H & R Block Inc (HRB) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

And welcome to the H&R Block Second Quarter Earnings Call.

(Operator Instructions) Please be advised that today's conference is being recorded.

(Operator Instructions)

I would now like to hand the conference over to your host, Colby Brown, Vice President, Finance and Investor Relations.

Sir, please go ahead.

Thank you, Lateef.

Good afternoon, everyone, and thank you for joining us to discuss our fiscal 2020 second quarter results.

On the call today are Jeff Jones, our President and CEO; and Tony Bowen, our CFO.

We've posted today's press release on the Investor Relations website at hrblock.com.

Also on the website, you will find a link for the webcast containing today's presentation, which will be posted after this call.

Some of the figures that we'll discuss today are presented on a non-GAAP basis.

We reconciled the comparable GAAP and non-GAAP figures in the schedules attached to our press release.

Before we begin our prepared remarks, I'll remind everyone that this call will include forward-looking statements as defined under the securities laws.

Such statements are based on current information and management's expectations as of this date and are not guarantees of future performance.

Forward-looking statements involve certain risks, uncertainties and assumptions that are difficult to predict.

As such, our actual outcomes and results could differ materially.

You can learn more about these risks in our Form 10-K for fiscal 2019 and our other SEC filings.

H&R block undertakes no obligation to publicly update these risk factors or forward-looking statements.

At the conclusion of our prepared remarks, we'll have a Q&A session.

(Operator Instructions)

With that, I'll now turn the call over to Jeff.

Thank you, Colby.

Good afternoon, everyone.

Thanks for joining us.

We have a lot of exciting updates to cover on today's call.

I'll start by recapping our progress against the strategic framework we introduced to you last year.

Then I'll talk about our plans for fiscal '20 in both tax and small business.

This will include details about the significant progress we have made to digitally enable all facets of H&R Block.

This work is essential to our success in both fiscal '20 and the long-term as we launch innovative new products, modernize how we deliver expertise and care and ensure the best trained tax professionals in the industry can help clients in better and easier ways.

Finally, Tony will discuss a non-GAAP financial reporting change, second quarter results, including share repurchases and dividends and our fiscal '20 outlook.

Fiscal '19 represented the first steps to modernize H&R Block and to position ourselves to deliver sustainable growth.

We made improvements to our business and excellent progress against our enterprise growth strategy.

We brought transparency to pricing in all our channels, and we lowered prices for millions of consumers.

We leveraged AI and machine learning to make the DIY experience faster, easier and more personalized.

We introduced more new digital products than ever before, which attracted consumers to our brand, and we made tremendous progress on our technology road map.

These combined efforts enabled us to deliver at the top end of our financial outlook, make record increases in our client satisfaction scores and grow overall clients and share.

This positive momentum has carried into the first half of the fiscal year.

In addition to closing the Wave acquisition, which will help us accelerate our efforts in serving small business owners, we're seeing positive results in our tax business.

We achieved return growth and share gains during the extension season, which just ended in October.

And having recently spent time at our National Retail Meeting, I'm certain that our associates and franchisees are ready to extend this momentum into the upcoming tax season.

So as we look ahead, I'd like to talk about our plans for the year and how we're combining technology and our human advantage to deliver expertise and care in new and compelling ways.

In our offices, teams remain focused on operational excellence to improve the quality and consistency of the experience.

A key element of this improved experience is upfront, transparent pricing, which will remain a top priority.

We're also building on last year by enhancing our standard operating procedures.

And we'll continue to leverage our competitive refund advance product to drive consumers to our brand.

We're also strengthening the tools that enable our tax pros to provide best-in-class service for our clients.

This includes digitizing how our tax pros work and communicate with clients through a tool called Work Center.

This technology provides our tax pros a 360-degree view of the client, consolidating and simplifying routine tasks and offering a portal to all the services we provide.

This year, we'll introduce a variety of enhancements such as an improved dashboard to streamline how tax pros manage both in-office and virtual returns and document management that makes the process of gathering and sharing tax documents easier.

By equipping our tax pros with the right technology, we're increasing their efficiency, giving them more time to provide help and inspire confidence in their client, which will be a key to retention.

Next, Tax Pro Go represents an important product as we offer mobile-first solutions that appeal to busy, young consumers who know H&R Block, but haven't yet tried our brand.

This season marks the second year we have offered this fully-assisted digital service nationwide.

Based on client feedback, we've improved the product flow and simplified pricing.

We're also making it easier to connect with our tax pros, a key differentiator for H&R Block.

No one can match their level of training, quality and tenure with nearly half of our pros being members of the Block team for more than 10 years.

In DIY, we've improved all aspects of our offering, with a focus on ease, speed and personalization.

We will maintain our challenger mindset by pricing competitively, making sure consumers know about our award-winning product and ensuring clients are never surprised by their price.

We're capturing client data earlier in the process and further leveraging AI and machine learning to remove questions and steps from the workflow.

This year, you'll hear us talk about how consumers can now switch in 2 clicks, making it even easier to move from a competitor.

We've also improved our online assist product, formerly known as Ask a Tax Pro.

This offering gives our DIY clients on-demand access to a tax pro for help with any questions they may have.

This year, we're increasing the prominence of this product by highlighting our price advantage and offering it as a separate SKU on our website.

Let me switch gears to talk about a digital tool for clients called MyBlock.

Regardless of how a client engages with us, whether it's in office, online or through Tax Pro Go, MyBlock is the digital hub of our clients' experience with H&R Block.

Through this platform, clients can upload and store their tax documents, access prior year returns, set appointments, manage their Emerald Card and use our tax estimator for help with planning.

This year, MyBlock enables secure document upload, private messaging with the tax pro and greater visibility into the status of the return.

And we've redesigned the workflow and streamlined our digital signature experience for clients who choose to finish their return online.

I am pleased with where MyBlock is today and the valuable role it will play in the future.

Let me turn now to small business.

We currently serve over 2 million small business clients in tax and are working to ensure that more small business owners understand the expertise we can provide through new tools and a redesigned tax prep experience.

Through Wave, we continue to simplify the financial lives of small business owners.

We're excited to announce that we've opened our API to third-party developers to extend the functionality and reach of our tools.

We're also releasing new integrations to make it easier for small business -- small businesses to track all of their transactions from various sources in a single system.

These integrations dramatically simplify the accounting process, allowing small business owners to focus on what matters most.

And I'm pleased to announce that we have partnered with Shopify for our first integration launch.

This is a significant accomplishment as it represents the first direct accounting integration in the Shopify App Store.

What I've just covered outlines our plans for the upcoming season and some of the ways in which we're using technology to drive value for consumers and small business owners.

By focusing on digitally enabling every aspect of our business, we're setting the company up for success for both this fiscal year and the long term.

With that, I'll now hand the call over to Tony.

Thanks, Jeff.

Good afternoon, everyone.

Before I get into the details of our results, I'd like to discuss a key change to our non-GAAP financial reporting starting this quarter.

We are now reporting an adjusted non-GAAP EPS, which excludes amortization of intangibles related to acquisitions.

This adjustment removes amortization of intangibles related to Wave, franchise buybacks and tax office acquisitions.

For context, approximately 1/3 of our historical D&A expense was related to acquisitions.

We believe these adjusted results will be beneficial for investors when evaluating H&R Block's operating performance.

To assist with modeling, we have included quarterly historical adjusted EPS schedules in our earnings release.

Turning to our results.

As a reminder, we typically report a loss during the fiscal second quarter due to the seasonality of our tax business.

Therefore, second quarter results are not representative of our full year performance.

Starting with revenues, we saw year-over-year growth of $12 million or 8% to $161 million.

This increase was primarily due to Wave, which contributed $11 million.

Additionally, in the tax business, extension season results in the U.S. were strong, with volume and share growth in both Assisted and DIY.

These results were partially offset by a lower net average charge in Assisted, which reflects the investment in price taken at the beginning of last tax season.

It does not indicate a change in our plans for the upcoming season as we continue to anticipate our net average charge to be flat to the prior year.

I'll discuss details around our revenue guidance in a few minutes.

Turning to expense.

Total operating expenses increased $39 million or 11% to $404 million.

This was primarily due to Wave as well as planned investments related to our technology road map and higher legal expenses, partially offset by lower occupancy cost.

Interest expense was $21 million, which was relatively flat to the prior year.

The changes in revenue and expenses resulted in an increase in pretax loss from continuing operations of $29 million.

GAAP loss per share increased $0.10 to $0.93.

Adjusted loss per share, which we will report going forward, increased $0.07 to $0.85, driven by the increase in pretax loss and lower shares outstanding, partially offset by an increased tax benefit due to favorable discrete items.

As a reminder, while beneficial on a full year basis, the lower share count negatively impacts EPS in quarters in which we report a loss.

In discontinued operations, there were no changes to accrued contingent liabilities related to Sand Canyon during the quarter.

For additional information on Sand Canyon, please refer to disclosures in the company's reports on Forms 10-K and 10-Q and other SEC filings.

Regarding capital, our priorities remain unchanged.

At the top of the list is maintaining adequate liquidity for our operational needs to account for our seasonality.

We came into this year with a strong financial position after generating over $500 million of free cash flow in fiscal '19.

We did make strategic investments back into the business that we believe deliver value to our clients, ultimately benefiting our shareholders.

Making prudent investments to drive sustainable growth remains a key element of our capital allocation.

Last, we will deploy excess capital through quarterly dividends and share repurchases.

With respect to dividends, the health of our business and our outlook for the future has allowed for dividend increases over the past 4 years.

Over that time, our quarterly dividend has increased 30%.

We will perform an annual review of the dividend after each fiscal year.

Regarding share repurchases, we remain committed to, at a minimum, repurchasing shares to offset dilution from equity grants.

During the second quarter, we repurchased 5.7 million shares for $137 million at an average price of $23.94.

Year-to-date, we have repurchased a total of 7.3 million shares for $181 million at an average price of $24.75.

Going forward, we will continue to be opportunistic in our share repurchase approach.

I'd now like to provide thoughts on our fiscal '20 outlook.

Starting with the tax industry, we expect overall return growth of about 1%, with assisted volume flat to slightly up and DIY growing 2% to 3%.

This is consistent with the trends we've seen over the last several years.

Regarding H&R Block, we expect to grow both clients and market share in fiscal '20, which would mark the third consecutive year of improvements.

This will be driven by sustained growth in DIY and a continued improvement in our client trajectory in Assisted as we anticipate holding market share in that category.

With respect to pricing, following a year in which we reset price in our Assisted business, we expect net average charge to remain consistent with last year.

In DIY, we will continue to price competitively as we focus on driving return volume and share gains.

DIY net average charge is expected to increase slightly due to favorable mix, led by online assist.

We expect these client growth and pricing expectations, along with the addition of Wave, to result in revenue growth of 1.5% to 3.5%.

This is consistent with the outlook provided during our last 2 quarterly calls.

With respect to earnings, we anticipate total EBITDA dollars to be slightly higher than fiscal '19 as we return to revenue growth.

While our EBITDA loss increased in the first half, we still expect EBITDA growth for the full fiscal year.

The majority of our revenue increase and planned cost reductions that will offset Wave's operating losses will be achieved in the fourth quarter.

We expect these changes to result in revenue growth outpacing EBITDA growth, which will impact our margin.

Therefore, we continue to anticipate EBITDA margin of 24% to 26% in fiscal '20.

We're updating our tax rate outlook to 19% to 21%, an improvement from our original outlook of 23% to 25%, primarily due to favorable settlements with tax authorities during the second quarter.

Moving on to the other items on our financial outlook.

We expect total depreciation and amortization of $165 million to $175 million, of which $70 million to $80 million will be amortization of intangibles related to acquisitions.

As I mentioned earlier, this amortization expense reflects both Wave and other acquisitions, and will be excluded from EPS for non-GAAP reporting.

We expect full year interest expense to be $90 million to $100 million.

And finally, our business continues to be capital-light, and we expect capital expenditures to be slightly lower than the prior year at $70 million to $80 million.

I'm excited about the season ahead and look forward to updating you on our progress in March.

With that, I will now turn the call back over to Jeff.

Thanks, Tony.

I, too, am very excited about the progress we're making on our long-term objectives and our plans for the upcoming tax season.

We're building on the successes of fiscal '19 as we continue to develop products and tools that will allow consumers and small business owners to interact with H&R Block in new and exciting ways.

I'd like to thank our associates, Tax Pros and franchisees for their continued focus on providing expertise and care to our clients, and all they're doing to prepare for the upcoming season.

I look forward to sharing more next quarter.

With that, we'll now open the line for questions.

Lateef?

(Operator Instructions) Our first question comes from the line of Jeff Goldstein of Morgan Stanley.

You mentioned your view that your assisted volumes can improve their trajectory this year.

Maybe you could just add a little bit more color on your confidence around that, specifically given you reiterated again your plans to not increase price this year?

Hey, Jeff, it's Jeff Jones.

Thanks for the question.

As Tony mentioned in his prepared remarks, we've been on a trajectory year-over-year of improving our performance in the Assisted business.

As you may know, last year, we made a conscious decision about eliminating free EZ, which we knew would cost us clients.

But set that aside, we know we kept pace with the industry.

So we take a step back and think about all the things we continue to do this year, year 2 of upfront transparent pricing, all the work we're doing on operational excellence and standard operating procedures, continuing to build on the marketing effectiveness that we started last year and into this year, to be honest, the culture and excitement with the field and franchise organization.

We think about retention.

Obviously, we already have a high retention market, about 73%, and I'm eager to see how our client satisfaction scores from last year might translate into retention this year.

But you put all that together, and we feel really good about the plans we have in place to continue on that trajectory.

And as Tony said, our goal is ultimate growth.

And this year, we expect to maintain share in the category.

Okay.

That was helpful.

And then expenses were a little bit higher than we were expecting this quarter, and it seems to be centered on a step-up in the other wages line item.

So is there anything onetime to call out there or somewhere else?

And is there any change to how you're thinking about the expense base for the remainder of the year?

Yes.

Thanks, Jeff.

This is Tony.

Yes, there were just several items in other.

I mean, a lot of the Wave expenses related to some of the variable costs, show up in other.

We also have some legal expenses that occurred during the quarter that are showing up in other.

There's a number of moving parts.

But as I said in my opening comments, when you look at the full year, we expect a fair amount of benefit to occur during our fourth quarter, not only will the vast majority of our revenue growth occur during that quarter, where we have some identified expense roll-offs that will also hit, that will allow us to grow EBITDA during that quarter, grow EBITDA for the full year and hit the overall guidance that I outlined.

Was there anything on the other wages line item specifically, though?

Not the -- yes.

Yes.

I mean, we've got field wages, which obviously picks up the vast majority of our field network in the U.S. as well as some of our international businesses.

Wave wages that we picked up during the quarter would be showing up in other wages, that would probably be a significant portion of that increase as well as the investments we're making in our technology road map.

And hiring additional IT professionals would also show up in that line item.

Our next question comes from Hamzah Mazari of Jefferies.

This is Ryan Gunning filling in for Hamzah.

Just a quick question.

Do you think there are any variables in the upcoming tax year that maybe the market isn't considering that could impact returns positively or negatively?

Yes, Ryan, this is Jeff Jones.

Last year was obviously unique year with the government shutdown, the delayed season, which turned into extensions.

Though when we look back over history of growth rate, that's why we see the industry this year kind of returning back to about 1%.

There's nothing that we know of at this point that would impact that number.

Obviously not trying to predict what the government may or may not do, but there's nothing that's on our radar at this point that we see impacting that growth for upcoming seasons.

Our next question comes from Kartik Mehta of Northcoast Research.

Hey, Jeff and Tony.

Jeff, I wanted to ask you a little bit about the marketing budget, especially as you have Wave now.

And maybe what the anticipation is, if you're going to maintain kind of marketing budget where it is and just take some and add it to Wave?

Or do you expect overall marketing budget to increase and increase both the tax side and for Wave?

Hey, Kartik.

So let me pull it apart a little bit.

Overall, our marketing budget for the year is reflected in our guidance.

And what we are absolutely focused on is spend effectiveness.

You may remember last year, I talked a lot about the changes we were making in performance marketing, et cetera.

We saw great results there.

That will continue.

With respect to Wave, at the highest level, we think Wave has an incredible value proposition.

And they have been able to grow effectively, really through that reproposition, relying primarily on SEO.

They have started to experiment with SDM marketing and are really at the beginning of learning, that's effectiveness added to their mix.

We think there's a lot of opportunity to grow awareness, and you'll see us take a few steps this year, things like Shopify integration, health.

We are now co-merchandising them on H&R Block's website.

We are now e-mailing qualified H&R Block clients about Wave, we'll be e-mailing qualified Wave clients about H&R Block.

So inside the installed base, we think there's a lot of opportunity that doesn't rely on a lot of incremental investment, and that's where we're focused for fiscal '20.

And then just one last question, Jeff.

Maybe the growth in Wave customers and revenue.

Yes.

So at this stage, we're not really guiding on customers.

But I will say that the top of the funnel remains very healthy for Wave.

They grew revenue this quarter, about 40%.

As we said last quarter, for years now, they've been growing 40-plus percent on the revenue line.

They did that again this quarter.

It was a little softer than we would have liked, based on the mix of payment types but overall, still feel very, very good about the health of the business, the way they're thinking about serving small business owners and the simplicity of their product, and the way they're thinking about the product road map and what's to come.

Our next question comes from Henry Chien of BMO.

I just wanted to ask about some of the operational excellence that you've been doing?

I know you reiterated margins for next year.

But just curious, excluding the cost impact from Wave, the underlying margin trend and sort of where are you -- where you're targeting and achieving any potential sort of operating efficiencies that could impact margins going forward, beyond the sort of impact with Wave?

Yes.

As I shared in my opening comments, all of the Wave operating loss will be offset with other cost reductions as well as revenue growth, which will allow us to grow EBITDA dollars for the year.

I also said that the revenue line will grow a little bit faster than the EBITDA line, which will cause a slight contraction in the EBITDA margin.

We feel really good that EBITDA dollars are going to improve in a year that we did a really strategic acquisition for a company that's currently operating at a loss, but we know, over time, will be accretive to H&R Block.

When we talk about operational execution, it's not only focusing on the P&L, but also in our offices and a number of the changes we're making there and how we serve clients, how we staff our offices, all of the, all the way that we lead and manage our offices, all those changes that we really focus on and make sure that every client's getting the best experience possible, and that's been a lot of our focus over the last year.

And frankly, has resulted in an improvement in NPS scores and client satisfaction scores that Jeff mentioned, should result in retention improvement over the long term.

Got it.

Okay.

And any sort of thoughts on the sort of fixed cost base, whether it's real estate or any other costs?

Otherwise, how you're sort of thinking about that?

Yes.

I mean, we try to make a lot of those decisions on a year-by-year basis.

I mean, we've been focused on growing.

Obviously, the last couple of years, we did a number of changes last year in resetting our baseline, resetting margin levels, optimizing our footprint, resetting price.

And now, we're focused on how do we take that new base and grow both in the assisted side, DIY and now through Wave, which should result in improved EBITDA dollars over time.

And as those EBITDA dollars improve, that's really the main focus of what we're focused on over the next few years.

Our next question comes from Scott Schneeberger of Oppenheimer.

Jeff, could we start on the technology road map.

Clearly, you have one -- I'd love to get a progress update.

On the outside, we don't really know the road map, you have that.

And so could you just kind of summarize where you are along the path?

What's been accomplished?

What's yet to go?

And is it trending financially, I guess, now on the cost side, as you'd expected?

And are you starting to see benefits?

Yes.

Hey, Scott.

So great question, and I'm sorry that, that feels opaque to you.

So the technology road map that we talked about a year-or-so ago, has a lot of different dimensions.

I think at the top is what we refer to as the omnichannel tax engine or a tax platform, that's a major initiative to move from 3 engines to 1 engine.

That is a multiyear effort.

It's an effort that the company had attempted in the past, and we are on track with that initiative.

The team has found some great breakthroughs and the omnichannel tax engine is on track.

A second piece, a major piece of the road map is cloud migration.

Obviously, this is a place where, given the seasonality of our business and given resiliency, I think there's a lot of benefit of cloud.

This, too, is a multiyear move from our data centers to the cloud.

That road map is also on track.

The other ones speak more to things like data and architecture, information security, and those are less about a defined number of years and just a continued focus on improving them, really nothing to report there.

They're super-important priorities, but they're less of a road map.

So what I can report today is, our initiatives are on track.

They are going to take several years to complete.

When they are complete, we expect to see a run rate benefit in cost reduction and also greater ability to serve clients.

So I feel really good about the intent of why we launched them, and I'm happy to say they're on track, but they do still have a couple of years to go.

For my follow-up, I'd like to ask 2 questions, if I could just sneak them in, they're somewhat separate.

It looked like legal expenses was increased, it got discussed a little bit.

But curious, is that Free File Alliance, focused or other?

Just whatever you can elaborate.

And then my other question, it's a quickie is, will you be providing volume updates throughout the tax season?

You have a large competitor in the tax space, who is not going to do it this year after they had been in the past.

So just curious what's your plan is for that?

Yes.

So we'll take them in reverse order.

On your second question, we absolutely believe that we should be and will be as transparent as possible with you in our business, in our transformation, in our initiatives and we have no plans to change how we provide updates to you throughout the season, that will continue.

Yes, and I'll take the legal expenses, Scott.

I mean, FFA was a driver during the quarter.

We also had some Wave expenses that hit, we provide a lot of detail in our 10-Q, which we'll file later this week that talks about all of our legal matters.

As you know, we typically don't comment on the details of those pending matters.

If -- I just thought, is it going to remain elevated or no on the legal front?

Yes.

I mean, obviously, when you see a quarter bump up, it's probably not going to go to 0 on a year-over-year basis the following quarter, but we did contemplate that in our EBITDA margin outlook that I provided earlier in the call.

Our next question comes from George Tong of Goldman Sachs.

I wanted to dive deeper into the cost reductions that you're planning to make to help offset the Wave operating losses.

Now that you're further along into the year, can you just elaborate a little bit more on where these savings are coming from?

And if you've identified additional savings you didn't have earlier in the year?

And what the potential impact of executing on those savings could be to, say, revenues and market share performance?

Yes.

Thanks, George.

As I said, there's -- most of those are going to occur during the fourth quarter, you'll see in our release that we released before the call that our EBITDA loss is up slightly for the first 6 months.

But for the full year, we still expect EBITDA dollars to improve on a year-over-year basis, driven by, really 2 factors: one, the growth in revenue, which as you know, over 75% of our annual revenue occurred during the fourth quarter.

So it's all about that quarter, as well as some planned cost reductions that have already been identified.

It's just a matter of those rolling off, which will occur during the fourth quarter.

So there's some compensation efficiencies.

There's some promotional expenses in the marketing budget that will roll off.

Earlier in the year, we already had some onetime expenses related to our footprint consolidation that occurred last year that rolled off in the first half of this year.

So those are probably the 3 biggest drivers to your question on what else have we identified, and it's obviously a fluid conversation as we think about how the results are coming in.

We're off to a good start to the first half of the year.

But we still feel like the ranges that we provided in both revenue and EBITDA margin are on point.

Got it.

That's helpful.

And I know you've talked about pricing for Assisted at length.

But now, again, you're further into the year, what's the likelihood that you'll flex pricing as a lever?

Or are you fully committed to sustaining flat pricing for this upcoming tax season?

And then separately, on DIY, it looks like pricing is coming lower?

Can you share some thoughts, just additional thoughts on how you plan to go-to-market from a pricing perspective in DIY?

George, we'll tag team.

On Assisted, we are fully committed to holding that flat for fiscal '20.

When we reset pricing, we do not believe we need to reset pricing further.

This is all about getting our pricing in line so clients can see and experience the value.

You know we feel really good about how our clients judged that last year in the scores they gave us.

And over time, once that value prop gets clearer and tighter, and we feel like we're back on a path to growth, we expect and hope to be able to get back to inflationary level price increases in the Assisted business.

Yes.

And then as regards to DIY, George, that for the last couple of years, we've priced competitively, which has really been a key to -- part of our growth.

We want to grow awareness, we're building a great product, but pricing is a key element to it.

I'm not sure if you caught it in my opening remarks, but we actually expect the net average charge in DIY to be up this year.

So pricing will not be lower, and we expect it to be flat and the positive mix led by online assist will actually lead to a higher overall net average charge in DIY.

That's helpful.

Just to follow-up quickly on that.

So the pricing increase is going to be driven more by mix, is that correct?

That's right.

I mean, it's dynamic.

As you know, pricing changes throughout the season, whether it be first half or second half and by product, but we don't have any planned price reductions in DIY, and we believe that there's going to be a positive mix led by online assist.

Thank you.

At this time, I'd like to turn the call back over to Colby Brown for closing remarks.

Sir?

Thanks again, everyone, for joining us.

This concludes today's call.

Ladies and gentlemen, this concludes the conference call.

Thank you for participating.

You may now disconnect.