Lincoln Educational Services Corp (LINC) 2021 Q1 法說會逐字稿

Good day, and thank you for standing by, and welcome to the First Quarter 2021 Lincoln Educational Services Operating and Financial Results Conference call. (Operator Instructions). Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Michael Polyviou, with EVC Group. Please go ahead.

Thank you, Catherine, and good morning, everyone. Before the market opened today, Lincoln Educational Services issued its news release reporting financial results for the first quarter ended March 31, 2021. The release is available on the Investor Relations portion of the company's corporate website at www.lincolntech.edu.

Joining us today on the call are Scott Shaw, President and CEO; and Brian Meyers, Chief Financial Officer. Today's call is being broadcast live on the company's website, and a replay of the call will be archived on the company's website.

Statements made by Lincoln's management on today's call regarding the company's business that are not historical facts may be forward-looking statements as the term is identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate, continue as well as similar expressions are intended to identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results. The company cautions you that these statements reflect current expectations about the company's future performance or events and are subject to a number of uncertainties, risks, and other influences, many of which are beyond the company's control that may influence the accuracy of the statements and the projections upon which the segment and statements are based.

Factors that may affect the company's results include, but are not limited, to the risks and uncertainties discussed in the Risk Factors section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to the future events. All forward-looking statements are qualified in their entirety by this cautionary statement, and Lincoln undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise after the date thereof.

Now I'd like to turn the call over to Scott Shaw, President and CEO of Lincoln Educational Services. Scott, please go ahead.

Thank you, Michael, and good morning, everyone. Thank you for joining our call to discuss Lincoln Educational Services continued progress with the reporting of another substantial quarter of growth in operating excellence.

Our first quarter 2021 results compared very favorably with the first quarter of 2020 when we took the necessary precautions to close our 22 campuses towards the end of last year's quarter and swiftly transferred our operations to a distance learning model. Thankfully, we had no such disruption during the first quarter of 2021, and the Lincoln team has executed our strategies exceptionally well. As a result, our first quarter results are better than we anticipated when we spoke with you 2 months ago, and this fine start gives us the comfort to increase certain metrics of our full year guidance, which Brian will provide detail on during his remarks.

Later this year, in November, to be precise, Lincoln will mark its 75th year of providing the training required for students seeking essential and high in-demand careers. Our operating structure enables Lincoln to swiftly modify curriculums and entire courses to reflect advances in skilled trade technologies and processes at a pace that our publicly funded peers are not able to match. This ability to quickly react to macro conditions enabled our rapid transition to a distance learning model during the first and second quarter of 2020, then reopened all of those campuses by August of 2020 and generated 10.7% increase in student starts for the full year of 2020, meanwhile, other training methods and processes were either inhibited or limited and many in our field saw student enrollment decline.

The momentum we generated in 2020, despite all the challenges has built during our first quarter. From a financial perspective, the theme of double-digit increases we shared with you during our last call continued. For instance, revenue and student starts, which grew at a faster rate than we expected when we spoke in early March, and the ending student population, all experienced solid double-digit growth. In fact, student starts increased an astonishing 30.6% as compared to last year's first quarter, a rate that was somewhat impacted by our need to move many student starts that had been scheduled to begin in mid-March 2020 to the second quarter.

As a result of the strong top line performance and the numerous efficiencies we've introduced over the past several years, a variety of profitability metrics registered large first quarter gains, including consolidated operating income, adjusted EBITDA, net income and earnings per share. All of these achievements demonstrate why we remain bullish about our prospects for the remainder of the year.

Several operating factors combined to drive our growth. The demand for skilled labor and the relatively high unemployment rate certainly are a contributor. However, we see the vast portion of our growth coming from our team's successful execution. We have improved our ability to recruit students remotely and to help them through the financial aid process through a new centralized approach. We are training students for careers in fields deemed essential, and we are converting leads into student starts at an increasing rate.

Our graduation placement rates are higher than our nonprofit peers, and we've invested in new software systems and processes to better help our graduates secure their new careers. Our 22 campuses continue to perform well. In March, we detailed the substantial progress of our Indianapolis campus, which through the combination of new leadership at that campus, consolidating facilities, the launch of a new welding program, a reinvigorated corporate partnership, changes to the admissions teams, and the implementation of some operating efficiencies became a success story from all perspectives.

The first of our 4 new programs that we plan to launch this year will be at Indianapolis. This month, we will be launching a medical assistance program at this campus. In addition, by the end of the second quarter, we are expecting the start of our second new 2021 program, which is welding at the Mahwah, New Jersey campus. We remain on plan to launch 2 additional programs by the end of the summer, and we will keep you posted on these developments.

Our first quarter financial performance was also positively impacted by a reduction in bad debt. I'm going to let Brian explain the specifics that led to that development. What I'd like to focus on, is the decision of our Board of Directors and management, that we made to combine resources from the CARES Act, along with Lincoln's own resources made available to our significantly improved financial performance and condition as well as our strong start in 2021 to provide help to students impacted by COVID-19. There were several line items at the corporate level that we could have allocated the portion of CARES Act funds available to Lincoln. What the Board and management decided to do after the Department of Education issued rulings on March '19 this year was to help our students.

We understood the challenges our students faced when we had no choice, but to shut down our campuses last March. Many of our students lost jobs that enabled them to attend Lincoln or they had lost child care. There's a myriad of factors that combine to cause many of our students to drop out with the burden of student debt. What we decided to do was to help these students by allocating a substantial portion of the CARES funds available to our corporation, along with contributing additional funds that we have resulted from our improved financial condition to relieve students impacted by COVID-19 of this burden, which also resulted in reducing our bad debt.

Furthermore, to celebrate our 75th anniversary, as the role we see Lincoln having in training some of the people who need to be trained to revitalize the nation's infrastructure, we are increasing the scholarship opportunities at Lincoln to $75 million over the next 5 years. On average, this pledge will increase Lincoln's annual scholarship funding by approximately 25%. We think it's a fitting way to celebrate our 75 years of putting students first while continuing our tradition of being student focused as well as prudent stewards of our shareholders' investment. This increased scholarship funding, which is effective immediately, will help lessen our students' burden as they train for careers that should enable them to become productive contributors to our national economic well-being in growth.

Much attention has been paid in recent weeks to the job creation during the first months of 2021 and the progress the nation is making, putting the millions of people who lost their job as a result of COVID-19 pandemic back to work. We applaud this progress and are proud of our small but growing role in enabling people who lost their jobs during 2020 to train for and enter new, more satisfying, higher-paying careers that hold strong promise for personal and professional growth over the next several years.

As the nation makes progress in terms of job creation, we are finding that the skills gap that we've talked about for many years, meaning the gap between the skills required to perform the jobs being created and the skill set of the available labor pool despite the high unemployment rate, is reemerging as an issue. The hiring market is strong, and with the continued reopening of the economy as demonstrated by the 6.4% GDP growth during the first quarter of the year, we see the hiring market continuing to be strong. We also see continuing, and that's a contributor to our outlook for continued student start growth for each remaining quarter of 2021 is the difficulty employers are having at finding qualified, trained candidates to hire.

For example, as we speak to you today, Lincoln has more skilled positions available for our graduates than we have graduates. In addition to our state of the industry training that enables the graduate to become an immediate contributor to their employer, there are other factors why Lincoln graduates are sought out by employers. For instance, our 75 years of experience at training essential workers has enabled the company to identify the characteristics that contribute to employee retention.

In March, we told you about the corporate partner who, over the past 3 years, has inverted the 2-year retention rate of new hires, growing from 40% of hires at the first 2 years of employment to 80% while working with Lincoln. This retention trend is an oft-repeated success story with our corporate partners and a contributing factor behind our 3 years of student start growth.

When a student enters a corporate partnership training program, they do so after demonstrating a commitment and interest in the career and obtaining the skills required. Another differentiating characteristic of the Lincoln approach is the previously mentioned ability and eagerness to develop and modify, if necessary, curriculum tailored to the individual corporation's needs. Such an approach is virtually impossible to deploy through most other educational delivery models as our rapid changes to our curriculum when the corporations needs change. Our customized approach extends to the student where we provide the individual a wide variety of support to maximize their opportunity to both learn as well as excel in the program as well as with the employer. Again, this support is not available or feasible through most other educational delivery models.

Another distinguishing characteristic of Lincoln as compared to our publicly funded peers is our ability to provide life skill support to students. These life skills have often been the difference for a corporation keeping and losing a new hire. When combined with our career services, we provide well-rounded professional and life skills development to our students that lead to enhancing their opportunities to build that life-changing career.

Based on where we are at the first 4 months of this year, 2021 is shaping up to be one of the best years in our long history. Lincoln continues to implement enhancement to the student's learning experience as well as expand our programs and curriculums to help a broader range of students gaining the critical skills needed to begin or advance rewarding careers deemed as essential.

As we look out over the remainder of the year, our efforts to explore other similar tailored opportunities continue, and we do hope to expand the approximately dozen corporate partnerships currently underway as 2021 unfolds. We do expect to generate student start growth for the second quarter. However, given the movement of many first quarter 2020 starts to the second quarter of 2020, the rate is expected to be within the range of our annual guidance of 5% to 10% growth.

In addition, we continue to believe our summer high school starts will most likely be several hundred students less than last year, simply because we were not able to engage as easily with students since many high schools have been closed to in-person visits. However, we also continue to see strong demand for our programs from adult students, a trend that has been evident for several quarters. As I mentioned, our student start growth remains between 5% and 10% for the full year. In addition to the expected second quarter growth, we currently believe that we will generate year-over-year student start growth for both the third and fourth quarters of the year.

In summary, Lincoln is achieving for its students, corporate partners, faculty, and shareholders, and we have put in place the strategies to continue growing the company, improving the ROI for our students and building returns to our shareholders. We are off to a great start and look forward to reporting to you on our progress.

Now I'd like to turn the call over to Brian for a review of our first quarter results and updated guidance. Brian?

Thanks, Scott. Good morning, and thank you for joining us. This morning, I'd like to share some additional details behind our strong financial performance during the first quarter.

Highlighting our performance, we generated over $4 million of net income during the first quarter. This result is particularly impressive given our seasonality, in which our financial results during the first quarter are historically the lowest for any quarterly period during the year. The first quarter success was driven in part by the momentum we generated during Q4 of 2020 and carried into 2021. Our strong results last year enabled Lincoln to enter 2021 with a beginning population of approximately a 1,000 students more than on January 2020, which represents an increase of around 9%.

Now briefly reviewing our top line performance. Revenue for the quarter was $78 million, up $8 million or 11.4% over the prior year quarter, mainly driven by 9.8% increase in average student population. To be clear, this nearly 10% increase in average student population is net of approximately a 100 students on COVID leave of absence or LOAs. As a reminder, most of these remaining LOAs are healthcare students that have been placed on COVID leave of absence as they could not complete their externships due to ongoing COVID restrictions. Our team has been diligently working with these students and at the end of April, the LOA student count is down about 30% from March 31 levels.

We had 3,548 new students started at Lincoln Education during the first quarter. This represents start growth of 30.6% or an increase of 832 students over prior year, an impressive achievement as both segments continue to produce double-digit growth. A portion of this significant percentage growth is the result of the impact of the onset of COVID-19 on last year's starts. If you recall, last year, approximately 300 students had their student start dates postponed from the first quarter to the second quarter of 2020. For comparison purposes, our student start growth would have been approximately 17% if we included these student starts and then count for Q1 of 2020.

We attribute our strong growth to our enhanced admissions approach and our ongoing marketing initiatives. While our marketing spend may fluctuate between quarters based on opportunities, our overall student acquisition cost continues to decrease. This favorable trend has been occurring over the past several years, so it clearly demonstrates the efficiencies and effectiveness of both our marketing and admission initiatives. The strong growth in Q1 starts continue our third consecutive year of student start growth for Lincoln, a milestone, which our team is extremely proud.

Another positive metric during the quarter was our ending student population, which is 1,700 students or 15.5% higher than the 12,600 last year. These figures are net of students that are classified in COVID leave of absence. This is an important metric because the higher beginning population for the second quarter will help drive continuing revenue growth through the remainder of the year.

Now I'd like to shift to our operating expenses for the quarter. Education service and facility expense increased $2.1 million or 7% to $32.3 million, primarily due to continued growth in our student population. Selling, general, and administrative expenses decreased $2.6 million or 7.8% to $30.4 million. The decrease was mainly due to a favorable variance in bad debt expense of $2.4 million quarter-over-quarter. This was the result of the new guidance published on March 19, 2021, by the Department of Education.

This new guidance clarified previously issued guidance pertaining to permitted uses of the higher education emergency relief funds or HEERF. We are providing financial relief to students who dropped out of school due to COVID-19 related circumstances and who had unpaid accounts receivable balances during the period from March 15, 2020, through March 31, 2021, resulting in a net bad debt favorable adjustment of approximately $3 million. This relief is being provided from the company's financial resources combined with the HEERF funds. Excluding this onetime adjustment, bad debt expense as a percentage of total revenue would have been comparable to prior year Q1 bad debt expense.

Other reductions during the quarter included a decrease in sales expense, driven by continued travel restrictions resulting from COVID-19 during the current quarter. These same travel restrictions did not occur until mid-March of 2020 at the onset of COVID-19.

Corporate expenses for the quarter increased $1.1 million or 3% to $9.3 million. The growth in this expense item was primarily driven by an increased salaries and benefit expense, driven by our strong financial results and cost of centralization of certain administrative functions.

Turning to our bottom line. Our consolidated operating income improved by $7.4 to $6 million compared to an operating loss in Q1 of 2020. Adjusted EBITDA increased to $8.4 million from $800,000 in the prior year. The improvement in profitability was achieved due to the revenue growth of $8 million and the significant operating leverage we are generating on revenue growth. For the quarter, this leverage amounted to an approximately 93% of our revenue growth dropping to EBITDA. We believe some extenuating circumstances contributed to this very high leverage rate and expect to see a more normalized operating leverage of approximately 40% on future revenue growth.

Our pretax income was $5.7 million compared to a pretax loss of $1.7 million, an improvement of $7.4 million. Our income tax provision for the quarter was $1.2 million or 21.7% effective tax rate compared to less than $100,000 last year. The significant change year-over-year is because a year ago, our deferred tax assets were under a full valuation allowance, resulting in minimum state tax provision only. Now since we no longer have a valuation allowance, this quarter's tax expense reflects a normalized federal and state tax rates. This quarter's income tax provision was made up of 2 components: $1.6 million based on our annual effective tax rate of 27.9%, offset by $0.4 million discrete tax benefit. The discrete item relates to a restricted stock excess tax benefit is not expected to be immaterial for the remainder of the year.

Now let me clarify what I just described, our book income tax expense, which is different from our estimated tax cash payments. This is because we expect to utilize our federal NOLs of $43 million and our state NOLs of $77 million to offset taxable income in 2021. As a result, we do not anticipate paying any federal income taxes and nominal state income taxes this year.

Lastly, I'll share the balance sheet highlights followed by an updated 2021 guidance. At March 31, 2021, we had approximately $47.7 million in liquidity, including $21 million in availability under our current credit facility and $26.7 million in cash and cash equivalents. This represents a substantial 55% increase in liquidity compared to March 31, 2020. We had a net cash balance of $10 million for the current quarter compared to a net debt balance of $8.8 million at March 31, 2020.

Now I'd like to provide a recap of the CARES Act funds utilized. In total Lincoln was allocated $27.4 million in 2 equal parts. The first part equaling $13.7 million to be utilized for direct distribution to students in order to offset additional expenses they incurred in connection with the disruption of school operations. As of March 31, 2020, this full amount has been distributed to our students. The second part also equaling $13.7 million was available to either offset Lincoln's increased costs associated with significant changes in the delivery of instruction as a result of the pandemic or to provide additional aid to students. As of the quarter, we utilized the full amount, which includes approximately $10 million, which provided direct financial benefits to our students.

Finally, due to our strong Q1 first quarter performance, putting us ahead of our plan for the full year, we are increasing some of our annual guidance metrics. Adjusted EBITDA is now expected to be between $32 million and $37 million for the year, an increase of $3 million over prior guidance.

Pretax income is now expected to be between $22 million and $27 million for the year, which is also a $3 million increase over our prior year guidance. In addition, we are reaffirming the following prior year guidance: Annual revenue growth of between 7% and 12% over prior year. Student start growth of 5% to 10% over prior year, with growth in each of the year's remaining quarters as compared to the respective prior year period. And finally, we continue to expect our capital expenditures to be approximately $7.5 million.

We look forward to communicating our progress towards these goals throughout 2021 with you. Thank you for your time today. And with that, I'll now turn the call back over to the operator, so we can take your questions. Operator?

(Operator Instructions). Our first question comes from Alex Paris with Barrington Research.

Congratulations on the strong start to the New Year. I have a few questions, but I'll just knock it down to 1. You had announced a couple of investments planned for 2021, one of which you called out on the last call, centralizing financially. Where are we now? And is that complete? And what did that essentially entail?

Sure. It's not complete yet, Alex. We're still underway. It won't be complete really until probably first quarter of next year. And what it entails is simply moving the function out of the 22 campuses in many regards into a centralized call center where we think we can better serve the students and give them better access to their financial aid and do it on a more timely basis. So we're right on track with what our plan is and for our budget for the year.

They said one question, but I'll just sneak one other in here, if you don't mind. I guess, just on starts, starts obviously an eye-popping 31% growth year-over-year. And then I heard the breakdown. What you had said this morning was similar to what you had said in March, on the last quarter call that high school is going to be a bit of a challenge this summer. I've heard that from others in the space. But strong demand from adult students could lead to upside surprises over the course of the year. Has adult been holding up as well as you had hoped?

Yes. I mean, certainly, our guidance we gave just a couple of months ago shows that, yes, we have nice strong enrollments and that tend to be continuing. And we'll just have to wait to see how it all plays out for the full year. But yes, that's a very positive trend.

Our next question comes from Steven Frankel with Colliers.

Thank you for the opportunity to ask some questions this morning. So to dig a little more into that adult population in the pipeline. All of us on this side of the table continue to wonder, when are you going to see some kind of benefit from all of this economic dislocation. Kind of what do you see? What can you do from a marketing point of view to maybe stimulate some of that demand?

Sure. Well, I mean, we are getting some of that demand. As you can see from the last several quarters of growth, we're going to continue to do some additional marketing efforts to reach individuals. We definitely, though, it's more anecdotal, but we know that the increased amount of employment assistance that people are getting are causing people to, I'll say, delay certain decisions. And I say that simply because we've been looking to hire some additional people, especially in some of our call centers and frankly been told, they're going to wait until the fall before they make a decision. So I assume that that same thought process is probably trickling through to some of our students. So long story short, we've seen some good growth. We've achieved good growth with our adults. And that momentum seems to be playing out for the near future at least.

And how are things on the cost of acquiring leads? Have you seen your digital marketing costs decline now post collection?

We have seen our actual cost of leads increase by low single digits, but we are becoming better at acquiring leads and better at dealing with the leads. So our overall cost per start is actually down meaningfully in the first quarter.

And what's going on at least qualitatively with start rates?

The start rates are holding. Yes. They're staying about the same or conversion rates of leads into enrollment is definitely stronger than it's been. And overall, as I said, our lead to start rate has been improving, and the cost has been dropping.

And when do you think you clear this healthcare backlog? And what does the pipeline look like for the healthcare side? Do you think you see an acceleration once this clears? Are there still good demand for those programs?

Well, it hasn't slowed down our demand. We've kind of gone through that bump on the healthcare side. These are students that we are trying to get graduated by completing their clinical work. And given all the talk at least here in New Jersey and New York, where these students reside, of things getting back to normal in the next couple of months or at least things more open, I'm anticipating that the clinical sites will be available for these 80-or-so students to complete their education and move on. As far as new students coming, we definitely see strong growth on the nursing side. And as of right now, we haven't had to push off or don't anticipate certainly in the next quarter, pushing off any of the starts in our healthcare sector.

And any update from the State of New Jersey on your desire to run a new program there?

Yes, the only update is, wait. They haven't come to an agreement of how they are going to allow schools like ours become degree granting. When we submitted our application, it will be 2 years this September. They had rules and regulations of how that process would be. And then in the midst of that, they decided to change the process, and they still have not yet finalized the rules around that simply because, I guess, they've been distracted with COVID. But we are told we are at the top of the list. And so we anticipate or are anxious for them to come up with these new rules and regs. And at which point will just modify our application to be in accordance with what they are.

Our next question comes from Austin Moldow with Canaccord.

Thanks for taking my questions. I'm wondering if you're seeing any meaningful expense benefit from what you're doing with blended learning?

Yes. I mean, as of now, we are not because we're still in the development stage. It will eventually, I think, be more effective and efficient for us. But as we make the transition, as we still look to make the programs as robust as possible and, frankly, fully figure it out. I would not say that we're receiving any kind of meaningful savings from our blended program at this time.

So what would be the timeline on that kind of development stage?

I'd say like 18 months from now.

And just last one...

I was just going to add, one of the benefits of the blended learning, we think will be favorable for our students, so it should help our retention rates and other things, giving the students more flexibility. That's one of the main reasons we're doing it even more so on the onset than the cost savings.

And then given some consolidation in the industry on both the healthcare and technician sides, can you walk through Lincoln's M&A philosophy and strategy?

Sure. I mean, we look at properties that are on the market or reach out to those that aren't on the market, and we will continue to do so. And when we find the right mix at the right price that we think is advantageous to us, we will certainly move forward on that account. As you may or may not know, certainly, prior -- in our previous history, we made many acquisitions, and so we are certainly not averse to making acquisitions, and we continue to look for, frankly, attractive accretive things to buy.

(Operator Instructions). Our next question comes from Raj Sharma with B. Riley.

Congratulations on the really solid results. I had -- just wanted to dig in a little bit more on the starts. And I think in the last 4 quarters, you had much higher starts and the guidance is for 5% to 10%. Is there any sort of degree of conservatism? Or is it just tougher comps? Or could you help talk about that and just maybe also break it down on the starts between high school and young adults. And I know that you mentioned high school is tougher. Just a little bit more color on that.

Yes. So in general, about 20% of our starts are from the high schools in the full year. And as we look at it going forward, we view that to be down several hundred starts. So that is the reason why the last half of the year, the start rate -- I'm sorry, the start growth rate is less than in the first half of the year. But we will certainly revise or relook at that at the end of the summer, if need be. But as of right now, since our window, for us, most students start within about 30 to 60 days of reaching out to us. It's only our high school market that we have a longer window of seeing what the demand is. And again, based off of what we see, we see that the high school market will be probably down for us this summer. And then the question is how strong will the adult market be to compensate for that. And that's how we've come up with our projections for the rest got it.

And I know that you've already kind of mentioned this. The show rates are better than the last few quarters or just the bottom line? And also, just can you talk about the interest levels, the initial interest levels?

Yes. So the show rates are steady. They can fluctuate quarter-by-quarter. There's nothing dramatically going positive or negative on the show rates. Demand overall is strong. Our leads, well actually, if you look at our total leads, our total leads are down, but that's only because we've gotten out of third-party leads. So we're getting a much better lead. And so our lead to start rate has been increasing over the last 3 years. And we anticipate that that trend will continue, frankly.

And just lastly, I know that this has also been kind of asked earlier, perhaps. Just wanted to understand your growth plans for the next few years. Do you -- how do you see that? Do you see growth coming entirely from rising enrollment on existing programs, existing campuses? Or any sort of desire, appetite for -- to start more programs/acquire schools?

Yes. Well, first of all, we definitely have an appetite to acquire schools as well as open schools. And so while we anticipate that we'll still continue to have growth in our existing core 22 campuses, our desire and expectation is that we'll have more campuses than we have today in a few years, and that will be probably a combination of organic as well as acquisitions.

Stellar results. Congratulations.

Thank you. Appreciate it, Raj.

(Operator Instructions). And I'm showing no questions at this time. I'd like to turn the call back to Mr. Scott Shaw for any closing remarks.

Thank you, operator. As always, I want to thank our shareholders for your continued interest and support. We had an excellent start to 2021, which has bolstered our growth outlook for the remainder of the year. Lincoln's financial condition and our operating leverage has improved dramatically, and we are now able to make the investments needed to expand our opportunities for both our students and shareholders in the years ahead. Brian and I look forward to sharing our 2021 second quarter results with you in August. Until then, stay safe. Thank you. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.