Fox Factory Holding Corp (FOXF) 2014 Q1 法說會逐字稿

Greetings ladies and gentlemen and welcome to the Fox Factory Holding Corporations first-quarter 2014 earnings call.

(Operator Instructions)

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Mr. David Haugen, General Counsel for Fox Factory Holding Corporation. Thank you. You may begin.

Thank you.

Good afternoon and welcome to Fox factory's first-quarter FY14 earnings conference call. On the call today are Larry Enterline, chief executive officer, and Zvi Glasman, chief financial officer. By now everyone should have access to the first-quarter earnings release, which went out today at approximately 4:05 PM Eastern time. If you have not had the chance to review the release it is available on the investor relations portion of our website at www.ridefox.com.

Before we begin, I'd like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company's control and can cause future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements.

Important factors that could cause or contribute to such differences include risks detailed in the Company's earnings release, annual report on form 10-K, quarterly reports on form10-Q and other company filings filed with the Securities and exchange commission. Except as required by law, the company undertakes no obligation to update any forward-looking statements or other statements herein, whether as a result of new information, future events or otherwise.

In addition, within our earnings release and in today's prepared remarks, non-GAAP adjusted net income, non-GAAP adjusted earnings per share, adjusted EBITDA and adjusted EBITDA margin percent our referenced. It is important to note that these are non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in the company's press release, which has also been posted on our website.

And with that, it's my pleasure to turn the call over to our CEO, Mr. Larry Enterline.

Thank you David. Good afternoon everyone and thank you for joining us today.

On today's call, I will provide a brief overview of our first-quarter results and progress on our ongoing strategic condition and current activities. Zvi will review our financial results in more detail and discuss our guidance. After that we will open the call up for any questions you may have.

We are pleased to report a solid start for FY14. Our financial results for the first quarter came in towards the high end of our expectations. We generated $56.1 million in sales, an increase of 2.2% compared to the first-quarter of last year. The increase reflects strong growth of 14.1% for our powered vehicle products, highlighting the continuing demand for our premium products.

Our mountain bike product sales in the quarter were impacted by the shift in the timing of product sales from the first-quarter this year to the fourth-quarter of 2013, as we mentioned on our fourth-quarter earnings call. This shift in timing of product sales is not unusual in our business as product shipment schedules can be variable based on customer demand. With that said, we are encouraged by the positive customer response and enthusiasm for our model year 2015 mountain bike suspension lineup and continue to expect that mountain bikes will perform well in the coming quarters and over the longer-term.

We are also pleased to report year-over-year gross margin improvement of 170 basis points to 30.1% compared to 28.6% in the first-quarter of last year. As we have stated before, continued margin improvement is one of our key initiatives.

Our first-quarter improvement underscores our team success in improving Factory and supply chain efficiencies, as well as execution of product design for manufacturability program. Based on our year-to-date results, as well as our positive outlook for the remainder of the year, we are reaffirming our FY14 top and bottom line guidance, which Zvi will review in his remarks.

Industry Dynamics continue to be favorable as we are seeing continued demand for premium high-performance products in the mountain bike and powered vehicle categories. In addition, Fox is positioned to benefit from significant operational improvements that we have been making. These changes have enhanced the foundation of our overall company and helped create strong momentum for our business.

Our focus is on the same key strategic initiatives and growth plans that we have previously discussed. I would like to take a few minutes to provide an update on these. First, we remain focused on increasing our penetration into existing vehicle categories both through sales with our existing OEMs, as well as with new OEMs. We continue to introduce new products on a regular basis.

While we will go into more detail about our most recently launched products in our pipeline, I would like to highlight that the response to our recent soft launch of internal bypass shocks for side-by-sides, has been very well received by consumers and we will be amplifying these efforts with formal media events this summer. The feedback we're hearing about our products from our OEM customers continues to be positive. In addition, we have been introducing our business with our after-market specific products.

In the first-quarter, both in the after-market was an important contributor to increase sales of our powered vehicle products. As many of you are likely aware, in the first-quarter, we completed the asset acquisition of Sport Truck USA Incorporated, a full-service globally recognized distributor primarily of its own branded after-market suspension solutions. Sport Truck designs, markets and distributes high quality lift-kit solutions primarily with through their brands BDS suspension and zone off-road products.

Through this acquisition, we expanded our presence in the powered vehicle category with a premium adjacent product. Lifted vehicles, have increased greatly in popularity in the US. Prior to the acquisition we had not fully served this growing market and Sport Truck represented the perfect the opportunity for us to capitalize on this trend. Sport Truck is headquartered in Michigan and with the acquisition we now have a new Fox facility in the Midwest, which complements our other facilities in the US. Zvi will go over the financial aspects of the acquisition in his remarks but I want to reiterate that we are excited that Sport Truck management team is staying on board and look forward to working with them as part of the Fox team.

Our second key growth strategy is expanding our business through new adjacent product categories. Our Sport Truck acquisition represents progress on this initiative by bringing lift kit solutions into the Fox product portfolio. Long-term, we believe there is a significant opportunity to leverage our technology and expertise and develop new products internally for adjacent categories. We also will selectively and strategically evaluate future opportunities to grow through acquisition as we did with Sport Truck.

Third, we are focused on evaluating and capitalizing on opportunities to expand our international presence. With the acquisition of Toxoholics at the end of last year, we now have additional infrastructure in the European market. We continued to the pleased with the benefits we are realizing from this acquisition including improved customer service and customer relations throughout Europe.

Europe and North America currently represent the vast majority of our business but we see an opportunity to capitalize on the encouraging trends of emerging middle-class consumption. Long-term, we believe there is robust market opportunity for our products throughout Asia and Latin America. Specific countries that we have identified as target markets include China, South Korea, Australia, Brazil, Argentina, and Chile.

And lastly, we continue to focus on opportunities to improve our operating and supply chain efficiencies. Following meaningful improvements in FY13, we are pleased to deliver higher year-over-year gross margins in the first quarter of this year. Importantly, we believe there is room for further improvement in gross margin and operating efficiencies, which will in turn lead to accelerated profitability going forward.

Long-term, we remain confident in our ability to achieve our previously stated EBITDA margin target of over 20%. Our team is diligently working on moving a majority of our bike production to Taiwan and we expect to complete the move by the end of 2015. This fiscal year we expect to begin realizing margin improvements associated with the move, with a full benefit of course to be realized after the transition is complete. The new facility will enable us to reduce our lead time with the Taiwan-based manufacturers who are building a majority of high end mountain bikes.

In summary, we are excited about our business, industry dynamics are positive and following our recent acquisitions and successful execution on our and initiatives, we are well-positioned to deliver another great year. Normally, this is where I hand over the call to Mario, but as I am sure it be audience appreciates the importance of product development and customer relationships in our business, I am going to read what is normally Mario's section today. Mario is in Moab, Utah riding newer model year 2015 products with important OEM customers and influential media, and since he is a much better rider than I am, he got that assignment.

I will begin with mountain bike. The Sea Otter Classic in Monterey, California was held in early April. Sea Outer kicks off the cycling season that combines racing with a trade show and festival atmosphere. The event draws 65,000 fans, 10,000 athletes, 850 professional cyclists, 6,000 campers, 450 exhibitors and over 375 national and international media representatives.

We were there in full force to support the racing scene to interact with our customers and to launch our new model year mountain bike product line. We experienced a lot of foot traffic over the course of the four-day event, including the typically slow first and last days. We believe that strong Sea Otter attendance is a leading indicator for strong consumer activity throughout the upcoming season.

The new product lineup was on display for the public to view and we did one-on-one introductions with media from around the world. The reception was favorable with a lot of positive first look write-ups. We are currently hosting our first in-depth product launch to the North American media in Moab, Utah, as I previously mentioned. They will be treated to some great ride experiences on some of the best trails in the world and will be presented with a full download of our model year 2015 lineup features and benefits.

We have similar media events planned in the coming weeks and other North American locations and in Europe. While the new 36 is our headliner product in model year 2015, we anticipate accolades from the media for the entire line, based on the positive reactions they have had when they previewed the product through our racing applications development program. The majority of the advancements found in the RAD 34 forks the media tested at that time have been integrated in the model year 2015, from our entry point evolution products to our top-of-the-line factory series products.

Our World Cup professional athletes are racing on new products and technologies that have not yet been released to the market through our RAD program. Thus far, we are proud of our athletes' performance, winning the first two rounds of the men's downhill, the second round of the women's downhill, and two cross country pictures by Julien Absalon. In the ever-evolving Enduro racing circuit, the new 36 and our RAD 34 have garnered eight of the potential 12 podium spots through the first rounds of the World Enduro series and Bluegrass Enduro series seasons.

This bodes well for new product development, as these elite athletes are proving out new technologies and with continued success, these technologies will make their way into the product line as early as next year. The model year 2015 OEM spec season is wrapping up. We would tell you that we experienced gain or loss activity typical of the model year cycle and are pleased with the strong bookings activities from OEMs and third party manufacturers for the models that we have been chosen for.

Additionally, we are confident the momentum of our model year 2015 products will gain throughout this year on the race course and local trails and will lead to positive opportunities for us in model year 2016. As a final note to the related to the bike industry, premium mountain bikes seem to continue to buck the overall bike industry trends with strong initial model year 2015 orders. Reaffirming our belief that the category will be strong in 2014.

Now let's move on to our powered vehicle business. On our last earnings call, Mario spoke about the launch of an internal bypass side-by-side shock to the after-market to address the demands put on these vehicles with ever-increasing world travel and horsepower. We are still relying purely on word-of-mouth to initially drive sales of the shocks that retail for $5,000 for a complete set of four.

While sales have been good thus far, they don't currently have a meaningful impact on our overall revenue; however, the appetite for this level of performance upgrade, reinforces our belief that strong after-market sales lead to OEM sales, which will prove meaningful in the future. We will be holding formal media camps this summer with the top influences in the industry to officially take this technology off. This will include a full experience of internal bypass with courses set up for side-by-sides, a Ford Raptor, and a trophy Truck.

I will conclude with an update of our circle track progress. We're off to a strong start at the track with 28 wins and 23 additional top-five finishes, so far this is. We continue to take drivers and teams from competitors making an immediate results impact for the race teams and drivers who make the switch to Fox.

And with that, I will now like to turn the call over to Zvi to review our financial results.

Thank you Larry. Good afternoon everyone.

I'll review our first-quarter financial results, the Sport Truck acquisition, and 2014 guidance during my remarks today. Sales for the first-quarter 2014 were $56.1 million, an increase of 2.2% versus sales of $54.9 million in the first-quarter of 2013. The sales increase reflects 14% growth in powered vehicle's products, partially offset by an anticipated decrease of 4.4% in sales of mountain bike products. As Larry stated, the expected decline in mountain bike sales products is primarily due to the planned shutdown of our factory in January, which resulted in sales shifting out of the first quarter of 2014 and into the fourth quarter of last year.

Gross margin was 30.3% for the first quarter of 2014, a 170 basis point increase from gross margin of 28.6% in the prior-year period. The improvement in gross margin reflects the successful execution of cost improvement initiatives targeted at improving factory efficiency, supply chain, as well as continued execution of our product design for manufacturability program.

Total operating expenses were $12.3 million or 21.9% of net sales in the first quarter of 2014, compared to $9.7 million or 17.6% of net sales in the first quarter of the prior-year period. Within our operating expenses, our sales and marketing expenses increased slightly to $3.8 million in the first quarter of 2014, compared to $3.3 million in the same period of 2013. The increase was due largely to increased personal, promotional and outside services, as we continue to invest in promoting our company and the brand.

Research and development expenses increased to $3.1 million in the first quarter of this year, compared to $2.4 million in the same period last year, due largely to increased personal and product development-related expenses and continue to invest in new and innovative technology. Investment in R&D is a critical component of our business and while investment may fluctuate in certain years and quarters depending on timing, product developments and other factors that we expect will generally continue to invest at historical levels expressed in the percentage of sales.

Our general administrative expenses in the first quarter 2014 were $3.9 million compared to $2.7 million in the prior year period. The increase was largely due to $1 million in transaction-related expenses associated with Sport Truck acquisition, as well as an increase in costs associated with becoming a public company, partially off-set by decreases in other miscellaneous areas of G&A. Our net income in the first quarter 2014 was $2.9 million, compared to $3.5 million in the prior-year period.

This decrease in that income was primarily the result of the $1 million in expenditures related to the acquisition of Sport Truck combined with higher operating expenses as we continue to invest in our Company brand and technology along with the occurring additional cost required to operate in public company. Earnings per diluted share for the first quarter 2014 was $0.08, calculated on $37.6 million weighted average diluted shares outstanding, compared to $0.10 calculated on $34.1 million weighted average diluted shares outstanding in the first-quarter of 2013.

Non-GAAP adjusted net income was $4.4 million compared to non-GAAP adjusted net income $4.6 million in the first-quarter of the prior year. Non-GAAP adjusted earnings per diluted share for the first quarter 2014 was $0.12 compared to non-GAAP adjusted earnings per diluted share of $0.13 in the first quarter of 2013. We believe non-GAAP adjusted net income is a useful metric that better reflects the performance of our business on ongoing basis.

You will find a reconciliation of the GAAP measure, GAAP measure net income to non-GAAP adjusted net income and the calculation of non-GAAP adjusted earnings per share at the end of the press release issued today. You will also find a reconciliation of the GAAP measure net income to adjusted EBITDA in our earnings release today.

In the first quarter of 2014, adjusted EBITDA was $8.6 million compared to $8.8 million in the same quarter last year. Adjusted EBITDA margin was 15.4%, compared to 16% in the prior-year quarter.

Now, focusing on our balance sheet, as of March 31, 2014 we have cash on hand of $2 million. Total debt outstanding was $50 million, compared to $8 million of debt outstanding as of December 31, 2013. The increase in debt is due to debt issued for our acquisitions of Sport Truck. Inventory was $58.4 million as of March 31, 2014 compared to $42.8 million as of December 31, 2013.

The increase in inventory is largely due to the addition of Sport Truck's inventory acquired on March 31, 2014, along with normal growth due to seasonality on product cycle and preparation for peak selling season. Accounts receivable was $30.7 million as of March 31, 2014, as compared to $33.8 million as of December 31, 2013. Accounts payable was $26.7 million as of March 31, 2014, as compared to $24.3 million as of December 31, 2013. The changes in both Accounts Receivable and Accounts Payable was primarily driven by the normal seasonality of our business and the acquisition of Sport Truck.

Turning to our Sport Truck acquisition, as we previously announced, we closed on the acquisition in the first-quarter on March 31. We acquired the assets for cash consideration of $40.9 million, which is subject to working capital adjustments in accordance with the asset purchase agreement. The transaction is being financed with debt and includes a potential earn-out opportunity of up to $29.3 million payable over the next three years, contingent upon the achievement of certain performance-based financial targets.

The deal is expected to be slightly accretive to our earnings in the current fiscal year excluding transaction costs. The majority of the financial benefits will be realized in FY15 and beyond. To reiterate what we stated in our last earnings call, Sport Truck generated approximately $45 million of sales and adjusted EBITDA of approximately $7 million in 2013, which equates to an adjusted EBITDA margin of approximately 20%. The company has had good growth historically and we believe it will continue to grow at a rate consistent with our powered vehicle business going forward.

Finally, turning to our outlook, for the FY14 second quarter, we expect sales in the range of $81 million to $85 million and non-GAAP adjusted earnings per diluted share in the range of $0.23 to $0.28. For the full year, we are reaffirming our annual guidance that we provided on April 1, 2014, when we updated our guidance to include the closing of the Sport Truck acquisition.

We continue to expect net sales in the range of $300 million to $320 million non-GAAP diluted earnings per share in the range of $0.85 to $0.95, based on 38 million to 39 million weighted average diluted shares outstanding. As a reminder, non-GAAP earnings-per-share exclude amortization of purchased intangibles, acquisition-related expenses and management fees, net of tax. Larry.

Thank you Zvi. With that we would like to open the call for questions. Operator.

(Operator Instructions)

Sean Naughton, Piper Jaffray.

Good afternoon. Can you talk a little bit -- this is probably going to be a common question for you guys in conference call's upcoming. Can you talk a little bit about the bike channel, the independent side of things? It seems like the road bikes are having a little more difficulty turning and some of those 26-inch wheel bikes on mountain bike is not going really well.

The new innovation in some of the premium products where you're competing seems to be doing quite nicely. I'm just curious on any updates you have based on your visibility on sell through in that channel and whether or not that's holding back any of the orders that you're hearing about from the OEMs at this point?

Sean, good question. I think that's remained much as it started last fall. I think any difficulty we have seen is with only certain manufacturers, and it's generally in the 26-inch wheels size. We don't see that as a factor that is going to drag high end mountain bike down across the board.

We would tell you that model year 2015 orders are strong. We've been fairly pleased with that. The premium end of mountain bikes is holding up certainly better than the category mountain bikes as a whole and better than certainly road bikes. XXX

That's great. One question on the Sport Truck business. Just curious about the seasonality of that business just in terms of revenue and profitability, if you have that in front of you?

The margins don't tend to fluctuate that much between quarters. What we have seen is a fairly unseasonable business over the historical period but we think that's just been masked by growth in the business. It has been growing at a pretty good clip. We have seen not as much seasonality as if the business wasn't growing.

Pretty even on the 35 on a quarterly run rate, spread out pretty evenly throughout the year.

Yes, pretty even.

And then last question from me. Just on the gross margin, obviously nice performance there, nice increase. Can you just remind us, how much is that -- the Taiwan facility, is that a drag on gross margin currently and if so, how much of a drag was it and when should we expect some material improvements on that particular move?

We would tell you that exiting last year was about 100 basis points drag. By the end of this year, we think it will be about 100 basis points the other way. We are starting to see some positive improvements. It's less of a drag than it was, but as you can imagine, we ramp-up our model year production around this time of year.

So we are hiring people, training them, et cetera. It's more towards the back half of the year, where you're going to see a lot of those improvements from Taiwan.

And then beyond that, we're seeing a lot of our efforts that we've been investing in, what with our design from manufacturability program, our Six Sigma team, et cetera. We are seeing a lot of those kick in. We feel pretty good about the margin improvement opportunity.

I think the way to think about it, Sean, is it is Forks that are going over this year. Shocks will be moved over next year. We are seeing the ramp in the Fork production now, so clearly, we are not at peak efficiency as that ramp goes on. We will be doing the same thing next year with shocks. I think -- our outlook is to have steady improvement across the couple of years we move it over there. But obviously the full benefit you'll get once it's all over there and in full production.

Fair to say it is still a little bit of a drag and you may start to get a little bit better (multiple speakers)

Probably, in the first-quarter results you are looking at, I would say probably a bit of a drag.

Okay.

(multiple speakers) But getting better every day.

That's good. Thanks and congrats on the good quarter and best of luck in Q2.

Thank you.

John Anderson, William Blair.

Good afternoon, thanks for taking the questions. I wanted to start with the mix of revenue as you look to the balance of the year. I understand the pull-forward of sales in the fourth-quarter in the mountain bike segment and the impact on Q1 growth in mountain bikes. As you look ahead from here, could you talk a little bit about your expectation for growth rates in mountain bike and in powered vehicles, and excluding the Sport Truck acquisition because it looks to me like that is -- that clearly will be something that will add nicely to revenue growth this year. Just on a core business bases, are you expecting more balanced group during subsequent quarters this year?

Let me -- while Zvi thinks about particular numbers, John, let me overview how I see it shaping up. I think we're off to a nice start in mountain bike. Again, we have the normal spec gains and losses, the pluses and minuses as you went through.

But what we see in the quarter pattern makes us feel pretty good at this stage. And I think, as you know, everybody is rushing to get the new model year bikes out there. Obviously, we are as anxious as anyone to see how those begin to sell through.

And that largely will depend probably on how the back half of the year goes for us. Early indicators are good. As I mentioned on the call, Sea Otter attendance, which has traditionally been a good early indicator was good this year. I would say at this stage, we are relatively optimistic that mountain bikes going to do well this year.

If you strip out the pull-forward from -- the shift in revenue from Q1 to Q4 of last year, we would tell you that bike grew at what we've been saying, which is high single digits. And powered vehicle grew consistently -- or double-digit growth. We see that going forward.

We would tell you that with the Sport Truck acquisition, they were our largest distributor of off-road commercial vehicle products. It's going to be hard to separate the two because the two businesses -- they are distributor of our product sales and we would otherwise be recording sales to them; they now show up in their results.

We would tell you that it's probably -- the growth rate you should expect in the business are consistent with what we have been saying, aside from there is a certain OEM that we can't disclose that later this year their product line is going through a transition and there will be a one- to two-year hiatus of their product. But aside from that, core growth we would tell you is consistent with what we've seen.

Excellent. That's helpful. Coming back to gross margin, could you talk a little bit more about, on a full-year basis, what to expect? The margin improvement in Q1 was significant. Is that the kind of year-over-year improvement in basis points, I suppose, that we should be looking for as the design for manufacturability, and I guess more importantly, the benefits of the production transfer to Taiwan continue to build?

Yes, we are expecting a couple hundred basis points improvements on a full-year basis this year.

Okay, terrific. Last question, I was just wondering if there is anything you are seeing that is unique with respect to growth in North America versus Europe, any divergences there, anything worth noting or consistent with recent trend? Thanks.

Not at this stage.

I would say they're pretty close to how they have run historically.

Okay, thanks guys. I appreciate it

(Operator Instructions)

Mike Schwartz, SunTrust.

Hi, good afternoon, guys. This is actually Mitch in for Mike. Just a housekeeping question first. Did weather have an impact on the quarter with regard to order patterns at all?

We're not in the weather business. We just worry about running our business. We are going to leave that to the macroeconomic commentators.

Okay. And then can you provide some more color on the M&A environment? Do you believe there are other additional opportunities out there at this stage?

Yes, as we look out, I think we have mentioned it on past calls, we run a pretty active screen. Again, we're not a serial acquirer or a rollup kind of company. But we do keep our eye on things.

I think there are things that we are still interested in. There are smaller more tucking kinds of potential acquisitions. We just have to see as we go forward, how that end of it develops.

Okay, thank you. That's helpful.

Larry Solow, CJS securities.

Hi, good afternoon, guys. Anything on -- I realize it would be small -- anything anecdotally or qualitative news on the military side?

Well, I hear crickets chirping. We continue to work. We are active. We have gotten -- we've announced a couple of things we got over this past six, nine months.

We continue to work actively with the military. We are waiting for the outcome, obviously, of the Humvee retrofit major program and the jail TV new vehicle program.

In the meantime, we continue to serve the military, I think on a wide variety of development testing kinds of things that they're doing on various applications. I think our strategy is, we are there to serve and we're going to continue to do that and we're going to hope at some point there is clarity and awards on some of these major programs.

Great. You spoke of various successful -- you had a good performance in the aftermarket this quarter, particularly on the powered vehicle side. Is there any quantitative numbers you could share with us on how much that actually grew or contributed?

Yes, Larry. We have the information disclosed in the queue, which I think has already been filed -- it has been filed already, so you'll find that the detailed numbers in the queue.

Last question. Actually two more. The undisclosed OEM, the one-, the two-year hiatus, is that still -- we know the hiatus is coming but the absolute certainty of how long it goes, the duration, is that still pretty much on track?

I think at this point we believe we have clarity on when production will cease. I think we've got less clarity on when it will begin again.

Okay.

Again, there is no public pronouncement on this particular customer's strategy. Beyond that, we're going to wait and see and obviously we hope it's shorter than longer.

Right, absolutely. I think we all do. Last thing, last quarter you sounded pretty optimistic, actually the last few quarters, about adding new OEM customers on the power vehicle side this year. Do you still believe that? Do you still have the same outlook?

Yes, we are certainly optimistic. We are obviously working with customers. I don't know -- as you know on the powered vehicle side, they're fairly long procurement cycles

Absolutely.

From the time we start working with them to the time it translates into revenue. And I think we've encompassed in this year's guidance what we feel we will get this year. And then, obviously, next year when we guide, hopefully, that's even better scenario.

Great. Thanks, Larry. I appreciate it.

Thank you.

At this time I would like to turn the floor back over to Management for closing comments.

Thank you. Thank you all for your questions and your interest in Fox. We look forward to continuing to execute our plans and updating you on our progress as we go forward with these quarterly earnings calls. I'm also thankful for the support of our customers and suppliers and the hard work of our great group of enthusiastic employees at Fox. These are all keys to our continued success. Thank you and have a good day.

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.