Scholastic Corp (SCHL) 2004 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Scholastic first-quarter conference call.

It is now my pleasure to turn the floor over to your host, Mr. Ray Marchuk.

Sir, the floor is yours.

Thank you.

Welcome to Scholastic's first-quarter earnings presentation for shareholders and analysts.

I'm Ray Marchuk, Senior Vice President of Finance and Investor Relations.

To view,

our slides you can go to our Website, Scholastic.com, and click on Investor Relations and follow the instructions.

Before I begin I would like to note that this presentation contains certain forward-looking statements which are subject to various risks and uncertainties, including the conditions of the children's book and educational materials markets and the acceptance of the Company's products in those markets, and other risks and factors identified from time to time in the company's filings with the Securities and Exchange Commission.

Actual results could differ materially from those currently anticipated.

Now I'd like to introduce Dick Robinson, the Chairman, CEO and President of Scholastic to begin our presentation.

Thanks, Ray, and welcome, everybody, to our first quarter earnings call.

In a moment we'll review the highlights from the first-quarter and the current outlook for the fiscal year.

I'm joined by CFO, Kevin McEnery, who will provide more detail about the quarter's financial results and the status are cost and CAPEX reduction program.

Barbara Marcus, President of Children's Book Publishing and Distribution, will speak about Harry Potter and other trade publishing as well as progress in clubs, fairs and continuities to date.

Marjorie Mayor, President of Scholastic Education, will then discuss the good first-quarter performance based on our reading solutions strategy, and after a wrap-up we'll all be available for questions.

As announced in yesterday's press release, our first quarter was strong with revenues increasing by $169 million over the prior year.

The first quarter of our fiscal year is typically our smallest revenue period when most schools are not in session and we report a seasonal loss.

Due to our sales increase in the year's first-quarter, our net after-tax loss improved by $20 million or 51 cents per share over the prior year results, which were in line with our plan.

There are three highlights from the first quarter.

First, we recorded the sale of 11 million copies of Harry Potter and The Order of the Phoenix, this unprecedented sale for book publishing met our estimates for the full year and drove a more than 250 percent increase in our trade publishing revenue.

It was also the key driver of improved results for the children's book segment and for the company.

Second, educational publishing showed an impressive 20 percent increase in revenue as well as increased margins.

These improvements occurred in a tough environment for educational spending and in spite of an expected decline in scholastic literacy place revenues.

Third, capital expenditures were lower by $26 million as compared to that of the prior year resulting in improved cash flow for the quarter.

In addition, last quarter we acquired a direct to home children's toy catalog from Amazon for 4.75 million.

This company, Back to Basics Toys, gives us a presence in the catalog field complementing and strengthening our direct to home continuities.

Another theme for the quarter was the strong impact of books on our society and on Scholastic's business.

Readers bought and read Harry Potter Five in record numbers, but we sold even more books to schools and libraries to support the number one goal for our nation's schools, that is to improve reading.

This was a good summer for books and the power of reading, and a good quarter for Scholastic's business.

In the second-quarter, which began on September 1, we expect to see the benefit of the changes we made in the clubs and fairs for the school year.

As you're aware, the second quarter is the largest revenue quarter for these businesses.

Early results for school book club orders are good, consistent with our announced target of mid to upper single digit revenue growth, and fair bookings are also on plan.

Trade sales of Harry Potter will be concentrated almost entirely in our first-quarter this year.

This timing contrasts with last year when we benefited in our second-quarter from $25 million in Harry Potter sales spurred by the release of the Harry Potter and the Chamber of Secrets movie.

For this reason, we continue to expect significantly lower trade revenues in this year's second-quarter, though we are expecting good sales from the new Captain Underpants title and the relaunch of Goosebumps.

In general, our other factors in last year's second-quarter, such as strong sales from the release of READ 180 Stage C and high margin syndication revenues from The Magic School Bus TV series also make a difficult comparison for this year's second-quarter.

So we're on track with the fiscal 2004 plan we described in July.

We met our goals for the first quarter and our outlook for the rest of the year is positive, we expect significant benefit from our savings program in our second-quarter and through the rest of the year and we remain strongly committed to our target low for the year.

In that context we are maintaining the earnings guidance we gave in July of $1.95 to $2.35 per share for the year, but we are aware that we face a tough prior year comparison in the second-quarter.

Now here's Kevin McEnery, CFO, for more detail on the quarter.

Good morning.

The slide you now see on your screen provides an expanded breakout of our income statement.

The cost of sales increased to 59 percent of revenue from 52 percent last year.

This increase of approximately $120 million for Harry Potter 5.

SG&A increased 10 million or by about 6 percent, but declined as a percentage of revenue from 58 percent to 40 percent as compared to that of last year.

The dollar increase was primarily due to $9 million of additional promotional spending and trade processing costs associated with Harry Potter, as well as $3 million in increased employee benefits costs, mainly in healthcare.

These increases were partially offset by our cost savings program.

Bad debt as a percentage of revenue dropped to 4.4 percent from 6 percent last year due to the increase in Harry Potter sales which themselves have very little bad debt.

In dollars bet debt increased by slightly more than $2 million primarily due to product mix and a slightly lower pay rate in continuities.

Depreciation and amortization increased by $2.4 million in the quarter reflecting recent investments we made in facilities and IT.

We recorded $2 million in severance costs in the quarter for staff reductions that were announced in May but implemented during the first quarter of this fiscal year.

And consistent with our plan for the year, interest expense increased in the quarter buying about $1.3 million.

This relates to our decision to issue $175 million of 5 percent notes in April prior to the repayment of the $125 million of the 7 percent notes that mature in this coming December.

Overall operating results for the quarter improved 52 percent on a 55 percent increase in revenue and our net after-tax loss improved by 44 percent.

You should note that the combination of severance and the higher interest costs were equivalent to about 5 cents per share after-tax.

The next slide provides a segment by segment breakout of operating results.

Book publishing and distribution, revenues more than doubled to $288 million reflecting the increase in Harry Potter sales.

Non Harry Potter trade revenues were down by about $9 million due to higher reserves taken in response to a continued unsettled bookselling environment and due to a decline in revenue from Klutz, in part due to a timing of their new product releases.

Continuity programs had revenues of $65 million declining modestly from the previous year.

Some children's book publishing and distribution improved by $26 million and was on plan.

This was due to the increased Harry Potter revenues partly offset by other factors including the expected seasonal losses in clubs and fairs and modestly lower continuities contribution.

In the educational publishing segment revenues were up by 20 percent to $106 million while operating income improved by 42 percent to $15 million.

This improvement occurred in spite of an approximately $7 million decline in the high margin literacy place sales.

In international segment, revenues increased slightly principally due to favorable foreign exchange effects as well as increased exports, which were partially offset by modest revenue declines in part due to a discontinuation of some product lines.

Operating contribution declined by about $600,000.

In media segment, revenues declined modestly primarily reflecting lower software revenue while operating loss improved to $5.6 million as compared to $6.5 million last year.

Corporate overhead expenses, excluding last year's litigation costs, were basically flat last quarter year-over-year.

The summer is always a period of net cash use for Scholastic as we incur expenses in preparation for the startup of school and have limited cash receipts from our clubs and fairs.

This year's first quarter free cash flow, defined as net cash provided by operating activities less spending on capital expenditures, prepublication and production costs and royalty advances, improved over that of last year.

Net cash used by operations last year was $80 million, slightly higher than that of the prior year with the improvement in net income being more than offset in the quarter by the related increases in Accounts Receivable from the sales of Harry Potter and classroom libraries.

Final payments in these receivables are expected in the second-quarter.

This year's first quarter free cash flow also benefited from a $26 million decrease in capital expenditures relative to prior year when we acquired a new warehouse and fulfillment center in Maumelle, Arkansas for approximately $15 million.

For the year, this puts us on track for a planned decrease in CAPEX.

Prepublication and production expenditures increased by $7 million in the first quarter, largely reflecting the production cost of Clifford Puppy Days and the higher software and education prepublication costs.

Royalty advances were slightly lower.

Overall these factors resulted in a negative free cash flow of $111 million last quarter, a net $16 million improvement over that of last year.

This improvement keeps us on plan to meet our target of a $40 to $50 million improvement in free cash flow for this year.

As we discussed in July, generating free cash flow is a major focus for Scholastic and we are committed to continued improvements.

The company remains on track to meet its goal of $40 million in cost savings this year.

This includes $15 million from a reduction in force that we announced in May.

We expect to see more significant benefits of these cost savings during the second-quarter as reduced product costs are realized in our clubs and our book fair operations.

We also began to formulate our cost savings plan for fiscal 2005 and continue to look for further opportunities to improve our margins in our core businesses.

We will be providing details to you about this later on in the year.

Now here's Barbara Marcus who will speak about children's book publishing and distribution.

Thanks, Kevin.

This is really an extraordinary quarter.

As Dick told you, we sold 11 million copies of Harry Potter and The Order of the Phoenix even more quickly than we expected, and achieved the vast majority of our plan for the whole year.

As for the second-quarter, we believe that Harry Potter shipments made last quarter will be able to meet much of the holiday demand and that inventories of earlier titles of Harry Potter held by booksellers at the beginning of the first quarter are now mostly sold down.

Despite the sluggish bookselling market, we have some interest new titles in the second quarter.

We printed nearly one million copies of the first of two new titles in the Captain Underpants series by Dave Pilkey at the end of the first quarter, and the first title, Captain Underpants and the Big Bad Battle of the Bionic Booger Boys, Part One, the Night of the Nasty Nostril Nuggets, is already near the top of several bestseller lists.

The second title to be released at the end of this month is expected to perform well too, with a similar million copy printing.

We've also relaunched our Goosebumps series to a new generation of readers in time for this year's Halloween and early results indicate strong sell through.

Our newest license release of Legos Bionicle is also performing beyond expectations.

As we described in July, a top priority for us is growing revenue in our school book clubs.

Based on last year's results and customer feedback we've made a number of changes in our clubs.

One, we boosted the appeal to new and returning teacher sponsors with improved and simplified teacher benefits.

Two, we've made it easier for parents and kids to choose and buy books with simpler product selection and better promotion.

Three, we've refined our mailing plan and enhanced promotion of our online ordering, also known as COOL, where we expect over 25 percent of book club orders this year.

Four, we've combined Troll Book Club, including its customer list, into a combined Troll Carnival Club.

This has gone extremely well and we're excited about the prospect to reach the value segment of the market.

Our early results are strong and consistent with our announced mid to upper single digit growth target.

In school book fairs, our primary focus is implementing targeted changes to grow revenue per fair.

For example, one, we've taken special steps for our advertised titles to ensure that they are available in sufficient quantities.

Two, our sales reps are focused on higher revenue schools for both first and second fair bookings with a focus on driving revenue per fair.

Three, we are helping fair sponsors to recruit and train volunteers who are critical in helping children and their parents select and buy books and in merchandising the Fairs.

Although few books fairs are held this early in the year, fair bookings are on plan.

We'll have more specific data on revenue per fair and the impact of these changes at the end of the second-quarter.

As Dick mentioned, last quarter we acquired Back to Basic Toys from Amazon.com.

Back to Basic Toys is a direct to home catalog retailer specializing in high-quality educational toys for children with sales of over 15 million in 2002.

This was a unique opportunity to expand our direct to home business into catalogs and complement our strength in continuity programs through which we currently reach more than 5 million parents.

This acquisition is expected to be earnings neutral in the near-term and modestly accretive thereafter.

In continuities, we are still focused on our expanding our means of customer acquisition beyond the phone to reduce the effect of the do not call legislation.

This includes shifting our marketing and customer acquisition spending into other channels, especially direct mail.

We're also using new methods of enrollment including third party promotions, strategic partners of selling our products on calls, and an exclusive print promotion with a prominent seller of baby products.

Overall, we believe our direct to home business is on plan for its mid single digit revenue growth target as announced in July.

Now, here is Margery Mayer who will speak about Scholastic Education.

Last quarter was a solid quarter for Scholastic Education with revenues and margins up.

This was in spite of a continued tough funding environment for U.S. schools overall.

Growth in this segment was a result of strong sales of our supplemental and curriculum materials, which were up $19 million over last year.

We've previously spoken about our educational publishing strategy which is focused on meeting educators' number one need today, raising students' reading scores.

We believe trends in U.S. education including the no child left behind act signed into law last year will continue to propel this need.

Our results in the first quarter this year, our largest, are notable because they showed successes across a number of reading related products.

In fact, we believe they illustrate how we can use our core strengths in reading intervention, education and children's books to position ourselves as a provider of reading solutions.

Our reading solutions strategy showed strength in three major product lines last quarter.

First, sales of READ 180, our scientifically based reading intervention program, were up 40 percent over the prior year indicating the continued strength of this unique reading solution.

Available for grades 4 through 12, READ 180 should continue to grow from sales to both new and existing school customers.

We also continue to refine, update and extend the product.

Second, sales of classroom libraries increased significantly last quarter, largely helped by a large order from New York City and Los Angeles.

Classroom libraries illustrate how we can leverage our company's strength to meet a pressing need.

In this case, school districts' need for books in the classroom to augment their basal reading programs and encourage kids to apply and practice their reading skills once they have developed basic literacy.

We believe that the ability to select booklists and source and distribute diverse collections of high-quality books combined with our ability to provide value-added services are key to winning this business.

For example, in New York City we provided libraries to more than 15,000 classrooms containing over 1500 titles selected from our own and other publishers' list.

The ability to deliver high value to the market is also important.

Our scale as the world's largest children's book publisher and distributor gives us this advantage.

We see further growth in classroom libraries.

We are continuing to pursue opportunities to provide custom libraries as well as branded libraries designed in partnership with key education leaders, such as [Phyllis Hunter], former head of reading for the Houston school district.

The third product contributing to first-quarter strength was our new early childhood program featuring Clifford.

This program lays the foundations for literacy, math and social development, and meets the pre-kindergarten requirements of No Child Left Behind.

We were especially pleased by our success in the Texas adoption where we led with a 40 percent market share.

We see a good opportunity in this market segment, both in adoption and non-adoption states, and in private preschools.

Here again, our strategy is to leverage our company's strength and education and publishing to deliver a compelling effective product.

With that, I will turn things over to Dick Robinson.

Thank you, Margery.

Here's what we've covered today so far.

One, earnings significantly improved last quarter principally as a result of Harry Potter and Reading Solution sales.

Two, cash flow improved from reduced capital expenditure and further impact of improved operating results will be seen in our second-quarter when Harry Potter and Classroom Library receivables are collected.

Third, we've made targeted changes in our school book clubs and book fair operations and expect to see positive results from these changes this quarter.

Our plan for trade publishing anticipates only modest additional sales of Harry Potter combined with strong sales of Captain Underpants, Goosebumps, Legos Bionicle, among other titles.

Although this quarter will have a difficult comparison with last year's second-quarter in trade, this was anticipated in our plan.

For the fiscal year, we're on plan with solid results last quarter and our cost and CAPEX reduction programs are in place.

Five, we're maintaining our fiscal 2004 target earnings range of $1.95 to $2.35 per share.

And sixth and final, as we look to 2005 we plan to strengthen profits in our core business, continue to reduce costs, and improve margins throughout the company as well as focusing on free cash flow.

We'll provide more details later in a year.

With that, today's presentation is ended and we'll ask the operator to open up the lines for questions.

Thank you very much.

Peter Appert of Goldman Sachs.

Good morning.

Actually I'd like to ask two if I could.

First, for Margery, number one I guess, for the READ 180, are there new product introductions this year in terms of the expanded grades that are driving the growth?

And then related to that, is most of the incremental funding to drive this growth coming from some of these new federal programs and Title I?

And I'll just throw out the second question, and that perhaps is for Kevin, and that is -- understanding that the margins on Harry Potter incremental sales are fairly high, does it suggest that the loss for the core children's publishing business was perhaps substantially higher this year than a year ago?

Thanks.

Let me start with your question.

I think you asked if new product releases were helping to drive the READ 180 sales.

And we didn't really release any new product this summer, but what we've seen is acceleration in demand for READ 180, especially at middle school and high school.

I can't emphasize enough how much demand there is in high school.

I know that you've read the papers; there's a lot of attention being placed on high school retention and high school exit exams, and we're very excited to see how many high schools are turning to us for help with READ 180.

In terms of where the funding is coming from, READ 180 is being purchased to some degree or a large degree with Title I funds.

It's also being bought with other funds, special ed, English language learning funds.

This is such an important requirement for schools to raise reading scores that they're finding the money and that doesn't seem to be our biggest challenge.

Is there a continuing revenue component for READ 180 or is it all up front?

The way that READ 180's continuing revenue component has been to date has been the districts have started with -- the typical pattern is districts start with a relatively small installation and then add and add and add.

Most of our customers have come back for more and more and, in fact, we're seeing some schools that are turning into -- just single buildings that are turning into important revenue sources.

This summer we're going to be adding a large upsell package for our READ 180 installed base and we're going to be exploring other ways to exploit more revenue from the base.

Great, thanks.

Peter, overall we were very satisfied with the margin that we received on the Harry Potter sales.

To put it in perspective, this was an extraordinarily complex process and incurred costs associated with the production, the royalties, the promotion and delivery of an 870 page book.

These were significant costs and were appropriate and on plan and we thought everything went very well.

The margin on this book was higher than 20 percent which is certainly in excess of our overall margin in trade, and I think it's basically consistent with many of the analyst's targets.

So I think when you look at the segment breakout, I think you need to include the fact that within the segment we did have higher costs associated with some bad pay and continuities as well as severance and healthcare.

But overall, the segment was on plan and the Harry Potter profit also absorbed a little bit of the incremental costs associated with the startup of the book clubs and the book fairs.

Okay, thank you.

Lauren Fine of Merrill Lynch.

A couple of questions, and I apologize, I missed the beginning of the call, so if you said this I'm sorry.

Barbara made a comment about there being enough Harry Potter at the stores right now to cover the holiday season.

I'm wondering if you could estimate, of the 11 million print run, what is still in the channel?

And then I'm wondering if you could share with us what kind of reserves you have for the sales?

And then I have a follow-up question that I'll ask after you've answered those.

We have sold the great majority of the books that are in the stores.

We have some quantity out there.

It is not a large amount, and we feel comfortable that our customers have really projected with us for the August, September, October, November, December sales.

We are still selling a goodly amount.

We're still ranking at the top of the bestseller list.

So we are comfortable with the amount of Harry that is out in our accounts.

Lauren, as Barbara said, the sell through on this book was extraordinary, and as we closed the quarter we took a look at what we believe to be the amount yet residing in the chain, and we feel we're appropriately reserved for that based on what still is out in the retail.

Maybe another way of asking is, is the reserve for what's remaining higher or lower than what you would have on trade in general?

It's about the same, Lauren.

As Barbara said, we think that this has sold through very well and that the absolute dollar amount of inventory out there has been substantially sold through.

And then just, if I could, as a follow-up -- on education you had given I think guidance on revenues of 3 to 7 percent, which it looks like clearly even with modest growth for the rest of year you would still come in much higher than that.

I'm wondering if you want to update that guidance?

And then secondly, just going back to Peter's question on the cost side, was there a higher step up in book club costs in the quarter, especially as it related to trying to attract teachers?

Lauren, as Dick said, we're not really updating our guidance for earnings or revenue at this point in time.

We really want to see the results of the second-quarter, particularly as more of our core operations kick in.

But in terms of our costs, as Barbara did mention, we were focused on the acquisition and attracting particularly new teachers, and there was some component of that that was incurred in the first quarter.

Okay, thank you very much.

Brandon Dobell of Credit Suisse First Boston.

A couple of quick ones.

Would it be fair to say that the impact from the acquisition would be maybe $1 million in the quarter?

Secondly, I wanted to get some more detail on the pre-pub costs in the quarter, what was the main reason against the increase?

That took place in the middle of August, and it was a substantially less dollars of incremental revenue associated with that.

Just for my purposes of clarification, so if the biggest delta on the CAPEX year-to-year was going to be -- or is in the first quarter.

So if we look back at Q2, Q3 and Q4 of last year, modeling CAPEX along those lines this year would be about right?

I think that the biggest delta clearly is in the first quarter.

We continue to be focused on cash flow and are very careful on our CAPEX, but with a $26 million reduction in CAPEX in the first quarter, that's going to be by far the largest component.

Okay, thanks.

William Bird of Smith Barney.

Just two questions.

First, what's the planned initial print run for Goosebumps?

And second, of the few fairs that have run, could you comment on revenue per fair trends?

It's really so early, Bill, there would be no point in commenting because there's just so little data available.

Barbara, can you talk about Goosebumps, please?

Sure.

We have a plan for the year, and our first printing was between 75,000 to 100,000 of each title.

Then we'll start releasing each backlist title throughout the year.

Does that answer your question?

Yes, that's helpful.

Thank you.

Steven Barlow of Prudential.

Back to Harry Potter here for a minute, 170 so million of sales, 175 was the top end of your guidance.

Is there a way to update that?

Obviously with a 20 percent margin the more you sell the happier we all are.

It didn't sound like there was much royalty payments going out at this point?

Thinking about the cash-flow statement for the second-quarter, how does that work, Kevin, on that side of things?

First, Steve, as we indicated in the call, we feel that the great lion's share of Harry Potter side sales have already taken place and we're really not looking for very much increased revenue there.

So we've already reached our goal for the year.

There will be some more but not much.

Kevin?

In terms of operating cash flow in the second quarter, we'll certainly have some ongoing spending and expenditures associated with the issuance of bills, royalty payments and the like, and they will be offset, more than offset frankly, by the actual cash receipts that we are receiving from the trade and that will be received in the second-quarter.

So that was factored in to my comment before that we should see continued improvement in free cash flow in the second-quarter.

And lastly, in terms of the second-quarter, you're certainly having a few caveats and what you were talking about, is there a way to help us out in terms of how much EPS should be down in the second-quarter from a year ago second-quarter?

We're really not in a position here to give specific EPS guidance on a quarter to quarter basis.

I think that we've spoken about this in July.

I think that some of the models out there have reflected that and we're just trying to highlight some of the challenges that we foresee as we go into the second-quarter.

But to actually enumerate anything on an EPS basis, I'd be a little reluctant to do that.

Okay, thanks.

Mark Hughes of SunTrust.

Could you talk about the trends in the non Harry Potter trade business?

To what extent do you think Harry Potter maybe sucked some of the oxygen out of the other trade businesses?

As Harry Potter has started to slow down have you seen the other trade pick up perhaps?

I always think we have to look at Harry Potter as one of these extraordinary phenomena that really sell books to all parties, children, parents, grandparents.

So I think that that really drove the sales of all retail this summer.

Then you get to the particular segment, it has been sluggish as the entire book business has been sluggish at our various retailers.

But we feel that our trade publishing program, as we move through the year, has got some great highlights.

We talked about some of them in the call, but even to go beyond that, last year we had a wonderful bestseller by a woman named Cornelia Funke of a title called The Seafloor.

This year we're releasing her second title called the Thief Lord.

We have some strong license properties that we'll be releasing through the year, especially we're very excited about being the license publisher for Shrek II which will be coming in the spring.

So what I will say to you is the marketplace is still a little unpredictable and sluggish but we are going to do our utmost to keep publishing the best kind of books that kids like.

And we are doing that as aggressively as we can.

Right, and then one more question.

On the educational side, the strength this quarter -- I think the question before had alluded to how much you think that will carryover into subsequent quarters.

Was it a couple of good orders or do you think it was more widespread and enduring, the strength you saw this quarter?

We certainly saw the classroom library order; several of them were very strong.

But we believe there's a trend in large cities in particular to acquiring more classroom libraries and we believe that we will see some more of that during the year.

And the basic trends in our business are strong.

However, we are not changing our estimate for the year at this time, as we indicated.

I think we would have to say that the trends in this business are positive.

And then one final question, in talking about the Harry Potter sales in the second-quarter suggesting you've got a little bit more coming, you're not referring to last year's second are you, saying sales will be a little bit higher than last year?

No, we had 25 million of Harry Potter sales in the second-quarter last year, we don't believe they'll be anything like that this year.

Because this book has really had such a phenomenal sale and has been such a fabulous success that we're very, very proud of what we've done with this.

The staff has done a great job; the readers have done a great job.

And so have the booksellers.

But most of those sales are done.

We hope that there will be a little bit of pickup for Christmas and holidays, and we're initiating an advertising campaign to help support Harry Potter sales in the fourth-quarter.

But looking at this, most of the sales have already been made.

It's a phenomenal success, but it would be a little bit foolhardy to expect it to continue at the rate that it's been going.

Exactly.

Any thoughts there, any early thoughts?

Jo has made it very clear that she is not going to be rushed and when she's done she will tell us, and that's exactly in the same place as we are.

She always says she's writing, but that's it.

Okay, great.

Thank you very much.

Thank you for listening in to our first quarter call and we'll look forward to updating you on our second-quarter, which is a very important one.

So thanks again.

Bye-bye.

Thank you.

This does conclude today's teleconference.

You may disconnect your lines at this time and have a wonderful day.