Landstar System Inc (LSTR) 2018 Q1 法說會逐字稿

Good morning, and welcome to Landstar Inc.'s First Quarter 2018 Earnings Release Conference Call. (Operator Instructions) Today's call is being recorded. If you have any objections, you may disconnect at this time. Joining us today from Landstar are: Jim Gattoni, President and CEO; Kevin Stout, Vice President and CFO; Pat O'Malley, Vice President and Chief Commercial and Marketing Officer; Joe Beacom, Vice President and Chief Safety and Operations Officer. Now I'd like to turn the call over to Mr. Jim Gattoni. Sir, you may begin.

Thank you, Caroline. Good morning, and welcome to Landstar's 2018 First Quarter Earnings Conference Call.

Before we begin, let me read the following statement. The following is a safe harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, we may make statements that contain forward-looking information that relates to Landstar's business objectives, plans, strategies and expectations. Such information is, by nature, subject to uncertainties and risks, including, but not limited to, the operational, financial and legal risks detailed in Landstar's Form 10-K for the 2017 fiscal year described in the section Risk Factors and other SEC filings from time to time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking information, and Landstar undertakes no obligation to publicly update or revise any forward-looking information.

Our 2018 first quarter financial performance was by far the best first quarter performance in last, our history. First quarter revenue and diluted earnings per share were both first quarter records, while gross profit and operating income where all-time quarterly records.

During our year-end 2017 earnings conference call, we provided 2018 first quarter revenue guidance to be in the range of $925 million to $975 million and diluted earnings per share to be in a range of $1.22 to $1.27. On April 3, 2018, in anticipation of a meeting with sell-side analysts that was held on April 4, in conjunction with our annual agent convention. We updated that guidance in a Form 8-K filing with the Securities and Exchange Commission, providing for a first quarter range of revenue from $1,030,000,000 to $1,050,000,000 and diluted earnings per share in a range of $1.35 to $1.40.

Our initial guidance anticipated the number of loads hauled via truck product in the 2018 first quarter to exceed the 2017 first quarter in an upper single-digit percentage range and revenue per load on loads hauled via truck to exceed prior year in a mid-teen percentage range. Our updated guidance and actual first quarter results were higher than initially anticipated as both the number of loads hauled and revenue per load on loads hauled via truck exceeded the high end of our original guidance.

Revenue in 2018 first quarter was $1,048,000,000 and diluted earnings per share was $1.37, both within the range of our recently updated guidance. Loads hauled via truck in the 2018 first quarter increased 12% over the 2017 first quarter, while revenue per load on loads hauled via truck increased 21% over the 2017 first quarter.

We experienced consistent growth in truck volumes in each month of the quarter, with truck loadings increasing over the prior year month by 10%, 13% and 12% in January, February, and March, respectively. The increase was broad-based amongst many customers and industries.

Revenue per load on loads hauled via truck remained elevated each month for the 2018 first quarter. Revenue per load on loads hauled via truck increased over the prior year month by 21% in January and February and 20% in March. The strength in pricing that began in September 2017 carried through the first quarter.

Seasonally, we typically experience a mid- to upper single-digit decrease in revenue per load on loads hauled via truck from December to January. January revenue per load on loads hauled via truck decreased only 1.4% from our near record-high December revenue per load. A clear indication of the continuation of the tight truck market that began in the latter part of 2017.

Sequentially, from January to February and February to March, we experience a more normal seasonal trend in changes in revenue per load on a month-to-month basis.

The number of loads hauled via rail, air and ocean carriers was 20% above the 2017 first quarter. The increase in rail, air and ocean loads was driven by a 25% increase in rail loadings that was broad-based spread amongst many customers and a 10% increase in air and ocean loads, which is also generally broad-based. We continue to attract qualified agent candidates to the model. Revenue from new agents was $23.2 million in the 2018 first quarter, much improved over the $17.2 million in revenue from new agents in the 2017 first quarter. The agent pipeline remains full.

We typically experience a net decrease in a number of trucks provided by BCOs during the first quarter of any year. We ended the quarter with a record 9,868 trucks provided by business capacity owners, 172 trucks above our year-end 2017 count.

During the 2018 first quarter, we recruited a similar number of BCOs compared to the 2017 first quarter. However, during the 2018 first quarter, we experienced fewer terminations as compared to prior year's first quarter. Overall, the net increase in a number of BCO trucks in the 2018 first quarter speaks to the (technical difficulty) quality capacity in a tight truck capacity market.

Loads hauled via BCOs increased 7% in the 2018 first quarter over the 2017 first quarter on higher truck count and a 3% increase in BCO truck utilization defined as loads per BCO truck per quarter.

As expected, the ELD mandate had an insignificant impact on BCO productivity in the 2018 first quarter. We had a record number of third-party broker carriers hauled freight on our behalf during the 2018 first quarter. Our network is strong and continues to attract third-party truck capacity.

Gross profit increased 28% compared to the 2017 first quarter, our highest-ever quarter over prior year quarter percentage growth, excluding periods that included significant disaster relief.

Here's Kevin with his review of other first quarter financial information.

Thanks, Jim. Jim has covered certain information on our 2018 first quarter, so I will cover various other first quarter financial information included in the press release.

Gross profit, defined as revenue less the cost of purchased transportation and commissions to agents, increased 28% to $155.5 million and represented 14.8% of revenue in the 2018 first quarter compared to $121.6 million or 15.6% of revenue in 2017. The cost of purchased transportation was 77.3% of revenue in the 2018 quarter versus 76.3% in 2017. The rate paid to truck brokerage carriers in the 2018 first quarter was approximately a 140 basis points higher than the rate paid in the 2017 first quarter.

Commissions to agents as a percentage of revenue were 33 basis points lower in the 2018 quarter as compared to 2017 due to a decreased net revenue margin, revenue less the cost of purchased transportation on loads hauled by truck brokerage carriers.

Other operating costs were $7.6 million in the 2018 first quarter compared to $6.9 million in 2017. This increase was primarily due to increased trailing equipment costs and increased contractor bad debt.

Insurance and claims costs were $17.4 million in the 2018 first quarter compared to $14.5 million in 2017.

Total insurance and claims costs for the 2018 quarter were 3.7% of BCO revenue compared to 4% in 2017. The increase in insurance and claims compared to 2017 was attributable to increased net unfavorable development of prior year claims in the 2018 period.

Selling, general and administrative costs were $45.3 million in the 2018 first quarter compared to $38.3 million in 2017. The increase in SG&A costs was mostly attributable to an increase in the provision for bonuses under the company's incentive compensation plans and increase in stock compensation expense and increased wages, mostly in the information technology group. Stock compensation expense was $3.7 million and $1 million in the 2018 and 2017 first quarters, respectively.

The provision for an incentive compensation was $4.1 million in the 2018 first quarter compared to $2.9 million in the 2017 first quarter.

Quarterly SG&A expense as a percent of gross profit decreased from 31.5% in the prior year to 29.1% in 2018.

Depreciation and amortization was $11 million in the 2018 first quarter compared to $10 million in 2017. This increase was primarily due to the increase in the number of company-owned trailers.

Operating income was $75.2 million or 48.3% of gross profit in the 2018 quarter versus $52.3 million or 43% of gross profit in 2017. The increase in operating margin was driven by increased gross profit, partially offset by increased SG&A expense and increased insurance and claims costs. Operating income increased 44% year-over-year.

The effective income tax rate was 22.7% in the 2018 first quarter compared to 36.8% in 2017. The 2018 first quarter effective tax rate was favorably impacted by the Tax Cuts and Jobs Act of 2017. The effective income tax rate was also impacted in both periods by tax benefits, resulting from disqualifying dispositions of the company's common stock and by excess tax benefits related to Accounting Standards Update 2016-09.

Looking at our balance sheet, we ended the quarter with cash and short-term investments of $260 million. Cash flow from operations for 2018 were $72 million and cash capital expenditures were $4 million. There are currently 2,986,000 shares available for purchase under the company's stock purchase program.

Back to you, Jim.

Thanks, Kevin. As it relates to our 2018 second quarter expectations, I anticipate that truck capacity will continue to be tight. I expect gross profit margin to be in a range of 14.6% to 14.8% in the second quarter, assuming fuel prices remain stable and truck capacity remains tight.

Seasonally, revenue per load on loads hauled via truck in the first quarter is typically lower than the second, third and fourth quarters and generally increases in the low single-digit percentage range from the first quarter to the second quarter.

During March, we experienced a normal seasonal increase in revenue per load on loads hauled via truck. In early April, we have been experiencing a continuation of the normal seasonal trend.

I expect those normal seasonal trends to continue in the 2018 second quarter, and therefore, expect revenue per load on loads hauled via truck to be higher than the 2017 second quarter in a range of 19% to 22%.

Generally, the number of loads hauled via truck from the first quarter to second quarter increases in an upper single-digit to low double-digit percentage range. I expect a normal seasonal increase in the number of loads hauled via truck from the first quarter to the second quarter.

Therefore, I expect the number of loads hauled via truck in the 2018 second quarter to increase over the prior year second quarter in the low double-digit percentage range.

Based on the continuation of recent revenue trends, I currently anticipate 2018 second quarter revenue to be the range of $1,115,000,000 to $1,165,000,000.

Based on that range of revenue and assuming insurance and claims cost are approximately 3.5% of BCO revenue, I anticipate 2018 second quarter diluted earnings per share to be in a range of $1.48 to $1.54.

Overall, I am extremely pleased with the start to 2018. 2018 first quarter revenue increased approximately 34% compared to the 2017 first quarter on a 12% increase in the number of loads hauled and significant increases in revenue per load across all modes.

2018 first quarter revenue and diluted earnings per share were the highest first quarter results in the company's history. More impressive was the fact that the 2018 first quarter gross profit and operating income were the highest ever achieved by Landstar in any quarter in the company's history. In our view, the overall environment for Landstar is as strong as it has been in any point over the last 2 decades, and Landstar is firing on all cylinders. We continue to focus on profitable load volume growth and increasing our available capacity to hold those loads. We also remain focused on our strategic priority to continually provide an enhanced technology-based tools for the thousands of small business owners in our network. 2018 is setting up to be another historic year for Landstar as we look to celebrate the company's 30th anniversary by surpassing $4 billion in annual revenue for the first time in our history.

And with that, Caroline, we will take questions.

(Operator Instructions) Our first question or comment comes from Jack Atkins from Stephens.

So if I could just sort of start off here. If I can get you to sort of expand on the comments around how you're seeing this year sort of progress so far, and I think a lot of people are sort of wondering where we go from here after a much stronger-than-expected and stronger-than-normal seasonal first quarter. It seems like normal seasonality is continuing in April, even though we've had a little bit of a slower start to produce season. So just curious if you could maybe kind of looking to the crystal ball for a minute and sort of how you see the rest of this year playing out? What you think could be rail? If anything the -- just the strong operating environment that's out there right now?

Well, Jack, in the short term, I don't see anything derailing it. I mean, everybody knows the truck orders have been very -- relatively high over the last 6 months, which you still got to find drivers for those. So I mean, you can bring all the trucks you want, but with employment about 4% -- unemployment about 4%, where the drivers come from so you can pump more assets into the system and apparently there's 6- or 7-months tail, so those orders might start hitting over the summer. But I don't anticipate that in the short term, is going to impact much. And then, you got the demand side. And what's going to actually impact the demand side, right now, I think you've got high consumer confidence, high business confidence. Your manufacturing seems to be doing very well now. And again, don't anticipate that slowing down. The only thing we buy against is that this environment started in about September, right. So clearly, the fourth quarter from a comparable basis is going to be a little bit tougher than the first 3 quarters of the year. But I don't see anything derailing us in the shorter term -- let's say, shorter term, 3 to 6 months. And then, we'll see what it brings into the fourth quarter.

Okay. Okay. And then for my follow-up question, I guess, for you, Kevin. I think maybe kind of give us a sense for your outlook for free cash flow this year. You guys generated $117 million in free cash flow in 2017, but you got lower corporate tax rate this year. You guys were high cash taxpayer last year. You got higher earnings. So I would expect you guys are looking for much better free cash flow on a year-over-year basis. But at the same time, working capital is obviously going to be a little bit higher as well. So could you kind of help think through the puts and takes there? And kind of help us think through how you all are thinking about the trajectory of free cash flow in 2018?

Yes, Jack. They -- obviously, more net income is going to help there. But the way we're looking at the tax, the changes in the tax, is probably going to add cash of $35 million to $40 million. So our range on the free cash flow right now is $200 million to $250 million, somewhere in that range.

Our next question or comment is from Amit Mehrotra from Deutsche Bank.

First question, I guess. I mean, I want to ask one on demand, but I guess the answer is just going to be it's broad-based. I'm not going to ask that. The first question is on the acceleration in the BCO count. I think that's obviously, positive given the backdrop in the market. Kind of a different question, I guess, given the inflationary pressures across the industry with respect to driver pay, are you seeing any shift at all with respect to how BCOs are thinking about the economics of being part of the Landstar network. It seems obviously not given the increase in account, but just any thoughts around how you think that's evolving especially in light of maybe some further progress on the nontraditional brokerage platforms?

Sure. Yes, Amit, this is Joe Beacom. In a time of rising prices, BCOs, we pay on a percentage basis, right. So anytime the pricing goes up, the pay goes up and that's always been a very good opportunity for us to add BCOs to the network, and I think that's what you're seeing here is not only from an addition standpoint, where we've got a pretty good recruiting environment, but also from a retention environment, we're trying to put good information in the hands of the BCOs and let them make -- take advantage of the environment we're in. We got a strong demand environment. And again, just paying on percentage, if you look at our revenue per load in the first quarter was up 21% -- 20% on BCOs, but that's a pretty significant pay increase, and it's a good opportunity, and we recruit to that pretty strongly. And I think we're just seeing the results of that.

Yes. I mean, I know that you guys pay on a percentage basis, but I guess, the question is, are you seeing any more -- any potential shifts in those percentages or is the BCO count just so fragmented that you're not really seeing that?

I'm sorry. No, no. We're not anticipating any changes to our percentage programs.

Okay. And then, if you could just help us understand I think there's some technology investments that are being made especially on online platforms to maybe leverage the OpEx even better than you're already doing, which is hard to imagine that you could do, but seems that those initiatives could do that. Could you update us on maybe what the technology spend? I think it's about $35 million a year and where that may evolve over the next 12 to 18 months given some of these initiatives?

Yes. The -- our core maintenance in IT runs about $35 million a year, but when we talk about the incremental spend for just converting over to new train station management system from an order delivery standpoint to -- which is much more user-friendly that we have today, and then, all the mobile apps, which is -- we have rolled out a whole bunch of stuff last year. But our spend -- our incremental spend for all the technology enhancements and upgrades and some new stuff is about $6 million to $10 million a year. And we expect that to continue for over the next probably 2, 3, maybe 4 years.

Okay. Great. And then, last question for me. I don't actually know if this was asked previously because I hopped on a little bit late, but the cash deployment strategy, I mean you guys have obviously repurchased consistently stock over the last 20 years or so. Pretty nice chunks every year. That's obviously slowed down significantly. And so is -- should we expect cash deployment, I mean, excess cash to basically now accrue to shareholders in the form of special dividends more given where the stock price is? Or how you're thinking about that?

No, I think if you look over the last 18 months of what the stock has done, and we didn't speculate on a significant tax reform in December, right. When you're looking at valuation, you've been looking at market conditions over those 18-month period where we were in the market back from September of '16, I believe. It was really more of -- we were going to speculative on what was going to happen on the economic -- or the market. And it's just -- so we watched it for a while, and we end up doing a special dividend at the end of 2017 similar to what we did in 2014, is we weren't in the market. So we gave back the shareholders through special. Our philosophy is always its share buybacks, and we are going to continue our share buyback program. And during the first quarter, it's -- we probably have more close window periods in the first quarter than we ever have, but our philosophy is still to focus on the buyback program. And if we end up in the same position that we did, if you look at history. In '14, we did a special. In '17, we did a special. But our expectation is for -- and our expectation is we hopefully get back into the market and continue on our buyback program.

Yes. So the tax reform basically has recalibrated your assessment of what the true equity value in the earnings part of the company could be?

Yes. Yes.

Our next question or comment is from Bascome Majors from Susquehanna.

As you kind of alluded to, Jim, I mean, you're in this really great sweet spot of the cycle for Landstar. I mean, you're getting 20%-plus pricing growth like other asset like trucking companies, but you're also growing volumes double digits as arguably more reliable capacity source for your customers. To kind of follow-up on Jack's question from earlier. As we get into the part of the cycle later this year, where we're going to start lapping the start of these really once in a decade or 2 price increases. How do you think the Landstar model performs versus other asset likes and even asset-based truckload competitors? And I'm not asking you to guide the fourth quarter or the beginning of next year, but more so, trying to understand were you think you're better positioned and where you might be at a disadvantage as the cycle moves into that piece of it?

Our focus is on volumes, right. We live in a spot market world. We don't have a lot of influence over pricing. So our team is charged with adding volumes. And I think and with the technology we rolled out over the summer to enhance our mobile apps and provide easier user-friendly experience for not just the capacity, but our agent family, I think that helps us drive the volumes better than we probably had in the past and keep more BCOs in our system. So that's kind of what we look forward to in the -- over the next 6 to 12 months and looking to see how those new enhancements and upgrades are going to react in a -- I don't want to say when the comps get tougher, how's that toward the end of the year. But again, our focus is on volumes. You know -- and I always look back the most dire economic environment that -- since I've been at Landstar in 2009 to see the impact that we have. That -- how the Landstar model reacts in an environment that has may be a significant downturn, the extreme downturn of 2009. And you get that. Our model kind of in a great environment like this, remember, 50% of our business on a fixed margin, right. So our spreads are relatively fixed. So the kind of model, it protects us in a downturn, but the true asset-light guys expand margin opportunity at the front end of those, right. So that's what happens. And I think everybody understands that cycle and understands the Landstar model and how it reacts in the environment from a -- in a comparative basis to the rest of the industry and our peers. But I still think our goal is to focus just really pushing more volumes through our system through Pat O'Malley's team with the sales support, work with customers, work with agents, and Joe's team making sure, we have the proper capacity in the system to support the load volume growth. And that's really your focus. But from a model perspective and as it compares to the industry, we kind of have stable (technical difficulty) margins in the environment, but in any environment because of the 50% being our fixed margins and it's really just pushing volumes through the system.

I appreciate that color. So it sounds like you control the pricing, you certainly love it where it is right now. But share gain is always a story of more main money even as the price of comps get tougher.

Yes.

Our next question or comment is from Todd Fowler from KeyBanc Capital Markets.

Just to come back to the comments on the BCO count here in the first quarter. I know you talked about this earlier this month. But it sounds really that the growth that you saw in the BCOs is really more related to not seeing the normal attrition in the first quarter combined with your recruitment efforts. I don't know Joe maybe if you can just kind of flush out what you're experiencing with BCOs here early in 2018? And how you think about that for the rest of the year?

Sure. Thanks, Todd. As you said, the additions are being relatively flat year-over-year, good additions, good pace, lot of interest, but really the gain in BCOs has been on the turnover side. Annualized turnover in the quarter is around 27%, which is very good for us. Jim alluded to some technology that we put out to the capacity. We think that's helping as well. Just the model and the word pricing is, certainly helps all those factors in April. Through the first part of April, we're up net about another 50-or-so trucks, so we like where the second quarter has started. We like the pipeline. And whether they are coming off their own authority or from other systems, they get a chance to look at our load board that they like what they see. So we like that. And I think as always been the case, our agents once we get capacity in the network, our agents take care of them pretty well, and I think we're seeing that perform very well now. And I wouldn't expect that to change as we look into the rest of the quarter or the rest of the year.

Okay. Good. That helps. And there's been some questions on that. Just for my follow-up, Kevin, can you speak to some of the costs in the SG&A line. So I know that you mentioned the bonus provision was $4.1 million, it was up about $1.2 million from last year and then the stock comp piece of the $3.7 million. Are those -- should we see those at similar levels for the rest of the year with where you're guiding to, or do you see a step up in SG&A? And then just also remind us when the costs from the annual agent convention hit the share list? And that's what I've got for now.

Yes, Todd, the agent convention were hit in the second quarter. The 2-line items, I called out in my prepared remarks, definitely, those are estimates for the -- we estimate for the full year, and then, cut it up into 4 equal pieces for the quarter. So you should annualize those, if you will.

So for the $45.3 million of SG&A in 1Q, there's a step up in 2Q for the agent convention, but then, maybe, $45 million give or take is kind of where it should be in the third and fourth quarter?

Right. We do annual merit increases for the employees in July. So that would be a small increase. But generally speaking, yes, the agent convention is anywhere from -- between $2 million to $2.5 million and that will hit in the second quarter. But other than that and the annual increases, I think we're pretty close to -- what you saw in the first quarter is pretty close.

(Operator Instructions) Our next question or comment comes from Matt Brooklier from Buckingham Research.

So another BCO question for you. It sounds like the payout, the revenue share, that component of your model hasn't changed. Just curious, I know that Landstar offers cost savings (technical difficulty) for the BCOs, fuel insurance, and some other things. Have you potentially altered the -- I guess, the magnitude of what you're offering in terms of the costs, savings program to kind of sweeten your position in the market and potentially, I guess, it's more about keeping BCOs at this point in time? But potentially, using that as a tool to maybe attract more owner operators?

Yes, Matt, this is Joe. We haven't significantly changed the programs. We continue to -- it's fuel, it's tires. It's a lot of the significant costs, new equipment, and so forth that we offer. And we'll continue to negotiate those on an ongoing basis, but we haven't had any major shifts or changes in the program. It's a pretty mature program. And it's just proven to be effective over time. And we've got great relationship with the vendors in that program. But to your question, really no significant changes, but we're always looking for opportunities when we see them. We'll kind of get with our vendors and see if we can take advantage of them, but at this point there's not been anything significant.

Okay. And just as a follow-up. BCOs joining the network at this point in time, do you guys like want to survey across those for -- you ask why are they joining Landstar? Where they're coming from? Some of those reasons. I'm just trying to get a feel for if like the ELD mandate has changed how maybe owner operators view working with an asset-light carrier and potentially whether or not you guys are more attractive or less attractive in kind of the new post-mandate world run?

We don't really ask -- we don't really ask them a survey on where they came from or why they're here. It's typically a multitude of reasons. And oftentimes, reasons that we'll ask them on an individual basis. As they come onboard, they are assigned an adviser that helps them navigate the model, work with agents, find an agent relationships and understand the system. But the reasons they are coming here and where they're coming from is extremely varied. So we really don't have any concrete information there. Other than to say, from where they are to Landstar, they think it's a good move and a move in the right direction. And it's not for everybody, but for those that find the model attractive and are willing to make some decisions on their own. It's proven to be a good move. And I think where we've tried to improve is, putting good information in their hands more timely to make the right kind of decisions to make them successful. And as we continue to do that, I think, that's where you've seen the improvement in our retention.

Our next question or comment comes from Matt Young from Morningstar.

So we've all been hearing a lot about increased automation efforts across the brokerage industry in general. You guys have also been talking about investing in IT tools, mobile apps for -- and as such for your agents. Can you talk about where your agents would likely see the most productivity benefit over time? Wondering if perhaps there's more automation in terms of source of capacity with BCOs, the broker carriers, would it be related to pricing. Just trying to get a sense of where the biggest opportunities are in the years ahead.

Yes. How about all those? Yes, no. Seriously, I mean, with all visibility tools of the agents, they don't have to call trucks anymore and find out where they are. Processing freight bill is as simple as you think that is. It's not as simple it is, but you can -- where the TMS should improve our processing of getting information or invoices out to the customers. Our pricing tools, we have more data and everybody knows, Big Data, right. There is more Big Data available today than it was 5 years ago. So your pricing tools get a little more -- you got a little more confidence in the pricing tools that you have today than you had 5 or 6 years ago with that data. So everything is moving pretty rapidly in making our agent base more efficient. And on the capacity side, being able to push quality data out to the BCOs on a phone is a lot more efficient this year than it was 5 years ago, when you're using tablets and laptops. So things are moving fast. But if you look at the last, our model, our role is to support small business and our owners who know it has been and one of the keys to that role was to be able to share information amongst not only the shipper, but among the agent family and the carriers. So we didn't have to go far to enhance the tools we already had. It's just -- we're moving them off of laptops and tablets on the phones and making mobile apps and mobile friendly. But yes, I think that's -- these apps that are rolling out, in my opinion, you can build an app in about 6 months, but you can't build the scale and the support that Landstar has. We have the apps already. And we already have -- we have despite at any point in time, 7,000 or 8,000 loads available on our mobile app. So that's kind of where we are. I don't think that technology is a differentiator unless you let it become one, and we're just going to make sure we're right on top of all that.

At this time, I show no further questions. I'd like to turn the call back over to you, sir, for closing remarks.

All right, Caroline. Thank you, and I look forward to speaking with you again on our 2018 second quarter earnings conference call currently scheduled for July 26. Have a good day.

Thank you for joining the conference call today. Have a good morning. Please disconnect your lines at this time.