EZCORP Inc (EZPW) 2014 Q3 法說會逐字稿

Presentation

Good afternoon, ladies and gentlemen, and welcome to the EZCORP third quarter of fiscal year 2014 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Mark Trinske, EZCORP's Vice President of Investor Relations and Communications.

Thank you, operator and good afternoon everyone. On the call with me today is Mark Kuchenrither, our Interim President and Chief Executive Officer. Also with us today is Tom Welch, our Senior Vice President, Secretary, and General Counsel.

Today's conference call contains certain forward-looking statements regarding the Company's expected operating and financial performance for future periods. These statements are based on the Company's current expectations. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors, including fluctuations in gold prices or the desire of our customers to pawn or sell their gold items, changes in the regulatory environment, changes in market conditions in the overall economy and in the industry, and consumer demand for the Company's services and merchandise. For a discussion of these and other factors affecting the Company's business and prospects, please see our annual quarterly and other reports filed with the SEC.

Also, we provided supplemental information on our website. This information gives more information on earnings -- on a breakdown of our net earnings assets by segment. This material can be found at ezcorp.com in the Investor Relations section of our website.

On today's call, Mr. Kuchenrither will present his opening comments, talk about a few items on our financial statements and then we will open the call to your questions. Now, I would like to turn the call over to Mark Kuchenrither. Mark?

Thank you, Mark and good afternoon everyone. During my remarks today, I will start with an update on the recent Board and management changes at EZCORP and then continue with a review of the quarter. Let me start by saying that the leadership changes to both the Chief Executive Officer and Board of Directors were done to significantly improve the operating and financial performance of EZCORP and to realign corporate strategies to create long-term value.

We are focusing our strategy to return to a sustainable growth model, creating consistent financial returns. There are two primary factors involved in the strategy changes we are embarking on today. Number one, enhance operational execution. And number two, employ a capital allocation strategy focused on achieving a return on invested capital of at least 15%. Today is a new day for EZCORP and as we continue to focus on providing customers with the cash they need, we are also making strategic changes to our business to deliver a superior return on invested capital. We will now focus on delivering consistent financial results and increasing value. The leadership changes at the Board and management levels in the past two weeks are an example of the deep commitment we all have to improving our performance.

I have initiated a 90-day plan for our team to closely evaluate all aspects of our business and ensure that we have specific strategic plans and personnel to achieve this new standard of at least 15% return on invested capital. As you saw in our press release, we achieved our outlook in the third quarter and that's a good first step. But we're not satisfied with this performance. We have operational opportunities across all of our businesses and we know there are areas we can improve.

Hopefully, you saw our announcement yesterday that we added three extremely qualified Board of Directors, Joe Rotunda, Tom Roberts, and Peter Cumins. As many longtime EZCORP shareholders know, Joe was President and Chief Executive Officer of our Company and a member of the Board of Directors from the year 2000 until his retirement in 2010. Under Joe's leadership EZCORP grew from a few 100 storefronts operating in 11 states to over 1,,000 owned and operated locations in the US, Mexico, and Canada. And the Company's market capitalization grew from approximately $17 million to over $1 billion at the time of his retirement. His many years of experience with our Company and our industry will be invaluable to me and the rest of the Board. We welcome him back.

Tom Roberts served on our Board of Directors for nine years, from 2005 to January of 2014 and was our lead independent director much of that time. He is currently the Chairman of the Board of Directors of Pensco, a financial services company. Previously, he spent 15 years with Schlumberger in various executive positions, including Chief Financial Officer. He spent four years as President and Chief Executive Officer of the computer systems and services operations of Control Data Corporation. Tom brings a wealth of experience in managing and growing large international businesses as well as a highly sophisticated financial acumen. Tom will serve on the audit committee and he will chair that committee on an interim basis.

Peter Cumins is the managing director of Cash Converters International Limited. Cash Converters owns and franchises retail and financial service stores in 21 countries. EZCORP owns approximately 33% of the outstanding capital stock of Cash Converters. Peter's Cash Converters stores offer pawn loans, buy/sell, and in store and online payday and installment loans as their primary products. Peter has more than 24 years' experience in our industry. He is an excellent source of knowledge and experience that will be extremely valuable to us.

These Board members are going to be true resources for me and I'm going to involve them in a meaningful way. I am personally very excited about working with these new Board members as well as Lachlan Given, our new Chairman, and our existing Board members, Pablo Lagos and Santiago Creel.

I want to be clear, I'm smart enough to realize what a valuable asset this Board and their experience represent, and I'm going to use it. from a trending perspective, the growth in our pawn business is encouraging, but when we look at our year-over-year pawn loan growth and compare ourselves to our peers, we see additional opportunities to grow loan balances and pawn service charges. We are pleased with the growth of Grupo Finmart, a business that just a few years ago was a fraction of what it is today. In addition, we are generally pleased with the hybrid approach of using a distributor model and a traditional loan origination and servicing model. We also continue to work on strengthening Grupo Finmart's balance sheet by restructuring and paying off its debt.

Our US financial service business has been hampered by changes in the regulatory environment, most recently in Houston. While the regulatory environment is challenging, we still have opportunities to improve our operational performance. Our pawn business in Mexico and our online lending businesses have struggled all this year. Over the next 90 days, we will be evaluating each of these businesses to develop a comprehensive action plan through the lens of our return on invested capital model. We have a lot of work to do.

In the last few days, you may have read about Cash Genie and the financial conduct authority or FCA. In the course of evaluating and preparing the Cash Genie business for compliance with new SGA reg guidelines and rules, we noted three issues, primarily related to the legacy business, and self-reported these to the FCA in June. We are fully cooperating with the FCA and look forward to resolving these issues.

In the US, as we reported in our last 10-Q in February, we received a civil investigative demand from the Consumer Financial Protection Bureau, requesting us to produce certain documents and other information. We have submitted all information requested and the CFPB is in the process of reviewing it.

Now, we would like to point out a few items from our income statement on page six of the press release. If you look at the consumer loan sales and other revenue line, we reported $10.9 million in the third quarter, representing approximately a 300% growth when compared to third quarter last year. This growth primarily reflects a gain of $10 million from structured financing transactions at Grupo Finmart. These transactions also resulted in $38 million in accelerated cash flow.

Again, I want to be clear that these structured financing transactions, we are acting as the distributor, which accelerates cash flow and improves our ability to fund new loans. We will continue with both the traditional loan origination and servicing model, and the new distributor model. This quarter's structured financing transactions represented less than 25% of the Company's current loan portfolio.

If you move down the income statement and you look at the operating and expense lines, I want you to know that I am not satisfied with our current expense structure. We went too far, too fast in decentralization and we will analyze these areas closely over the next 90 days as part of our planning process. Interest expense in the third quarter was up 70% year-over-year to approximately $6 million. At Grupo Finmart, interest expense increased $1.4 million compared to the same quarter last year, and this was due to growth. The corporate expense was $1.8 million in the third quarter compared to $900,000 from the same quarter last year and that was due to a larger debt balance.

Equity and net income from unconsolidated affiliated was $2.1 million, representing fully the contribution from Cash Converters. If you turn to the balance sheet on page seven of our press release, I just want to point out one item. The restricted cash on the current and non-current lines total approximately $35 million. Grupo Finmart has collateral obligations with respect to some of the debt agreements they have outstanding. The collateral can be either in the form of loans or cash.

Due to the success of the second securitization, we have temporarily used cash as collateral in some cases and expect to replace the cash with loans over the next couple of quarters.

Lastly, in the quarter, we strengthened our financial flexibility by raising $230 million through a private convertible debt offering, which enabled us to pay off and close our senior secured credit agreement. It lowered our interest rate. We were able to create a call spread to protect shareholders from dilution and we bought back one million shares of stock to further protect shareholders from dilution.

Now, we would like to provide our outlook for Q4. We are confirming our guidance and expect our Q4 earnings per share from continuing operations to be in the range of $0.37 to $0.39. This outlook takes into account the impact of our recent completed financing, but does not include any potential expenses related to the recent management and Board changes at the Company.

In closing, I'd like to say that I am pleased with the changes we've made to the Board of Directors and I believe our Board members are a tremendous resource for me and the Company going forward. We will develop a plan within 90 days that will deliver long-term sustainable value. I am confident and I am ready to lead this organization. There's a lot of work to do.

Karen, we'll now open the call for questions.

Thank you, Ms. Kuchenrither (Operator instructions) One moment for our first question. Our first question comes from the line of Bob Ramsey from FBR Capital Markets.

Hey, good afternoon, Mark. I wanted to talk a little bit more about the Board and senior management changes, as I think they came as a big surprise to a lot of people. Were these changes related to the former Board's decision to terminate the Madison Park agreement or to set up the corporate governance committee, or buy back stock, or some of the other changes that the Board had been making, I guess, to name a Chairman that was not affiliated with Phillip Cohen?

No, the changes were made because of the -- to address the operating and financial performance issues at EZCORP. If you look at our performance since mid-2012, clearly we have not been performing. And that's -- I think that's pretty straightforward for everyone to see. And so that's why the changes were made.

Okay, and what can you tell me about Given and his relationship with Phillip Cohen?

Well, Lachlan has worked for Phil for many years, I don't quite know how many years, as part of -- as a consultant and I think that relationship I think was spelled out in the previous press release and that's all I know.

Okay, all right, fair enough. With the Board having members in several different countries now, when the Board does meet, do those meetings take place in person and does that in any way sort of make it tougher for everyone to get their heads together when they're in very different locations?

Well, I will tell you this, I mean this will be the first time we've had Peter Cumins on our Board from Australia, but I've known Peter for five years and he's not adverse to traveling. And as far as Santiago and Pablo, they've always made our Board meetings in person and are active. And so I don't foresee any challenges with that. These Board members are committed and know how important it is to be active and participate. And I've personally spoken with all of them in the past week, and I'm confident that they are ready to go and willing to commit their time as necessary.

Okay, and are the Board members that are still here, that were on the former Board, are they all committed to staying on the Board at this point. Is that safe to assume?

Yes.

Great. And then tell me a little about the planned CEO search. I guess first question is, are you sort of in the running for the permanent role as well? And then is the Board hiring I guess an outside executive search firm or how is that process taking place?

Well, it's the Board's call ultimately. But I will tell you that I'm working every day very hard to remove the interim in front of my title. I'm confident that I can do the job. I'm ready to do the job. I think I know what needs to happen. I've expressed my strong desire to fulfill that role. I think the -- my election to the Board of Directors and the fact that we've started a CFO search is encouraging.

Okay. Does the Board have an estimated timeline for when they'll make a decision?

No.

Okay, I guess to -- on the Board, when Love was the Chairman or had been named Chairman, the Board said that they were going to make a permanent corporate governance committee on the Board of Directors, consisting of independent directors. Is that still a desire of the new Board of Directors?

Yes, absolutely.

Thank you. And our next question comes from the line of John Rowan of Sidoti and Company.

Was there some type of reorganization of the pawn and retail business in the US and Canada? I just noticed the different labeling in the press release versus last year?

Hey, John that's a great question and I'm glad you asked it. I made that change with a purpose this week. We removed the retail as part of the title because I think, quite frankly, the last couple of years we've over emphasized the retail aspect of our business and I think it's very important that I sent an internal message and an external message that we are going to take and pay attention to the entire collateral life cycle within our business. We are a lender and we responsible for providing customers with the cash that they need. Retail is an important aspect of our business, but not -- but I want to reduce the emphasis that's been placed on it previously.

Okay. As far as the -- your ROIC goal is 15%, it's just talk that we haven't heard in quite some time. It was back in the days of Joe Rotunda that we used to hear a lot of goals about targeted ROICs for capital allocation. If I'm not mistaken, though, it used to be higher than that. Maybe just refresh my memory and if there has been a change in the targeted return, maybe give me an idea as to why that's taken place.

Another great question, John. Our weighted average cost of capital is 10% and in order to create value, we have to generate a return greater than 10%. Back several years ago, we had a higher goal but I wanted to start with something that is achievable, something I could commit to, and something that would create value. And again, it's a minimum. And so we're going to use that as not only a measurement for investments and growth, but also a measurement in how we review and annualize our current business units and operating segments.

Thank you. (Operator Instructions) Our next question comes from the line of Henry Coffey with Sterne, Agee.

Yes, I'm trying to understand the restructured financing transaction. Was that a cash gain that you got from selling those loans into a facility? Or is that the -- sort of a gain on sale having to do with the present value of residuals? Or what was the nature of the game?

Hi, Henry. First, it's good to hear you so just want to say hello and it's a good question. The structured financing transaction at Grupo Finmart are true loan sales. So they're actually true sales of part of the loan portfolio and so the risk associated with the loans passed to the buyer of the loans. Grupo Finmart acts as the servicer. It actually goes into a trust, in a Mexican trust and Grupo Finmart acts as a servicer of that trust and serves the customer, and also does the collections and so on.

So it's a true profit. It's -- the transaction in effect condenses a three-year revenue and cash flow cycle down to 90 days, in this case. So we accelerate both revenue and expense, associated expense such as commissions. But we also accelerate the cash flow from it. It's costing the Company about a 3% premium over their cost of financing, but that's a great trade off moving from three years to 90 days.

So it's a cash gain from selling the assets?

Yes, yes.

So they were sold at the part -- they were sold at gain over the par value of the loan because of the higher rate and the lower rate required by securitization party?

That's exactly right. So it is a cash gain.

And to kind of revisit the whole Board situation, maybe you could sort of narrate this for us. A friend of mine used to always say, something must have happened, but there must have been a cross point. I mean you did a convertible note and the next news item was the big shake up in management. What was the decision process? What was the cross point and how many of the Board members that left, left voluntarily, and how many of the Board members left because they were asked to leave by Cowan?

I can't explain the decision because I wasn't part of that decision. So I can't answer the first part of your question. We had two Board members that were asked to leave and we had one Board member that left on his own.

Thank you. Our next question comes from the line of David Scharf from JMP Securities.

Hi, good afternoon, Mark. I wanted to follow-up on a couple questions that were posed already. John kind of beat me to the punch that 15% ROIC. I was curious about it as well. It's clearly lower than you guys had articulated in years past, but I'm just curious. Should we think about that as a kind of baseline, very achievable figure in your mind? Or as you look at just the structural landscape of the regulatory environment here in the UK versus several years ago. Do you in your mind, because you mentioned it as being potentially a minimum, I mean do you see yourself getting back to a 20% plus level at any point in time? Or has the business just changed too much structurally?

Well, I think that's a great question. What I will tell you is I have to start somewhere and I want to start with something that I feel like the team and I can deliver. And again, I know for sure that my weighted average cost of capital is 10% and I know that I have to deliver an ROIC above that 10% to create value. And I felt like 15% as a minimum is a good starting point. Because as you know, as you model and forecast, nothing is ever perfect, and there's going to be some variation. And I wanted to give myself and the Company enough cushion that we wouldn't fall below that 10% cost of capital.

At the same time, we're going to prioritize. And so we have a limited amount of capital to allocate and we're going to be very rigorous in our analysis and the opportunities that deliver the highest return are going to be the ones that we're going to determine that we want to fund.

I don't know if 20% is achievable at this time. And so I didn't want to put something out there arbitrarily that I don't -- until we do the work.

Got it. Fair enough. And should we think about that 15% as a consolidated figure or something that you're going to look at business by business? I think you had mentioned several businesses, such as online and Mexican pawn that obviously are struggling a bit right now. And as you undertake this 90-day review, is that 15% a benchmark that you're going to apply to every standalone business entity? Or is it a corporate goal?

No, we're going to apply it to every standalone business entity and every investment, other than an investment made for safety or government compliance reasons, or maintenance. Any investment that we make for growth or in our business units, including the investments and working capital of our existing business units, we're going to take a look at their ability to provide a return on invested capital of at least 15%. And that's going to force us to make some decisions. And there are several paths that we could go down based on those results. And I want to take the next 90 days with the team to evaluate those and present those findings to our Board of Directors in September, at the end of September, and then ultimately reported back to you what our strategy is.

Got it. And then one last question, I know we typically wouldn't expect you to comment on competitors on a call such as this, but in reference to kind of US pawn balances, I think you specifically called out some observations that you might have as to why perhaps you hadn't been growing or rebounding as quickly as some other competitors. Are there anything specifically you can highlight?

Well, I think, again, I want to do the work. I want our team to do the work to look at our collateral through the collateral's entire life cycle, through -- from loan origination to disposition. And what I -- why I'm making the comments I'm making is that when I look at our redemption rates, I think we have opportunity to loan more and refine our analysis internally on how we think about loan to value, and increase our velocity inside that business.

But again, we need to do the work and I need to see it, and our team needs to evaluate it. But I believe that there is opportunities there.

Thank you. Our next question comes from the line of Bill Armstrong from CL King and Associates.

Good afternoon, Mark.

Hey, Bill.

Could you discuss in the UK with the new SCA rate caps that we saw higher losses at Cash Genie. Could you kind of talk about the outlook there and not only in terms of loan loss, as well as in terms of originations and what -- how that might impact the business model. And in fact, is the business model viable going forward under the new regulation?

You're going to have to forgive me. I've been a week into this job and so I don't -- and I haven't been focusing on that business too much, because it represents a very, very small part of our business. But what I will tell you is that we have a very, what I believe is a very capable team. Looking at the changes being imposed by the FCA and are adapting the business model to accommodate those changes. And over the next 90 days, we'll be working through our planning process and we'll see what that tells us with regards to the business.

What I will tell you is that the UK market is -- it's just a -- it represents a tremendous opportunity because the consumer demand is there. And if we can figure out a way to provide the customer with the cash they need and deliver an ROIC that we want, which I've described, and we believe we can get there in a reasonable amount of time then we're going to go for it.

Okay. Fair enough. And on the structured asset sale, what was the net income or earnings per share impact of that sale for the quarter, the $10 million?

I'd have to do the math because it's complicated too because we have a Panamanian structure that we have in place there too that gives us a lower tax rate. I'll tell you what, let me take that down and we'll come back to you with that answer because I don't want to give you just an off the cuff answer and be wrong.

Okay. And then just one final quick one. Your guidance for the fourth quarter looks like it include $0.03 of transaction costs for the convert. Does that -- my math correct?

Yes, your math is correct but it's not transaction costs. It's actually the interest expense. You'll recall, we borrowed $230 million and so now, we have to service $230 million of debt. And the way the convertible bond works, there's a cash interest at [2 and an eighth percent] and that's the cash interest that we pay. And so that rate is cheaper than what we were paying with our bank facility, which was around 3%. But there's also a non-cash interest component that's imputed on the income statement that basically marks the market what we would pay in interest if we went out with a true debt vehicle. And so there's two components on the income statement and that results in a $0.03 impact approximately in fourth quarter.

Right, the wonderful accounting of convertible notes. So I guess maybe just for modeling purposes going forward, what would the GAAP interest cost on those notes be sort of on a quarterly or annual basis, both the contractual cash interest plus the additional interest that GAAP requires?

No, I understand. I believe it's approximately 3.3%, I'm sorry, $3.3 million, I'm sorry, $3.3 million a quarter.

Okay.

And again that's based on the full $230 million.

Got it. Okay. Thanks very much.

Sure.

Thank you. Our next question comes from the line of John Hecht with Jefferies.

Afternoon, guys. Thanks for taking my questions.

Hey, John, from Jefferies. It's good to hear you.

Thanks very much. Quick question. Is that just looking at the -- where you finished up this quarter and the guidance for next quarter, you talked about a number of things you're considering in terms of expense management and I'm just trying to wonder if you can kind of give a sense for bridging how you get from this quarter to next quarter. Would you -- do you think given the volumes at a Finmart, you can engage in a similar amount of loan sales, number one?

Number two, what kind of expense savings can you achieve in the near term? And then number three, we've obviously seen a stabilization in the pawn segment. Is that where you see most of the kind of benefit from here to there?

That's a great question, John. So first, I'm going to take them one at a time. So the Grupo Finmart transaction, if you recall, we did our first transaction in first quarter. We followed up with another transaction in second quarter and then we actually did two transactions at the end of this quarter. And we are moving to, starting in the month of August, we're moving to monthly transactions. So we're going to -- we took it from 36 months down to 90 days and now at the end of August, we're going to take it down to a 30-day cycle to further improve cash flow and velocity of those type of transactions.

So I'm anticipating two transactions this quarter, one in August and one in September. The monthly transactions will be smaller in size than the -- on an individual basis than what we -- what you've seen in the quarter. But what they will do is we will start to have a predictable balanced approach between the distributor model and the traditional model. And that's what we're looking for. We want predictable earnings, predictable cash flow so we can manage the business. So you can anticipate two of those in fourth quarter.

And then you're absolutely right, the pawn business, we've now anniversaried over the change in gold price and volume that we -- that impacted us last year mid-June. And so fourth quarter comparables start to become much more favorable to us. And so we expect to benefit from that in the fourth quarter.

In terms of the expense analysis that I talked about earlier, the forecast was determined prior to any of this analysis that I talked about. So any expense savings that we determine as we go through our 90-day plan is not currently contemplated in the forecast.

Thanks, very much. I appreciate the color.

Thank you. Our next question is a follow-up from the line of Bob Ramsey from FBR Capital Markets.

Thanks for taking the follow-up. Just to follow-up on John's question there about the securitizations, I know you said it will make earnings a little more predictable. With the two transactions, what is the sort of expected size or the range of size? And then is that kind of a good quarterly run rate or is there a good annual run rate way to think about that business on a go-forward basis.

Great question. First, I would say these are not securitizations. These are -- Grupo Finmart has a securitization, a public securitization and that's true financing. But this is truly an asset sale. I just want to make that distinction because it's very important. And the size that -- Grupo Finmart is working with their partners that buy the loans to determine the size, but -- and I'm going to give you a wide range right now. It's probably somewhere between $5 million and $10 million a month depending on seasonality and growth -- the growth projections of the business. and I think that that will be -- that's why we're not starting until August because the team is actually working on refining what that's going to look like for the next 12 months going forward.

And I would expect a controlled step function growth in size over time as the Grupo Finmart grows its business organically.

Okay, and then is it right or fair to think about gain on sale in future periods as being in the same ballpark as this quarter and last?

Well, again, I don't want to -- I think it's probably in the range but I don't want to commit to that because again the team is doing the work and so I don't want to mislead you with giving you a bad number.

Okay, and I guess too, as I think about those sales, it's a tradeoff of fee income from interest income. Obviously, it was a pretty big transaction this quarter. Just curious if it was early in the quarter or late in the quarter, or if it will have any impact on consumer loan fees in the future periods?

Well, it does have an impact on consumer loan fees because remember, you're accelerating the fees that would have been collected over a three year period. By getting the sale, you're in essence limiting those loan fees going forward and you're taking the gain on the sale of the transaction all at once. But you're also eliminating the commission expenses that would roll out for 36 months as well. Now, those were all rolled forward as well.

And so the way to think about this is almost like inventory turns. I can turn one time every three years, or over the course of three years, I'm turning this loan. I'm collecting revenue and I'm recognizing expenses over a three-year period, or for a 3% premium, I can accelerate that now down to 30 days. And for us, we look at the analysis and say, you know what, [ping] a 3% is worth it to us because we can use the cash that we can to reinvest in a higher return.

Okay, that all makes perfect sense to me. I guess I was just trying to get at whether in the third quarter you will have the benefit of those balances for much of the quarter or not. If this is sort of a good starting point as we go forward.

You know what, Bob, you asked that and I didn't answer that part of the question. Yes, these transactions actually happened June 30.

Okay, so -- yes, so, okay, very end of the quarter. Perfect. And then could you, I know you said the guidance doesn't include severance payments. Could you tell me how much you expect that to be?

I have no idea at this time.

Okay. All right. that's good. Thank you.

Thank you.

Thank you. And our next question is a follow-up from the line of John Rowan from Sidoti.

The tax rate for the fourth quarter and ongoing, is that going to be at around 31% or are we -- or is it going to be affected by the continued sales of the loans out of Grupo Finmart, which seem to be at a lower tax rate?

Yes, we've got -- it's a good question. I think our tax rate will be about 30% going forward. We'll have some fluctuations depending on where the profit, the mix of the profit across the businesses. But we've created a very favorable structure to us with Grupo Finmart. First, Mexico's tax rate is effectively 30% versus the US. But also, we have a Panamanian structure that lowers that even further. And so as the Mexican business grows than our overall tax rate will benefit accordingly.

Okay. And then just last question. When was the last time you had a positive same-store pawn loan balance in the US similar to what you had this quarter?

You know, I don't know that. I'd have to look that up and get back to you, John. I don't -- that's a good question but I don't know that off the top of my head.

Okay. Thank you very much.

Thank you. And our next question comes from the line of David Scharf from JMP. And he has left the queue. I am showing no further questions at this time. I would like to turn the call back to Mr. Kuchenrither for his closing comment.

Thank you, Karen. First, I want to thank everyone for participating in the call. It's a pleasure to get an opportunity to speak with you and I look forward to speaking with you again. You can rest assured that we have our head down and will be working hard, and I'm really looking forward to talking to you in 90 days.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.