Group 1 Automotive Inc (GPI) 2022 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Group 1 Automotive's 2022 Second Quarter Financial Results Conference Call. Please be advised that this call is being recorded.

I would now like to turn the floor over to Mr. Pete DeLongchamps, Group 1's Senior Vice President of Manufacturer Relations, Financial Services and Public Affairs. Please go ahead, Mr. DeLongchamps.

Thank you, Jamie, and good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we'll refer to on this call for comparison purposes have been posted to Group 1's website.

Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the call, statements made by management of Group 1 are forward-looking statements that are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, but not limited to, risks associated with pricing, volume, inventory supply due to increased customer demand and reduced manufacturer production levels due to component shortages, conditions of market and adverse developments in the global economy as well as the public health crisis related to COVID-19. Those and other risks are described in the company's filings with the Securities and Exchange Commission.

In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website.

Participating today on the call, Earl Hesterberg, our President and Chief Executive Officer; Daryl Kenningham, President of U.S. Operations; and Daniel McHenry, Senior Vice President and Chief Financial Officer.

I'd like to now hand the call over to Earl.

Thank you, Pete, and good morning, everyone. I'm pleased to report that for the quarter, Group 1 generated record adjusted net income of $198 million from continuing operations. This equates to adjusted earnings per share of $12 per diluted share, an increase of 18% over the prior year.

Our adjusted results exclude noncore items totaling approximately $2 million of after-tax gains, which primarily resulted from the sale of 2 franchises in the quarter. These record-setting results were largely due to continued strong new vehicle margins that were able to more than offset weak supply, continued double-digit same-store growth in our aftersales business, impressive cost control and significant contributions from our recent acquisitions.

Consumer demand for vehicles remained strong, exiting the second quarter, and we continue to sell most units almost immediately after OEM delivery. This dynamic should continue throughout the year.

As with the U.S., consumer demand for vehicles in the U.K. continues to remain strong and new vehicle availability is still constrained. Our new vehicle order bank of 17,000 units represents more than a 6-month backlog based on first half unit sales.

We continue to believe that pent-up demand built over the past several years due to both Brexit and the very strict pandemic lockdowns will help drive strong U.K. vehicle demand well into 2023. We're also seeing continued strength in the state of Texas. The market collectively outperformed our total U.S. same-store growth in new vehicle sales, used vehicle sales, after sales and net profitability.

Texas demographic trends continue to be a positive tailwind for the company due to population growth, reasonable cost of living, low taxes and a friendly business environment. We believe this is both a near-term and longer-term advantage for our company.

To provide some color on our U.S. second quarter performance, I'll now turn the call over to Daryl Kenningham.

Thank you, Earl. We are pleased with our overall performance in the U.S. business. Our after sales and F&I were outstanding once again, both generating incremental standout performance.

As of June 30, we had 3,600 U.S. new vehicle inventory units and stock representing an 11 day's supply, which was roughly flat from December of '21. Our pipeline customer orders have stayed consistently strong with no discernible change in presales or inventory aging. Despite significantly fewer trade-ins due to a 26% decline in new car sales in the quarter, our same-store used retail sales declined only 4%. Our organic sourcing efforts, including 9,200 units acquired from individuals through AcceleRide, led to stronger-than-expected used vehicle inventory of 32 day's supply.

As a franchise dealer, we have a distinct advantage over used-only operators due to the numerous channels of sourcing available only to us, including our service drives, the lease returns and OEM closeouts.

As I mentioned, our aftersales performance delivered once again. Through our technician recruiting and retention efforts, we increased our same-store technician headcount by 12% versus the second quarter of 2021. Following a very strong '21, our customer pay business generated 20% same-store revenue growth compared to a year ago.

Collision revenues increased 18%. Wholesale parts revenues were up 16%. This allowed us to grow overall same-store after sales revenue by 15% versus the second quarter of 2021 despite continued declines in warranty work. We foresee our aftersales business continuing to be a strength over the course of the rest of 2022. Our F&I business was up $388 per unit in the quarter, and we're seeing improved product penetrations nearly across the board.

The final major factor driving our outstanding profit performance was continued cost discipline. Second quarter SG&A as a percentage of gross profit was 59%, a sequential reduction from 60% in the first quarter and down from 70% in pre-pandemic second quarter of 2019.

Lastly, I'm happy to say that our customers continue to vote yes on AcceleRide. We sold an all-time record 6,900 vehicles through AcceleRide in the second quarter, 10% of our U.S. vehicle sales, an all-time record. We offer delivery in every U.S. dealership and over 70% of our customers who choose this convenience option are local, which gives us the opportunity to maintain them as a customer by providing future service through our outstanding aftersales operations. As we continue to make enhancements -- and we continue to make enhancements to AcceleRide.

During the quarter, we started to more fully integrate our websites into AcceleRide, and we've also begun to integrate AcceleRide with our desking and CRM software as well as our credit software. This will provide faster and more transparent transactions for our customers.

I'll now turn the call over to our CFO, Daniel McHenry, to provide our balance sheet and liquidity overview. Daniel?

Thank you, Daryl, and good morning, everyone. Up to June 30, we had $26 million of cash in hand and another $83 million invested in our floorplan offset accounts, bringing total cash liquidity to $109 million. We also had $236 million available to borrow on our acquisition line, bringing immediate available liquidity to $345 million. These amounts do not include the cash received from the sale of our Brazil operation, which finalized on July 1.

Through the first half of 2022, we generated $457 million of adjusted operating cash flow and $402 million of free cash flow after backing out $55 million of capital expenditures. This capital was deployed through a combination of acquisitions, share repurchases and dividends.

As previously announced over the first half of the year, we spent $254 million repurchasing over 1.4 million shares at an average price of $176.74. This represented over 8% of our beginning of the year share count.

Our rent adjusted leverage ratio as defined by our U.S. syndicated credit facility was 1.8x at the end of June. This strong leverage position will continue to allow for meaningful capital deployment in 2022 as appropriate opportunities exist.

Finally, related to interest expense. Our quarterly floorplan interest of $5.9 million was a decrease of $2.7 million or 32% from prior year due to lower vehicle inventory holdings. Noncore planned interest expense increased by $4.9 million or 36% from prior year, primarily due to the debt raised in conjunction with the Prime acquisition.

As a reminder, the majority of our debt has been fixed through interest rate swaps. As of June 30, 76% of our $2.8 billion in floorplan and other debt was fixed. Therefore, the annual impact to EPS is only $0.32 for every 100 basis point increase in the overnight funding rate, or SOFR, which is the benchmark rate referred to in our floorplan and mortgage debt interest -- instruments.

For additional detail regarding our financial condition, please refer to the schedules of additional information attached to the news release as well as the investor presentation posted on our website.

I will now turn the call back over to Earl.

Thanks, Daniel. In 2022, we've continued our focus on high-quality external growth actions with the purchase of 5 U.S. dealerships that are expected to generate $660 million of annual revenues. These dealerships add to our existing scale in Austin, Albuquerque and Shreveport markets.

Growing our U.S. and U.K. businesses remains our top capital allocation priority, and we expect to find additional external growth opportunities in 2022. However, our balance sheet cash flow generation and leverage position will continue to support a flexible capital allocation approach, which will likely include serious consideration of further share repurchases in addition to pursuing external growth. Since November 2021, we have repurchased 2.4 million shares, representing over 13% of our outstanding share count.

This concludes our prepared remarks. I'll now turn the call over to the operator to begin the question-and-answer session. Operator?

(Operator Instructions) Our first question today comes from John Murphy from Bank of America.

The thing that probably stood out the most was the resurge in parts and service. I mean there's a lot of good things that stood out, but that seems that relative to what we were looking for stood out the most. I'm just curious what's driving that? I know you're up 12% in techs, but I mean, you're even saying in wholesale parts, you're up mid-teens. So it seems like there's a real resurgence there. Is there anything other than hiring the 12% tech that's going on? And how sustainable do you think these levels are?

John, this is Daryl. The recovery in -- I'll speak to 2 different pieces. The wholesale part speaks to the collision business in general is recovering, and we service a lot of outside collision centers, obviously, as well as our own collision business. So there's an industry collision recovery that's happening, and that's driving some of the wholesale parts increase.

On the customer pay service, the thing that we focus on is how can we drive capacity in our shops. And whether it's our hours of operation or 4-day work which you're familiar with our technician hiring. And then the ability -- availability of appointments to our customers, we think it's very important to have as many appointments available as possible. That's different than some in the industry will do. They will limit appointments. We tend not to do that. We'd rather be available and then that puts a little more pressure on us to keep our capacity higher, our staffing high and our hours of operation at a point that is convenient for customers. So I would say that's probably the largest difference as well as the car park is continuing to age. And so there's more work to be done on some of these cars. So that's happening as well.

Okay. And then maybe if I can call just a follow-up on F&I PVR. Obviously, it continues to surprise to the upside. There's a lot of skeptics out there. Could you kind of just remind us what the compositions are of the F&I PVR? And maybe just give us an idea of sort of a best-in-class F&I PVR versus the average, so people can understand where it could potentially go to, not on the average, but just on the high side?

Sure, John. This is Pete DeLongchamps. We're clearly pleased with the results. And if you break it down, we're at 70% finance penetration. Our service contracts are just slightly less than 50%. And when you take a look at the overall products, we've just continued to see increases there. .

And we're also seeing strong partnerships with our banks. There's a lot of discussion about delinquencies, and we've seen some of those delinquencies kind of return to pre-COVID levels. But when you look at charge-offs and what's happening in the marketplace, there's still a healthy appetite for lending. So the F&I team has performed at a very high level, and we continue to think that there's some opportunities ahead for us.

And our next question comes from Rajat Gupta from JPMorgan.

I just had one and a follow-up. On your productivity metrics, particularly the U.S. SG&A to gross, it was down sequentially despite flattish GPUs, units still pressured. Could you help unpack the drivers of the sequential improvement? Is it just parts and services drop through? Is it -- is continued in-store productivity improvements or perhaps from AcceleRide or other tools? And maybe if you could give us an updated normalized view on SG&A to gross once grosses do go back to pre-pandemic levels?

Rajat, this is Daryl. And I'll answer part of it, and one of my teammates may decide to chime in. On the people issues in the store in terms of productivity, yes, AcceleRide is driving -- continues to drive productivity with sales per sales person, sales per sales manager, sales per F&I manager.

With constrained inventory, we're still seeing higher productivity. I believe that will improve even further as inventories loosen. In aftersales, we're seeing higher productivity among our technicians and then that's generally connected to higher productivity among our advisers as well. Daniel may have something to add.

Yes. And answer to the second part of your question, what we've essentially said is that if we return to 2019 levels of profitability in terms of new and used vehicles, that our expectation would be that SG&A would not return to about 70% as a percent of growth.

Got it. And that view has not changed despite some of the AcceleRide improvements, the integration with the CRM credit apps, et cetera. Is that kind of baked in into that number or...

I think it's -- I think what we have discussed is that as those things get implemented, we would expect to see a further reduction in SG&A.

We're just launching our first set of stores, as you know, Rajat, on the testing on that.

Our next question comes from Daniel Imbro from Stephens Inc.

Congrats on the results. Earl, I want to start on the used side and talk about the value line offering. Are you seeing any outsized growth there just given consumer pressures? We've heard others talking about a potential trade down. And then I think historically, you've said that, that bucket or that strategy was kind of 7-plus year old vehicles. Are you expanding into older vehicles or there's any change in the strategy within that segment?

Well, I'll start out with that. This is Earl, but I'll let Daryl chime in because he's more into detail. But yes, as you would expect, in this type of economically challenged environment, particularly for the middle class and the volume brand and used car customers, we're seeing demand shift to lower price points. And with the advantage of our flexible business model, we try to pull on that lever and push the average price of our used vehicle inventory down and that applies to both the U.S. and the U.K. So that's one of the countermeasures that we just formally taken these times.

The problem with these value line cars is they're very difficult to source. We would be selling a lot more if we could buy a lot more. Like all used cars, they are scarce. But the lower-priced used cars are the most scarce is my observation. Daryl, do you want to add anything?

Yes. Daniel, the data supports Earl's comments that our fastest turning segment are sub-$10,000 cars, and our leanest inventories are in sub-$10,000 cars. And one thing to note, you saw our wholesale volumes down considerably about 25%. That's all in an effort to preserve as many cars inside our own system as possible and part of that is obviously value line.

Got it. and then as a follow-up, just moving over to the U.K. kind of side, we were seeing, I feel like last couple of quarters, a more steady economic reopening that seems to be more disruptive kind of this quarter, given COVID and now some economic uncertainty across the continent. So what are your field teams, your operational teams saying that they're expecting as we look to the back half of the year and preparing for the September registrations month?

Yes. I don't think there will be a big September new vehicle registration month as there have been historically same with March because they're just -- supply is just so limited. As I mentioned in the script, we have a new vehicle order bank of 17,000 units. And in each of the first 2 quarters, we've retailed a little over 7,000. So you can see that's a pretty big backlog.

And the same dynamic in the used vehicle market is occurring in the U.K. as the U.S., these middle class in volume brand customers are under pressure from increasing utility prices or food prices. And so we're seeing the average price points go down. And we are actually -- in normal conditions, the U.K. used vehicle market is much newer cars than the U.S. There's a lot of nearly new used vehicles sold in the U.K. in a normal market. And that market has dried up because of the lack of supply of new vehicles. So we're selling continually older lower-priced used cars in the U.K. But of course, this is increasing our reconditioning cost and so forth.

So that's another factor that's put a little pressure on our used vehicle margins. But overall, 83% of our business in the U.K. are luxury brands and Volkswagen, which is a near luxury brand in the U.K. So the majority of our business continues to be in more higher income consumers.

Daniel, it's just one thing I would add to what Earl has to say. I think if you look at the comps for quarter 2, if you really need to look at year-to-date, both quarter 1 and quarter 2 together because there was a significant number of closures in quarter 1 2022. So I think some of the result needs to be balanced over the 2 quarters effectively.

Our next question comes from Adam Jonas from Morgan Stanley.

You provided some useful color, I believe, on the U.K. order bank and the backlog. Could we get a similar number for the U.S. in terms of how big is the order bank, how long is the backlog and how that might compare to a quarter or 2 ago in terms of stability? And then I have a follow-up.

Adam, this is Daryl. We haven't seen any material change at all. When you look at our domestic business, about half of our pipeline is presold. When you look at our volume imports, it's 80%, some as high as 95%. And when you look at our luxuries, it's in the 60% range. And that is right where it's been for the last couple of quarters.

That's amazing. And just a follow-up, any thoughts on some of your competitors that are investing or acquiring -- investing in or acquiring a captive finance capability to kind of help roll out business, particularly in the used market. I didn't know where that was on your order of priority of use of the capital.

Yes, this is Earl. It's not at the top of our list right now. Obviously, we watch what others are doing. So you never say never, but the -- we have so many lenders who are willing to support us with retail lending, and we just don't see any benefit for our company in the near term in taking that kind of step. We also think that we can sell 25% or more volume of used vehicles through our existing physical plan. And so investing in additional fixed cost doesn't seem right for Group 1 right now. And quite frankly, we have trouble sourcing additional used vehicles right now. Daryl, do you want to add anything to that?

No. That's it.

And our next question comes from David Whiston from Morningstar.

On used, you talked about how you could sell more if you could buy more. I mean, I know there's a lot of issues with used right now because of the chip shortage impact on new but is the real problem for you. What's more of a serious problem, I guess, is what I'm asking, is it that there's too many bidders like the rental agencies coming back in? Or is the problem more just not overpaying because used, the acquisition costs are so high right now?

I would say -- this is Daryl. I would say you have to be careful about overpaying and that's probably our -- we're doing a lot of work on appraisals and appraisal accuracy in our company. And because of the dynamics in the market over the last few months and what we expect, that's, I would say, the largest issue, David.

Okay. And I think it was Earl that said you're looking to give serious consideration to more buybacks. You've already been doing a lot. How much of the company do you want to buy back long term?

We don't have any goal on that. That's -- capital allocation is something that's dynamic and it's a continual process of discussions with our Board. So we just have to balance the accretion from acquisitions that are made available to us versus the accretion and returning capital to shareholders via buybacks. And of course, the buybacks don't have any execution risk.

I'll also say that the quality of the acquisitions we've made such as these Toyota stores in Austin and Albuquerque and things like that, we don't think they have any material execution risk either. So we think we're in the best position we've ever been in terms of capital allocation with the ability to do both of those things simultaneously make quality external growth actions, investments and also return capital to shareholders.

Our next question comes from Michael Ward from Benchmark.

Earl, I'm just curious, the bear case on the dealer group is that we're at peak earnings. I'm just curious what your thoughts are.

Well, I don't think so because we have a flexible business model, and that's the beauty of what we do, right? And to me, the key driving factor to our business model now or over time is the balance of supply and demand on new cars. That's what makes everything work. And I have incorrectly predicted that would revert to pre-COVID levels for a year, 1.5 years now. And I believe all the auto manufacturers are also starting to see that maybe this is a more sustainable model for everyone. And I see a lot of aftersales growth opportunity for companies like Group 1. And these comps we're putting up on aftersales now are against some pretty strong comps from a year ago, and I don't think we're anywhere near our peak and being able to capture more of the aftersales market.

And in used vehicles, I think that market is going to revert back a bit. But I think there's great volume opportunity for us when it stabilizes. And you can see that where our new vehicle sales are down over 20%. So there's a lot of room for volume to offset any degree of margin correction.

Mike, it's Daniel here. And just as a follow-up to what Earl said, you need to remember that the company is structurally different what it was in 2019. We've grown the company by $3 billion in revenues. You've seen the share repurchases that we have done. And I think that's all going to help sustain our EPS going forward.

As a follow-up, it seems like we're going to have a new normal of inventory going out -- going forward. But for at least the next 2 years, we're going to be in an inventory build mode and as a result, these record levels of like these preorders, it sounds like it's over 70% of your expected deliveries over the next 6 months, have an order behind it. I think by definition, that's going to push more people to AcceleRide. And when I look at that chart on Page 15, and it's showing that F&I goes up by $151, when people use AcceleRide and just get a better understanding service goes up, we're going to see an increased usage of AcceleRide for both service and F&I and just getting more knowledgeable. And does that push those 2? Does that help additional growth? Am I reading that wrong?

Mike, this is Daryl. I think you're reading it exactly right. Customers today shop for vehicles, and we're now in the appointment business. The days of our people waiting outside for a customer to wander into a dealership are going away, and that has implications on. And a lot of it is because customers now have digital tools that they can use and leverage to shop with us, and that has implications all through our business on staffing and compensation and all kinds of areas. And we're seeing it with the 10% of the business that we're doing with AcceleRide, and I expect that to do nothing but grow.

Yes. Mike, this is Earl. I just want to follow up on that inventory build comment you made. And I continue to remind myself of the staggering fact that pre-COVID, we had 29,000 new vehicles in inventory at Group 1, and we were a much smaller company. We have 30-some less dealerships, I think. And we don't -- I don't think we've cracked 4,000 new vehicles in inventory yet, 4 versus 29,000 when we were a smaller company. So I don't think this build -- inventory build is going to happen overnight. I've been shocked by it. I must admit. But I think that's a pretty staggering hole in the inventory.

And our next question is a follow-up from Rajat Gupta from JPMorgan.

Can you maybe help us understand the divergence in consumer health between Texas and some of the other markets you're present in? Maybe if you could provide us some metrics on what percentage of incoming shipments are presold in Texas versus other markets or maybe any other regional commentary that you could provide if it's meaningful?

Well, I'll just start out on a macro basis. I don't know if Daniel can come up with some data for you. But even through COVID, Texas continued to grow like a weed. I'm involved with some economic development organizations in Texas. And these -- even when oil prices were low and there was a correction in the energy market and such, Texas -- the companies were still moving to Texas monthly. And that's never stopped and that doesn't appear to be a trend that is going to stop.

And then, of course, the energy business, not only have the prices recover because of these global macro forces, but the energy business is shifting to newer forms of energy and renewable energy. So I think you have the best of both worlds in Texas. You have just natural growth of industry in places like Austin and Dallas and even Houston. We have a huge medical and medical research community there.

And then you have the energy business that's probably back to one of its stronger periods of growth. So that, combined with the business environment, the legal environment in Texas, it's just the best place we found in the country to do business.

Our next question is also a follow-up from Adam Jonas from Morgan Stanley.

Remind us your net debt-to-EBITDA leverage target. You're 1.8, but kind of give us your ranges just when thinking about your ability and capacity to keep doing M&A and buybacks and what the cap is?

Sure, Adam. Our credit facility allows us to go to 5.5x in terms of leverage ratio. As a company, if we saw another big acquisition, even bigger than the Prime acquisition, we would possibly go as far as 3.5 to 4x. But ideally, we'd like to stay under 3x.

Just a follow-up there. Any signs of the auto credit tightness impacting your business in any way? I mean, obviously, you're seeing some softness in use, but I didn't know what you're watching in particular in terms of credit cohort or showroom traffic or anything else that gives you an opportunity to be cautious, if need be, so what's your radar telling you on consumer credit?

Sure, Adam. It's Pete DeLongchamps. I addressed that a little bit earlier in the comments, but we are seeing no tightening whatsoever. When you think about -- the asset class performed very, very well in 2008 and '09. And when I talked to the heads of these finance companies, as I said, they are seeing some delinquency increases on the lower end, but it's back to pre-COVID levels. But I think the reassuring part of that is losses are at historic lows and the appetite for car loans is robust. So we have not lost any car business because of the availability of credit.

And our next question is also a follow-up from John Murphy from Bank of America.

I have 2 quick ones. On SG&A, right, my understanding is that about half is variable, half is fixed. And on behalf of a variable, a big chunk of that is pay plans for salespeople. So I'm just curious, a lot of concern in the SG&A will inflate as volume comes back and gross has come under pressure or normalized, not necessarily you can come under pressure. But how are the pay plans constructed for the sales folks? I mean AcceleRide is making it more efficient. You have a lot of vehicles that are essentially presold, and you have lower headcount. So I mean how should we think about that reinflation of SG&A as volume comes back? And how are the pay plans constructed?

John, Daryl. Historically, variable pay plans are based on 2 things: unit sales and gross profit per unit generated. And I think what you will see moving forward because of the nature of our business changing, I think you'll see that dynamic change a bit. And as margins get perhaps, there's less negotiation going on. I think you'll see the compensation plans change a bit to accommodate that.

Okay. Meaning that, that sales portion -- the sales comp is not going to inflate one-for-one with units because gross has become under pressure. So there should be some real leverage that even comes off of that go forward. Is that a fair statement, Daryl?

We would hope to see that, but...

And then just as a second follow-up. I mean, Earl, you said something in a press release just about the acquisitions that the -- it seems like you were surprised at how well your integration of your acquisitions have gone. And I know you've been a little bit skeptical in the past, you're concerned about that. What has been so surprising on the positive side, that kind of made you say you're integrating these with extreme speed, just kind of indicated you were very pleasantly surprised and it might need to maybe a greater appetite to making these acquisitions going forward.

Well, the real challenge was 28 prime stores to take into our accounting center and so forth all at once, but also to integrate AcceleRide was done with incredible speed by Daryl's team. And some of these recent acquisitions like a Toyota store in Austin, these are huge dealerships. And the way we do it is we do it the first day. And so doing a big dealership or doing 28 dealerships that really taxed us and it did create some strain, I will tell you. But the benefits came much more quickly than I would have imagined. And I think you're seeing some of that in our after sales growth. I mean, obviously, it's not a same-store number yet. But I really was very impressed with what Daryl and Daniel's teams did to bring those -- just to kind of standardize those operations with the rest of our operations in a short period of time.

John, this is Daryl. Just a bit more detail there. We had acquisition teams over 100 people that flew from around the country to the Northeast from all of our disciplined F&I, parts and service, sales, accounting, each assigned to every one of those stores and they were on the ground in those stores on the day that we took over. And that was a huge difference maker. Employees of ours that were -- have been with us a long time working with the new teams that we had just acquired -- whose store we just acquired made a huge difference with the technology uptake with AcceleRide with our processes. And that was a real key, and they were there for about 2.5 weeks.

And ladies and gentlemen, we have reached the end of today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.

Okay. Thanks to everyone for joining us today. We look forward to updating you on our third quarter earnings call in October. Have a good day.

And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.