quarter of 2012.

International also benefited in the range of 1% from New Year's Eve and New Year's Day falling in the first quarter of 2013.

Our international division grew by 80 stores this quarter, made up of 85 store openings and 5 closures.

Turning to revenues, our total revenues were up $33 million, or 8.6%, from the prior year.

This increase was primarily a result of three factors.

First, higher supply-chain revenues, resulting from increased volumes from higher order counts, a change in the mix of products sold per order, and an increase in commodity prices.

Second, higher domestic and international royalty revenues, due to same-store sales growth and international store-count growth.

And, finally, we contracted a third-party to manage our gift-card program, which entailed the third party assuming a majority of our gift-card liability for a small fee.

As a result, we reduced our gift-card liability by $2.6 million, which was booked as revenue, and reimbursed the system's advertising fund $1.8 million for its historical cost of the program.

We expect future impacts to revenue and G&A expense from this program to be minimal.

Moving onto our operating margin.

As a percentage of revenues, our consolidated operating margin for the quarter increased by 1.3%, from 29.8% to 31.1%.

This change was essentially driven by three factors.

First, a change in our mix of revenues positively impacted our operating margin, as we now have more franchise revenues from royalty, which have no cost of sales, as well as the change in our gift-card program.

Second, company-owned store operating margins increased as a percentage of revenues from the prior-year quarter due to higher volumes, which leveraged labor and occupancy cost.

This was slightly offset by higher food cost.

Third, our supply-chain margin percentage increased slightly from 10.6% to 11.3%, due to the positive impact of product mix and higher volumes, offset by an increase in the commodity cost.

The average cheese-block price in the first quarter was $1.67 per pound, versus $1.52 last year, which led to a -- contributed to a 2.5% increase in our overall market basket for the quarter.

As a reminder, food commodities are generally priced on a constant dollar markup to our franchisees.

Therefore, the higher cheese prices do not impact our supply-chain dollar profit.

They do, however -- it did, however, negatively impact our supply-chain margin as a percent of revenues.

Overall, we continue to expect a commodity increase of 3% to 4% in 2013, which we believe will be manageable in the overall context of our business.

Turning to G&A expenses, G&A increased by $6.5 million, or 13.6%, quarter over quarter.

The increase was primarily due to the following factors -- variable performance-based compensation expense and investments in the international technology areas of our business; an increase in non-cash comp expense; and, the one-time reimbursement we made to our system's advertising fund, related to their support of our gift-card program, as I mentioned a moment ago.

As we have previously indicated, we estimate our full-year G&A to increase an additional $9 million to $13 million over 2012, due to planned investments to expand our international support team, e-commerce and technological support, and the increase in non-cash compensation.

Also note that we charge franchisees for providing e-commerce and technological support, and we expect to have increased revenues of $1.5 million to $2 million in 2013 related to these services, to partially offset these cost increases.

Keep in mind that G&A expense can vary up or down by, among other things, our performance versus plan, as that affects variable performance-based compensation, as well as the timing of hiring of team members.

Regarding income taxes, our reported effective tax rate was 37.0% for the quarter.

While this rate was slightly under our normal range, we continue to expect that 37.5% to 38.5% will be our effective tax rate for the foreseeable future.

Our first-quarter net income was up $13.7 million, or 66%.

When you remove $7.4 million of items affecting comparability, primarily expenses related to the recapitalization from the first quarter of 2012, net income was up $6.3 million, or 22.3%.

This increase was primarily driven by higher domestic and international same-store sales, international store growth, and higher company-owned store and supply-chain margins.

Our first-quarter diluted EPS was $0.59.

There are no significant items that affected comparability during the quarter, so as reported, EPS was the same as adjusted.

The $0.59 is a $0.12, or 25%, increase from the $0.47 as-adjusted EPS in the first-quarter of last year.

Here's how that $0.12 difference breaks down.

Our improved operating results benefited us by $0.09.

Our lower diluted share count, primarily due to our stock repurchases, benefited us by about $0.015, and our lower interest expense and slightly lower tax rate benefited us by another $0.015.

During the first quarter, we generated $42.6 million of free cash flow, which we used to make scheduled principal payments on our debt, and repurchase and retire shares.

We repurchased and retired approximately 363,000 shares for $18 million, at an average price of $49.65 per share.

We ended the quarter with $75 million of unrestricted cash.

In closing, we are pleased with the results of the quarter.

We will continue to focus on improving our operational performance, growing our global store base, and utilizing our free cash flow to drive shareholder value.

Thank you for your time today, and I will turn it over to Patrick.

Thanks, Mike.

Good morning, everyone.

We're off to a great start for 2013, as you can see from the results we reported this morning.

They speak not only to the strength of our franchise business model, and the consistency it can produce, but also to the power of our brand, our very strong operators, our compelling technology, and our quality food at a good price.

In the domestic business, we drove solid traffic, despite the fact that we were not on air with a new specific product.

Instead, we featured a variety of great food at the same great value we have offered for some time now, which our customers responded to.

And value is something that pizza is known for.

For under $25, including a tip for delivery, you can feed a family of four with pizza, something that we feel keeps our category strong in an uncertain economy, versus other segments of the restaurant industry.

Our value offerings were backed up by really strong advertising during the first quarter, which included high-scoring ads that resonated well with our customers.

And while we did not promote our new handmade pan pizza on TV in the first quarter, we know that this high-quality, fresh-not-frozen-dough product continued to be popular among our existing customers, as well as new ones.

It is a product that continues to perform well.

Now that we have this additional pizza platform, it gives us room to grow in a new crust segment, and take some share, which we recently have been taking from regional chains and independents.

Strong sales and traffic were the highlights for our domestic results in the first quarter, while continued sales strength and robust store openings were clearly the highlights for our international business.

You may have seen that our UK master franchisee posted very strong results in the first quarter, not only in the UK but also in Ireland, and they posted some encouraging results in Germany and Switzerland, as well.

South Korea, Turkey, and Brazil also experienced great results in the quarter, demonstrating the broad geographic strength of our brand and its resilience in a variety of economic climates.

We also drove great store growth this quarter.

One example was Japan, where they hit the 250-store milestone.

While Japan is a developed market economically, it is not a mature pizza market yet, so we see more potential for growth there.

We like our mix of both developed and emerging economies, and we see excellent opportunities for sales and sales growth around the world, as delivered pizza remains a very underpenetrated segment.

One opportunity we are proud to be developing worldwide is our innovation around online ordering and technology.

Domestically, we continue to drive orders and sales from all of our digital platforms.

We are also continually improving these sites with enhancements like card-on-file, which is now available for online orders, and will soon be available for all mobile orders, as well.

Digital ordering averaged over 35% of total sales in the quarter, and mobile ordering continues to be our fastest-growing segment.

Technological innovation continues to be an advantage in a number of our international markets, as well.

In Australia, they recently launched an app that allows customers to give stores real-time feedback.

Customers can also see how their local store is rated by others, and what the top five customer-rated stores in the country are.

Japan recently launched an iPhone app, featuring a popular Japanese vocaloid, which is a synthesized singing animated character popular in Japan.

In the UK, ordering through mobile devices is now over 25% of all orders, with over 60% of delivered sales coming through digital channels.

Clearly, digital ordering is where the pizza industry is going, not just in the US, but worldwide.

As Mike noted in his comments, even though we now have a regular dividend, we still have the flexibility to deploy free cash flow for share repurchases.

We also deployed cash for a scheduled principal payment on our now year-old debt facility.

We recognize that interest rates have come down even lower than our current favorable rate since we refinanced last year, however, provisions of our debt structure make it unattractive to restructure our existing debt now or in the near term.

In conclusion, our consistent results, our technological advantage, and powerful global brand, have resulted in a great start to the year.

We are well positioned for the year ahead, with no plans to rest on our laurels.

We intend to open more stores, offer compelling consumer promotions along with high-quality products, delivered with the service that we've been known for worldwide.

We are focusing on technology and staying ahead on innovation, both in the US and in many of our international markets.

And, as always, we are continuously making sure that we are also doing what we believe is best for the long-term strength of our Company and our shareholders.

With that, I'd like to turn it over to the operator for questions.

Operator, I am ready for the first question.

Michael Kelter, Goldman Sachs.

You had mentioned in your past analysis that weather was not a major driver of your business.

Now that the first quarter is under your belt, do you still feel that way?

Or did weather possibly help the first quarter, given how extreme the shift was this year versus last year?

Maybe it fell out of the norms of your model.

The answer is, it is possible that it slightly helped.

But it is kind of the inverse of what we said last year about the first quarter, which was working against us, and it just -- the model says it is just not enough to be material to the overall results.

So, no -- do not think weather was a factor.

And you mentioned no plans to refinance the debt, because of the penalties that you would incur.

Are there any other options that you have available to you that you might be considering?

Maybe extending your leverage within the confines of the existing facility?

Yes, we have looked at it in the near-term -- probably no news on that front.

And then one last one.

The stock continues to move higher, inclusive of multiple expansion, given how strong your fundamentals are.

Is there a point where you stop buying back stock and look for other accretive ways to deploy the free cash flow?

The answer is as it has always been.

We are always going to look at what we think is going to give and produce the best returns for our shareholders.

And so we are always looking at every possible way of doing that.

And so it is going to be driven by our analysis.

All right.

Thank you.

Thanks, Michael.

Brian Bittner.

Patrick, Mike, congrats to you and your team on these excellent results once again.

Thank you, Brian.

I want to actually ask about the supply-chain business.

You had a 20% increase in operating profits in that segment year-over-year.

The volumes out of your domestic business were obviously up a lot less than that.

So it seems as though there is some type of operating leverage in that business as your volumes do increase.

Is that so?

What type of contribution margin does incremental throughput come at in that business?

Or is there something else that happened in the quarter that got you that operating leverage in that segment?

Brian, you are right.

There is some operating leverage there.

But there is also a lot of what happens with mix, because the margins on different products are not the same.

And you look year-on-year, and last year with what we were doing with Stuffed Cheesy Bread and Parm Bread Bites, and the fact that volumes were actually down a little bit, as opposed to up.

You look at that -- this year, we have got Pan Pizza, we've got a different mix going through there.

So there is a combination of factors at work.

As we kind of go forward here, though, if you get volume upticks, you expect the profit growth of that segment to grow faster than volume growth, right?

Yes.

We certainly get some leverage off the higher operating volume, but this -- I think it is fair to say that the margin that we had this quarter is probably up on the high side of what one should be expecting.

Okay.

On the technology side, are you still really in the learning phase when it comes to using this platform to actively drive incident rates and actively drive average check, whether it be one-on-one marketing or just interaction throughout the payment process?

Or is this something that is much more active now -- kind of transitioning away from education phase and starting to apply it?

I think the answer, Brian, is probably somewhere in the middle of what you just laid out.

There is still enormous learning that is taking place.

We actually have the CMOs and the CIOs of our largest international markets downstairs.

I was just meeting with them an hour ago, and a lot of the discussion -- all of the discussion -- is really around learning from around the world, and best practices, and I think there is still enormous learning and enormous leverage that we are going to get out of the digital platform.

We are obviously -- we are doing great things with it.

We continue to believe that it is a big reason why you are seeing share gains for the larger players, versus the regionals and the independents.

But there is, clearly, a lot to come on that front.

Our calendar, going out a few years, is pretty full with innovation that we think is going to continue to drive impact with customers.

Great.

Thanks, guys.

Mitch Speiser, Buckingham Research.

Great.

Thanks very much.

Patrick, at the analyst day in January, you indicated in 2012 that your online orders in the US were up about 27%.

I was wondering if you can share that information here in the first quarter, if that rate has sustained.

Yes.

I will try to find numbers here, but yes, it is clearly still growing double-digits.

And if you look back four or five years, the answer has been -- mix has been growing about 5% a year, overall mix of sales.

We tend to see that ramp more in the fourth quarter and into the first quarter every year, than during the spring and summer and early fall.

It is kind of an interesting pattern that not sure we entirely understand yet, what drives that.

But, yes, we are continuing to see the gains.

The trajectory on growth continues to be in that same range.

So I do not have the exact year-over-year number on it, on growth, but it's staying at pretty much that same pace.

Okay, thanks.

And at the analyst day, it was brought out that the big three chains in the US have about an 85% market share of online orders, which is, obviously, dominating.

As we look forward, how durable do you think that is, especially with technology becoming more and more accessible?

Can you maybe give us a sense of -- can this competitive advantage sustain on a long-term basis?

We really think it can.

We are investing very heavily in both people and capital in technology.

There are solutions for regionals and independent players out there.

But they simply do not give the same experience to customers that they can get through our platform, or, frankly, through the platforms of Pizza Hut or Papa John's.

I've described this before -- while we believe -- and if you look at Google Play and iTunes and how things are rated, we do incredibly well versus our largest competitors.

We think the bigger gap in technology is between the three of us and the regionals and independents.

That continues to be true, and I think it is going to be something that is very difficult for them to overcome.

You know, there are, they do have platforms -- third-party platforms that they can access.

But it is just not the same experience as you can get from us.

So, yes, we do think it is a serious competitive advantage.

It is something we are going to continue to invest in, to try to maintain and grow.

I am sure that some of them are going to do better things into the future, but I think it is tough for them to catch up with us.

Great.

Thanks very much.

Joe Buckley, Bank of America.

Thank you.

Just a couple questions on the advertising.

Was the pickup in national advertising presence through the entire quarter -- does that begin with the beginning of the year?

Yes.

I think so.

There are going to be some weeks that are going to bounce around a little bit, but overall, the quarter had a good lift on GRP versus last year.

Okay.

And then, the Pan Pizza was not featured, but did you get pretty good carry-through from the fourth-quarter launch and walk-in support in the fourth quarter for the Pan Pizza?

Yes, we sure did.

We sure did.

It is performing very, very well for us.

And first quarter was a good test for us.

Once -- you learn a lot on the strength of the product once you go off-air.

We were off-air for the entire quarter.

And are now back on-air with Pan.

But it performed very, very well for us in the first quarter.

Couldn't be more pleased with that product.

Just one more, Patrick.

You mentioned a 35% digital order mix, I believe?

Was that for domestic?

Yes.

I was talking about domestic.

North of 35% of sales domestically.

And -- but it is a very comparable number in international, as well, with broad-spread market-to-market.

There are markets that are over 50%.

And there are still markets that are relatively early in their development, and there are some that are still not offering online ordering.

So, those are relatively small, but yes, overall the average outside of the US is about the same as the number inside the US.

Very good.

Thank you.

Thanks, Joe.

Alvin Concepcion, Citi.

Congrats on a great start to the new year.

And just another follow-up on the Pan Pizza.

I think on the last call you mentioned you were bringing in some new customers with it, but the demand was being driven mostly by existing customers.

Was that still the case this quarter, particularly since you were off-air?

And if that was the case, as Pan Pizza is being advertised again on TV, have you seen that dynamic change at all?

I cannot get into the second quarter, but for the first quarter -- yes, that was absolutely still the dynamic.

It has really been about increased frequency, increased retention, and mostly the dynamic has been customers of Domino's who have gone elsewhere when they wanted to buy pan pizza are now staying with us for those occasions.

So it does bring in new customers, but it has not been bringing in new customers particularly out of line with what we typically see when we are on-air with promotions.

And so most of the growth has been in orders in fourth quarter and in the first quarter -- have really been through higher frequency from existing Domino's customers.

Great.

And then, are you looking to launch the Pan Pizza in other markets this year?

And if so, what is the timing look for that?

Not going to get into specifics on that one.

Okay.

Thank you.

Thanks, Alvin.

John Glass, Morgan Stanley.

Just, first, a follow-up on the advertising spend -- is that -- is the increase ratably equal across the quarters, or will there be quarters where you have got heavier weights than you did, based on the incremental spending versus a year ago?

Yes.

I do not know that I want to give our competition too much information on this front.

But I guess what I would say is that first quarter was probably going to be a bigger increase overall than you will see the balance of the year.

But I'm not going to go into more than that, just for competitive reasons.

Okay.

And then -- this is a bit of a left-field question, but given the increases in digital technology and online ordering, is there a catering opportunity for Domino's?

You know, school lunches, for example -- some school systems, including ours, sometimes get Domino's Pizza for lunch.

Is there an opportunity to nationally expand your ability to market to larger organizations or create national accounts, where people can order maybe online, and sort of unlock that opportunity for you?

Yes.

We actually already do some national account business, which has been kind of interesting little growth area.

It is still relatively little.

But the ability to deliver for a company function to 50 or 60 or 70 locations for some event, is something that we are pretty uniquely suited to do.

And so, I think the answer is -- we have looked hard at catering.

I do not know that people think about Domino's the way you often think about catering.

But we do think that there are things we're going to be able to do to make large orders easier for customers into the future, and digital clearly helps that.

So more to come on that.

I do not know that catering, exactly the way that we all think about catering will be a big area.

But I think there are definitely things that we can do to make larger orders easier for customers.

Thanks.

And then, for Mike -- I'm sorry, the G&A commentary, I lost a little bit.

Can you recap what is extraordinary this quarter about G&A?

I know there is some ongoing investments, so maybe you can just recap what is going to stay in the first quarter and what persists in the balance of the year?

As I said, the main components are the fact that we've got an additional contribution to our marketing fund as a result of redoing the way we handle gift cards.

That was about $1.8 million.

And in future quarters, that will not probably have a comparable number.

Anything we do with gift cards going forward will be much smaller.

We did have an increase in non-cash comp versus last year.

We will continue to see that throughout the balance of the year.

We also had some higher variable comp, because we did have a very good quarter.

That does have a tendency to move up and down.

And then we also had significant amounts versus last year -- we did have additional expenses for the investment we have been making in IT and international.

And that, I presume, goes through -- is that spread across the four quarters?

Yes.

Great, thank you.

Mark Smith, Feltl and Company.

Hello, guys.

First off, just as we look at the consumer spending environment through the quarter, and consumers maybe pulling back early in the quarter.

Can you give us any insight into cadence of comps, and whether you benefited from the value proposition early in the quarter?

I was actually going to break apart the quarter.

Clearly, we had strong order count growth.

We are very aware of what has been going on in the rest of the restaurant industry.

Particularly January, I think in a lot of the category, it looked a little bit slower.

Clearly, our results were well above what most in the category were seeing.

So it's a little harder for us to pull it apart, because, happily, we over-performed, versus a lot of the industry.

I think the answer is -- consumers, in many ways, have cleaned up their balance sheets.

I think they knew what was coming, to a great extent with some of the changes on taxes, and our belief was, as we were watching our numbers coming in, that the impact was maybe more muted than what people had expected.

But then we also started seeing results from the rest of the industry, and it certainly looked like there was some effect from that.

So, it is a little hard for us to say, since our numbers appear to have been better than a lot of the category.

But overall, my take is -- customers have gotten a little more conservative about their balance sheets.

That means that they are able to weather things a little bit better when there are changes, and I think that they knew that the changes were coming.

All of that said, we are a good value and we have continued to be a good value.

Our offer was consistent with what we have done in the past.

But we think that certainly continued to be strong for us in the first quarter and part of why we had a strong quarter overall.

Okay.

Great.

And then, second, just as we look at competition.

You said you continue to take share from regionals and independents.

But as we look at more niche specialty pizza players and the fast casual space, is there anything that makes you nervous, or that you see changing in the pizza category?

Yes.

First, I have no idea what fast casual is in pizza.

If you look at fast casual, largely it is defined as better-quality, better-tasting products.

And we think we have that.

So we think that is part of why we have had strong growth over the last few years, really, since we re-launched our brand.

There are a lot of people out there doing interesting things in the pizza category.

We continue to watch all of those things.

I would tell you none of those are at a scale that you see any real effect.

Some that have gotten a lot of attention have already closed a lot of stores.

We have seen that in some markets, as well.

So overall, the answer is -- there are a lot of independents and regionals out there.

Overall, we know that they have been losing share to the largest players.

And so -- are there some brands that are doing better and are on their way up, within that?

Absolutely.

But the net effect is, the larger players have been taking share from the smaller players.

Okay.

One last question.

Just as we look at the timing, and getting maybe some benefit from New Year's.

Any other holiday shifts that had an impact, or that we should be watching through the remainder of the year?

Do not think so.

It was really just New Year's in this year.

But that was close to 1 point.

The rest of the year, I do not know that we are seeing anything -- (laughter) we are looking at each other here -- I do not think there is anything particularly big coming from a shift.

Great.

Thank you.

Peter Saleh, Telsey.

Congratulations on the quarter.

I want to ask something -- we continue to see growth in comps, and in the pizza category.

And I know we have talked about this in the past, but what are your thoughts on accelerating unit growth in the US?

Yes.

You know the answer is -- we still expect some growth this year.

We have been saying modest growth, and we think it is going to continue to be relatively modest in the US.

Obviously, over time, we would like that to become more meaningful, but I think we still need to prove that.

And that is clearly an area where there is upside, if we can get that going.

But I think still for the near term, I would expect relatively modest growth on the domestic side.

Are franchisees who want to grow, are they having any trouble finding financing?

You know, it has gotten much better for larger players.

So if you own 10 or more restaurants, and you are looking to borrow $1 million or more, the answer is -- that market has gotten very robust.

If you are a small player, particularly if you are looking to buy your first store, that market is still relatively tight.

And so it is two very, very different markets.

For our larger franchisees, the financing environment is really quite good at this point.

And then just last question.

On China -- where do you stand on China, and getting more robust growth going there?

Yes.

We are happy with progress in China.

It is still relatively small.

But we are moving along there.

And over the longer term, we are optimistic.

In the near term, given the scale of the business, as we are still ramping up, I do not think it is going to be a big driver, but longer term, we are certainly optimistic about China.

Great.

Thank you.

Steve Anderson, Miller Tabak.

Good morning.

I want to go a little bit further on the new [unit development plans] domestically.

In light of your new prototype that you've launched, have you set any numerical goals that you'd like to have, at least from a company-owned standpoint?

We have not yet.

But we will move faster on re-images and relocations with our own stores than we would ask our franchisees to.

But we are still working through the analysis on the new designs and how they are doing.

And so, no conclusion on that yet.

But so -- I think the short answer is no.

Do not have specific timeframes around that yet.

How many of those do you have in operation right now?

A bit north of 100.

Okay.

Thank you.

There are no further questions at this time.

Do you have any closing remarks?

No.

I'd just like to thank everybody for being on today's call, and look forward to updating you further on the business in July, when we report our second-quarter results.

Thanks, everybody.

This concludes today's conference.

You may now disconnect.