Hackett Group Inc (HCKT) 2024 Q2 法說會逐字稿

Welcome to The Hackett Group second-quarter earnings conference call. (Operator Instructions)

Please be advised the conference is being recorded. Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO; and Mr. Rob Ramirez, Chief Financial Officer.

Mr. Ramirez, you may begin.

Good afternoon, everyone, and thank you for joining us to discuss The Hackett Group's second-quarter results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and CEO of The Hackett Group; and myself, Rob Ramirez, Chief Financial Officer. A press announcement was released over the wires at 4:05 PM Eastern Time. For a copy of the release, please visit our website at www.thehackettgroup.com. We will also place any additional financial or statistical data discussed on this call that is not contained in the release on the Investor Relations page of our website.

Before we begin, I would like to remind you that in the following comments and in the Q&A session, we will be making statements about expected future results, which may be forward-looking statements for the purposes of the federal securities laws. These statements relate to our current expectations, estimates and projections, and are not a guarantee of future performance. They involve risks, uncertainties, and assumptions that are difficult to predict and which may not be accurate. Actual results may vary. These forward-looking statements should be considered only in conjunction with the detailed information, particularly the risk factors that are contained in our SEC filings.

At this point, I would like to turn it over to Ted.

Thank you, Rob, and welcome, everyone, to our second-quarter earnings call. As we normally do, I will open the call with some overview comments on the quarter. I will then turn it back over to Rob to comment on detailed operating results, cash flow as well as comment on outlook. We will then review our market and strategy-related comments, after which, we will open it up to Q&A.

This afternoon, we reported total revenues of $77.7 million and revenues before reimbursements of $75.9 million, which was above the high end of our guidance and adjusted earnings per share of $0.39, which was at the high end of our guidance. Our results were driven by the overperformance of both our Oracle and SAP segments. Oracle's over performance is consistent with the momentum that they have experienced since the second quarter of last year. A new important development is the notable increase in the demand we continue to experience in our historically strong enterprise performance management offerings. Oracle has reemphasized its sales commitment to this area and we are clear beneficiaries of this strategy.

Our SAP Solutions segment also performed above our expectations as it closed several value-added reseller transactions, which benefited the quarter. We're seeing some of the sales investments we made in this segment last year start to pay off.

Our global strategy and business transformation segment was down 3% when compared to last year, as we see economic headwinds continued results in extended decision-making. As I mentioned last quarter, this has been particularly noticeable in the e-procurement area.

On the positive side, we are continuing to see increased activity from companies considering Gen AI investments. We have conducted hundreds of meetings with global 1,000 organizations as a result of their interest in our recently launched Gen AI ideation and design platform, AI XPLR. These meetings have provided us with a unique detailed exposure to these organizations Gen AI adoption plan, implementation concerns, as well as their limitations.

Given this unique perspective, we have continued to make significant enhancements to our platform's version 1 capability and plan to release in AI XPLR version 2 this month. The most important enhancement is our ability to simulate enterprise use cases for our clients by utilizing Hackett IP and utilizing our strong business process knowledge. This can only happen because of our ability to identify and test automation opportunities at a detailed level, which also enables us to design meaningful use cases using our AI XPLR's Gen AI-assisted capabilities.

Our AI projects have also exposed us to significant implementation assistance our clients require to successfully implement sophisticated Gen AI use cases and solutions. Given the strategic access and the platform enhancement, we think it is only natural for us to extend our AI implementations capabilities to be able to fully develop and implement Gen AI use cases.

Although the project conversions from our hundreds of meetings are still low at this point, we expect our sequential revenues in this area to continue to increase strongly. We also believe that our new AI XPLR version 2 capabilities will improve our conversion rate and also expand downstream opportunities on our existing [engagements].

There is no doubt that in just six months, our aggressive pivot to become the architects of our clients' Gen AI journey is being well received and has extended our branding in Gen AI. This has been enabled by our unique ability to identify meaningful AI use cases, determine their feasibility, and also assess their benefit realization potential by utilizing our benchmarking database.

On the executive advisory front, we continue to invest in our growing IP-based programs. We believe our move to fully integrate Gen AI content into all of our advisory programs, which began in April, will be responsive to our clients' strong interest in this area. On the balance sheet side, you will hear from Rob, that the short term -- in the short term, you can expect us to use our strong cash flow and operations to continue to pay down our outstanding balance of our credit facility. Longer term, we plan to use our balance sheet to fund acquisitions and to buy back stock while continuing to invest in our business.

With that said, let me ask Rob to provide details on our operating results, cash flow, and also comment on outlook. I will make additional comments on strategy and market conditions following Rob's comments. Rob?

Thank you, Ted. As I typically do, I'll cover the following topics during this portion of the call. I'll cover an overview of our 2024 second-quarter results, along with an overview of related key operating statistics, I'll cover an overview of our cash flow activities during the quarter. I'll then conclude with a discussion on our financial outlook for the third quarter of 2024. For the purpose of this call, I will comment separately regarding the revenues of our global S&BT segment, our Oracle solutions segment, our SAP solutions segment, and the total company.

Our global S&BT segment includes the results of our North America and international benchmarking and business transformation offerings, executive advisory and IPaaS programs, and our OneStream and Coupa implementation offerings. Our Oracle solutions and our SAP solutions segments include the results of our Oracle and SAP offerings prospectively. Please note that we will be referencing both total revenues and revenues before reimbursements in our discussion. Reimbursable expenses are primarily project, travel-related expenses passed through to our clients that have no associated impact on our profitability.

During our call today, we will also reference certain non-GAAP financial measures, which we believe provide useful information to investors. We have included reconciliations of GAAP to non-GAAP financial measures in our press release filed earlier today and will post any additional information based on the discussion from this call to the Investor Relations page of the company's website.

As Ted mentioned, for the second quarter of 2024, our total revenue was $77.7 million. Our revenues before reimbursements were $75.9 million, which was above the high end of our quarterly guidance. The second quarter reimbursable expense ratio on revenues before reimbursements was 2.3% as compared to 1.9% in the prior quarter and in the same period of the prior year.

Total revenues from our global S&BT segment were $42.3 million for the second quarter of 2024. Revenues before reimbursements for our global S&BT segment were $41.6 billion for the second quarter of 2024, a decrease of 3% when compared to the same period in the prior year. As Ted mentioned, this segment has been impacted by extended client decision making in our business transformation engagements, particularly impacted by our e-procurement offerings.

Total revenues from Oracle solution segment were $23 million for the second quarter of 2024. Revenues before reimbursements for Oracle solutions segment were $22.2 million for the second quarter of 2024, an increase of 9% when compared to the same period in the prior year. These results continue the momentum we've experienced since the second quarter of 2023, with strong growth over the last five quarters when compared to prior year periods.

Total revenues from our SAP solutions segment were $12.3 million for the second quarter of 2024. Revenue before reimbursements for SAP Solutions segment were $12.2 million for the second quarter of 2024, a decrease of 2% when compared to the same period in the prior year.

Approximately, 22% of our total company revenues before reimbursements consist of recurring, multi-year subscription-based revenues, which includes our research advisory, IP as a service, multi-year benchmarks, and application managed services contracts.

Total company adjusted cost of sales, which excludes reimbursable expenses and non-cash stock-based compensation expense, totaled $43.8 million in both the second quarter of 2024 and 2023, representing 57.7% and 57.9% of revenues before reimbursements, respectively. Total company consultant headcount was 1,145 at the end of second quarter of 2024 as compared to 1,154 in the previous quarter and 1,148 at the end of the second quarter of 2023.

Total company adjusted gross margin on revenues before reimbursements, which exclude reimbursable expenses and non-cash stock-based compensation expense, was 42.3% in the second quarter of 2024 as compared to 42.1% in the prior year. Adjusted SG&A, which excludes non-cash stock-based compensation expense, was $16.8 million or 22.1% of revenues before reimbursements in the second quarter of 2024. This is compared to $16.3 million or 21.5% of revenues before reimbursements in the prior year.

Adjusted EBITDA, which excludes non-cash stock-based compensation expense, was $16.3 million or 21.5% of revenues before reimbursements in the second quarter of 2024 as compared to $16.4 million or 21.6% of revenues before reimbursements in the prior year.

GAAP net income for the second quarter of 2024 totaled $8.7 million or diluted earnings per share of $0.31 as compared to GAAP net income of $8.7 million or diluted earnings per share of $0.32 in the second quarter of the previous year. Adjusted net income, which excludes non-cash stock-based compensation expense, for the second quarter of 2024 totaled $10.9 million or adjusted diluted net income per common share of $0.39, which is at the top end of our earnings guidance range. This compares to adjusted net income of $10.8 million for adjusted diluted net income per common share of $0.39 in the second quarter of the prior year.

The company's cash balances were $19.1 million at the end of the second quarter as compared to $13 million at the end of our previous quarter. Net cash provided from operating activities in the quarter was $13.7 million, primarily driven by net income adjusted for non-cash activity and increases in accrued expenses and income taxes payable, partially offset by an increase in other assets and decreases in accounts payable and contract liabilities. Our DSO or day sales outstanding was 68 days at the end of the quarter as well as at the end of the previous quarter and as well as in the prior year.

During the quarter, we repurchased 6,000 shares of the company's stock from employees to satisfy income tax withholding triggered by the vesting of restricted shares for an average of $22.94 per share at a total cost of approximately $144,000. Our remaining stock repurchase authorization at the end of the quarter was $12.9 million.

During the second quarter, the company paid down $4 million on its credit facility. The balance of the company's total debt outstanding at the end of second quarter was approximately $27 million. During the third quarter of 2024, the company has paid down an additional $5 million.

At its most recent meetings subsequent to quarter end, the company's Board of Directors declared a third-quarter dividend of $0.11 per share for shareholders of record on September 20, 2024, to be paid on October 4, 2024.

I will now discuss our guidance for the fourth quarter. Consistent with seasonal -- for the third quarter, excuse me. Consistent with seasonal third-quarter trends, we expect the impact of the additional US holiday and the typical increase in time off due to summer vacations in the US and in Europe to unfavorably impact available days by approximately 2% on a sequential basis.

The company estimates total revenues before reimbursements for the third quarter of 2024 to be in the range of $74.5 million to $76 million. We expect global S&BT segment revenue before reimbursements to be down slightly when compared to the prior year but up on a sequential basis. We expect both Oracle solutions and S&BT solutions segment revenue before reimbursements to be up compared to the prior year.

We estimate adjusted diluted net income per common share in the third quarter of 2024 to be in the range of $0.39 to $0.41, which assumes a GAAP effective tax rate on adjusted earnings of 27.7%. We expect the adjusted gross margin as a percentage of revenues before reimbursements to be approximately 43% to 44%. We expect adjusted SG&A and interest expense for the third quarter to be approximately $17 million. We expect third-quarter adjusted EBITDA as a percentage of revenues before reimbursements to be in the range of approximately 22% to 23%. Lastly, we expect cash flow from operations to be up on a sequential basis.

At this point, I'd like to turn it back over to Ted to review our market outlook and strategic priorities for the coming months.

Thank you, Rob. As we look forward, let me share our thoughts on the near- and long-term demand environment and the growth opportunity it offers our organization. Although demand for digital transformation remains strong, it continues to be impacted by extended decision-making as organizations assess competing priorities created by high interest rates and the demand disruption, which it is intended to affect. Digital innovation across all areas of enterprise cloud applications, analytics, workflow automation are dramatically influencing the way businesses compete and deliver their services.

However, there is a clear major change which is rapidly emerging, and that is the demand for Gen AI solutions. Its unlimited potential will define an entirely new level of what we describe as, Gen AI-enabled digital world-class performance standards, driving all software and services providers to extend the value of their existing offerings. We believe this will result in unprecedented innovations, which all organizations will have to consider. Strategically, we continue our focus on recurring high-margin IP-related services.

But what is new is the accelerated focus and investment we're making in our Gen AI capabilities. The most significant investments have been the development of our AI XPLR platform and then the training and development of our associates. Although they are consuming our organization, I'm also very proud of the way we are making this pivot in a highly efficient way, whether you look at profitability, cash flow, or any other aspect of our performance. This can only be done because of our IP and the talented individuals we continue to attract as well as retain.

We are utilizing the AI XPLR platform as the vehicle to integrate the Gen AI impact across all of our offerings. We also continue to hire and upgrade our skills in critical data and tech architecture resources to further support our efforts. These efforts will allow us to become key architects advisers and consultants of our clients' Gen AI journey.

We also continue to see strong downstream revenues from our benchmarking and executive advisory clients to our business transformation and cloud application consulting services. This halo effect, which has been approximately 40% over the last several years continues. We believe that this will only be expanded by the AI XPLR offering and the broad and strategic access that it provides. Organizations who rely on our AI assessment, solutioning, and market intelligence platforms are more likely to utilize our advisory and consulting services. We also continue to publish our market intelligence reports. We have started to publish our research reports on Gen AI and key solution providers in the space, which is important to the content of AI XPLR and our executive advisory programs.

On the talent side, competition for experienced executives continues. Overall, we saw turnover continue to moderate and remained low during the quarter, and we expect that trend to continue. Longer term, we have transitioned to hybrid sales and delivery model, which provides us with effective access to our clients and their respective teams. This hybrid model provides our associates with greater personal flexibility to perform their defined responsibilities remotely, which is very valuable to them. This should allow us to attract and retain talent.

We also continue to XPLR strategic partnerships that will allow us to extend our AI capability and sell our IP through new channels that will allow us to reach beyond the current global 1,000 focus in an efficient manner.

We also continue to redefine our global benchmarking leadership through enhancements in Quantum Leap, which has been not entirely integrated, but obviously, all of the benefit realization capabilities of XPLR are fully enabled through the Quantum Leap and some of the benefit case assessments that exist inside of our digital transformation platform. These platforms allow clients to leverage our IT to create compelling benefit case assessments, accelerate process flow and software configuration decisions, and track the value realization of transformation initiatives over the life of their respective effort. We believe the integration of these platforms with AI XPLR significantly enhances the value of IP and fully aligns with our perspective on the emerging Gen AI world-class performance standards which will be achieved due to these new AI technologies.

As I mentioned on our previous call, we are adding videos of our platforms on our Investor Relations page of our website. You can expect to see us do more of that in new website before the end of the quarter. Investors will be able to utilize these videos and access we're providing through the investor portal to become more familiar with our new capabilities.

Lastly, even though we believe that we have the client base and the offerings to grow our business, we continue to look for acquisitions and alliances that strategically leverage our IP and add scope, scale, and capability which can accelerate our growth. As always, let me close by congratulating our associates on our performance and by thanking them for their tireless efforts and always urge them to stay highly focused on our clients and our people no matter what challenges they may encounter.

Those conclude my comments. Let me turn it over to our operator, and let's move on to the Q&A section of our call. Operator?

(Operator Instructions) George Sutton, Craig-Hallum.

Thank you. Ted, you mentioned that you've had hundreds of meetings relative to the XPLR offering and you have thus far had low project conversions but expect that to increase strongly. I wondered if you could put a little bit more detail around those comment.

Well, I think what we're seeing is that there the education side of our clients, which appear to be probably driving half of the calls that we were executing over the first three months since launching AI XPLR are really now changing. Clients are now engaging clients who have dedicated some capabilities to AI. May have made some commitments to some Gen AI development platform to develop their use cases. Try to identify areas of the business for which it wants to pursue. But the overwhelming majority is simply, I'll say, testing or trying to develop their capabilities in very narrow areas in order to prove both their capabilities and then also the value realization from this effort.

So we now believe we've moved from primarily education. If you take say the first couple of hundred calls, and to then more meaningful client conversations, let's say the next 200 calls, the conversations now include a more complete conversation of both ideation, design, development of the solution, and full deployment. That is why AI XPLR was built.

It was to be responsive to a couple of things that we saw were critical to the client. One, they wanted a better indication of the opportunities available to them since many of them were highly focused in some narrow areas or column favored areas. And we have been a strong proponent that you should be considering making these investments with a much broader context, which means understanding what your enterprise opportunity is, that's what led to this simulation capability that we're now introducing in version 2.

So what does that mean that instead of talking -- educating our clients about how we ideate and design solutions, we will now be engaging them in an M1 with a full simulation of their opportunity, a full -- let's call it, as complete as it can be, utilizing -- what we're using is industry process flows and all of the client information we have available to us before meeting with our clients. We find that engagement where we're able to speak to specific numbers of opportunities across areas of the business and speak not only to how they are identified and how they're designed. We've also developed skills around making sure that the handoff meaning functional other requirements, data sources, both public and private, all those considerations are addressed in a more detailed level.

We believe all of that is more highly responsive to the issues that the clients are facing. And because of all of those things that I'm discussing, where they were starting, where they're now moving to relative to understanding, their commitment to time and dollars, how we believe that we can be more compelling, and engaging clients. We believe we do that by presenting them with a broader use case number and opportunities that have been simulated inside of our AI XPLR platform.

All of these changes, we believe, will allow us now to walk into a client opportunity, no matter whether they're starting or sophisticated, talking about where they are relative to the ability to assess enterprise opportunity, define their use cases and also talk about some of the deployment and implementation considerations. So as they develop capabilities, we've developed capabilities. The engagement of the clients, I'm going to say with the exception of -- I'm going to say a max of 20% of those clients where maybe there was not a direct fit relative to the requirements they were seeing -- they seem to be looking at versus where we were developing capabilities. We believe those are clients that understand the haptic capability and how it's changing.

So I believe not only do we have a more complete way and extending the way to serve clients; I believe that our opportunity to go back to these clients and now reengage them with more capability. All of those when we see what they're doing and how they're doing it, we believe that our offering is going to be competitive. And so it's all of the above.

And yes, when you mentioned the fact that we believe the revenues -- it's going to be strong. Well, the dollar amounts of our entry points have changed because they become more customized to the client reaction or request. By the way with more, I'll call it, customized or higher amounts come, also longer times to kind of validate the opportunity and close those engagements. But we had enough success in what we call phase two dumb our revenues will continue to increase strongly sequentially.

One other question relative to implementations. Just thinking through -- you mentioned strength in the Oracle practice, and I believe that's because of a push in part from their sales force. And I just wanted to confirm that.

And then relative to the IPO of OneStream and your success in growing that practice, can you just give us an update there? Did you benefit from the IPO and the focus there?

And then lastly, you called out e-procurement, which is, I believe, predominantly Coupa. They pulled back on their sales resources. Is that what's driving that area that's a bit of a challenge?

Well, I'll simply say that excluding the performance of that group, our SBT practice was probably up 3% or better instead of down 3%, just to give you some perspective and respond to that question without providing individual numbers about that practice. So I agree with your observations.

How do we benefit? Look, we benefit when both OneStream is successful and Oracle is successful. We believe they're the top two EPM or CPM providers in the marketplace. We have this very strong capability in the EPM, both in the transformation as well as the software implementation. That relationship emanates from the very strong relationship we have with the CFO community.

So we really like the fact that Oracle's reemphasize that area and we're benefiting from it. And yeah, we also believe that the OneStream IPO only benefits and creates an opportunity for OneStream to continue to grow its business. And if they do so, we're going to be an active participant in that growth.

Jeff Martin, Roth Capital.

Thanks. Good afternoon, Ted and Rob. Ted, wanted to dive a little deeper on AI XPLR 2.0. You mentioned that it will be available later this month. How much do you think the new features particularly simulation that the difference in helping close conversions (multiple speakers)

I believe it's to twofold, Jeff, I believe that clients are listening to our capabilities and are considering that within the context of their plans and they're becoming more informed. And the more detail we provide and how -- I think how strong we are is that ability to identify and design, which includes driving all the way through functional requirements and data sources, we believe, extends our capability and provide more value and capability that we're offering our clients.

So one, those two things are important. I think also, so we're -- that's also extending our capabilities, all the way through to a proof of concept and validation. And again, the more we extend our capabilities and directly respond to what the clients need help with.

We believe, for example, some of the things that are in the pipeline now are clients that we made early presentations to. We didn't hear much from. We thought they were educational. They picked up the phone, called us back. When they called us back, we were demonstrating greater credibility. That greater credibility has given us a chance to present a larger scope, which they now accept.

So you've got to consider this somewhat of a startup. I mean, clients are learning how to -- to do the work and engage the services, compare the capability. And we're aggressively building capabilities where we believe the client limitations and capabilities are.

So you can just expect us to continue to extend those capabilities. And we just believe that all of the above will give us a chance to compete for that work further. And I still don't know if somebody has the volume of calls we've had with clients and the detailed level of discussions around Gen AI adoptions, the underlying GEN AI development platforms they're considering, and again, some of their issues and limitations. So we're trying to go back and respond to it all through both platform and internal capabilities. You'll see us continue to do that aggressively.

The point I was trying to get at was simulation seems like it's a huge value add for the client. I was just curious how long it might take to do a simulation for a client. What all does that entail in terms of the pulling data from their systems?

Well, first, the first thing is to get them to believe that we can. So we've just started doing our first demos and the reaction is how are you doing, it, and may be hard for you to believe, but XPLR and the capabilities inside of Hubble when we provide the -- when we provide XPLR with the right level of information that correlates to that client's industry and more specific client information that we may get publicly or as a result of setting up the call is allowing us to get in front of the client, apologize for the fact that we did this without any direct involvement from them or direct information in the areas we're going to cover. But we think it's incredibly compelling for us to be able to turn to any or most -- let me not say any because it varies so much. Most areas of the business and have a conversation about the use cases there are available and what we believe is the feasibility of the use cases. And as you know, we break down use cases as breakthrough, transformative, and incremental. So then we also correlate to the benefit.

So to some extent, I think that we're catching some of our clients a little bit off guard with the capability we've developed as quickly as we have. But I think that the conversations we're having and we've had are clearly extending our branding. And if we continue to build capabilities of whatever opportunities emerge in this space in the areas we're covering, I just believe we're going to be highly competitive.

Okay, one more for me, if I could. You mentioned strategic partnerships. Just curious if you could help us understand the overarching strategy there. Is that to penetrate more the middle market? You mentioned -- you're intending to extend reach beyond the global 1,000. Just curious if you can give us the strategic viewpoint of how you're --

Well, first, beyond the global 1,000, as you know, we also have had vendor strategies in our IPaaS program, so we've had an initial conversation where we're trying to determine whether we can take some of those relationships and support their AI either extended or offerings by sharing our capabilities with their channel. So the answer is yes. We've initiated those conversations, so we'll see where they go. So relative to extending capabilities because of the success of AI XPLR and the fact that all the work that we paid by giving these clients these one (inaudible) or in some cases more than one session and review of XPLR and discussion around Gen AI adoption and related issues. It has attracted some of the, I'll call it, some of the firms that are now trying to transition their skills or build with some new skills in the AI implementation areas. So and as we walk into clients, sometimes we get it introduced to some providers. So we're kind of developing a good understanding of the ecosystem, who's out there, and figuring out the best way to work with them.

(Operator Instructions) Vincent Colicchio, Barrington

Yeah, Ted, shifting gears here a bit. With your heavy focus on the AI consulting, is there less emphasis currently on the market intelligence programs.

No, we're just it's -- interesting. We just don't believe that you -- obviously, there are requirements to help clients with organizational and enterprise app issues and areas that they want to continue to address. But when you engage the client more strategically or broadly and when you look at how we believe to spend dollars which will shift over time, we don't believe that you can separate our existing capabilities with the new capabilities. So what we've done is we've enveloped all of our, I'll call it, traditional capabilities with AI XPLR or Gen AI capabilities so that any conversation can result in either AI opportunity -- AI consulting opportunity, or I'll call it, downstream or a more traditional or legacy opportunity, for lack of a better term.

So to me, it's the ability to turn left or right at the client need your assistance. I just believe that the trend and the demand that will build around Gen AI is so significant that to not emphasize it and use that as a primary go to market as we look out several years would not benefit our organization the same way.

And then SAP, you said you are close of business towards the end of the quarter. Is this a momentum shift sustainable? What are your thoughts there on SAP?

Look, both Oracle and SAP have performed pretty well throughout this, if you want to call it, economic cycle, right? And now you've got to call it economic and emerging Gen AI cycle. So then you've got two cycles going at the same time. So Oracle, it's really -- obviously, Oracle is outperforming the other groups. The SAP group is performing well, and we think -- and both have an opportunity to continue to perform where they're at or better, just given how successful they've been through, what I believe, as you know, has not been the best economic cycle. And when you also consider the new distractions that clients have now because everyone is offering them to implement some use cases are presenting some new AI embedded opportunity for them to consider. So there's a lot of competing wins. It all leads to the deployment of technology. And change in the deployment of technology and organizational change is good for our business.

And lastly, what is driving the strong growth in your top client? I see some impressive growth there.

Well, obviously, it was a very meaningful Oracle implementation, but it's probably expanded into four of our groups, including our AI group.

At this time, I show no further questions. I will now turn the call back over to Mr. Fernandez.

Well, thank you, operator. Let me thank everyone for participating in our second-quarter earnings call, and we'll look forward to updating you again when we report the third quarter. Thank you.

Thank you for your participation. Participants, you may disconnect at this time.