Simply Good Foods Co (SMPL) 2018 Q3 法說會逐字稿

Greetings, and welcome to The Simply Good Foods Company Third Quarter 2018 Earnings Call.

(Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Mr. Mark Pogharian, Vice President of Investor Relations for Simply Good Foods.

Thank you.

You may begin.

Thank you, Melissa.

Good morning, I am pleased to welcome you to The Simply Good Foods Company Earnings Call for the fiscal third quarter ended May 26, 2018.

Joe Scalzo President and CEO and Todd Cunfer, CFO will provide you with an overview of the results, which will then be followed by a Q&A session for the questions at sell-side analysts may have.

The company issued an earnings release this morning at approximately 7 a.m.

Eastern time.

A copy of the release and the accompanying presentation are available under the investor section of the company's website at www.thesimplygoodfoodscompany.com.

This call is being webcast live on the website, and an archive of today's remarks will also be available for 30 days.

During the course of today's call, management will make forward-looking statements that are subject to various risks and uncertainties that may cause actual results to differ materially.

The company undertakes no obligation to update these statements based on subsequent events.

A detailed listing of such risks and uncertainties can be found in today's press release in the company's SEC filings.

In addition, management will make references to adjusted EBITDA, a non-GAAP financial measure that it believes provides investors with the useful information with, which to evaluate the company's operating performance.

Today's earnings release includes a reconciliation of the most directly comparable GAAP financial measure to non-GAAP measures.

And finally, the company has included in today's earnings release and presentation unaudited financial information for the 13 weeks and 39 weeks ended May 22, 2018, and unaudited pro forma financial information for the 13 weeks and 39 weeks ended May 27, 2017.

The pro forma adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect on a pro forma basis the impact of its business combination transactions on the historical information of our predecessor and successor entities as applicable.

The pro forma financial statements provide results as if the business combination transaction has been completed as of the beginning of fiscal 2017.

All financial measures related to fiscal 2017 discussed today will be on a pro forma basis.

With that, it is now my pleasure to turn the call over to Joe Scalzo, President and Chief Executive Officer.

Thank you, Mark.

Good morning, and thank you, everyone, for joining us.

Today, I'll recap our third quarter highlights, provide an update on our business, then Todd will discuss the summary of our third quarter and our year-to-date financial results.

After that, we'll open the call to your questions.

But before we get into it, on the behalf of myself and the Board of Directors, I want to say thank you to all of our employees and our business partners whose efforts and hard work have resulted in a strong marketplace financial results that we'll be discussing today.

Our third quarter continued the strong business momentum we experienced in the first half of the year.

For the third quarter, organic net sales grew 11.1% year-over-year with adjusted EBITDA up 21.4%.

Our topline growth continues to underscore the strength of our brand and the powerful nutritious snacking macro tailwinds of convenience, meal replacement and low carb, low sugar, protein rich products.

[Volume] was the biggest contributor to growth in Q3 about 6.5 percentage points.

Additionally, lower direct trade was a 4.6 percentage point contributor to sales growth.

The increase in adjusted EBITDA is a direct result of the sales growth and favorable trade.

These gains were partially offset by a slightly higher distribution cost and the incremental expenses in the business that we mentioned earlier in the year versus public company costs, marketing investments and investments to enhance organizational capabilities and key functions, including preparation for future compliance requirements.

Given the investments we've made across the business combined with on-air advertising and in-store programming, we're seeing solid sales growth across all channels.

And our e-commerce business continues to do well, up about 70% year-to-date.

We anticipate there's a percent of our total sales, e-commerce will increase at least 1 point in the fiscal year to 4% of our total sales.

For the year-to-date, 39-week period ended May 27, 2018, measured channel U.S. POS growth per IRI was up 6.9%.

Growth is driven by our strategic marketing initiatives, addressing low carb seeking lifestyle consumers, an opportunity is 4x greater than our original programmatic weight loss target.

Our measured channel POS growth in Q3 was strong, up 9.8%, this excludes our e-commerce business, which continues to be robust.

The initial first wave of consumer response to Rob Lowe in [his] sugars' advertising is having a positive impact on our growth.

Over the remainder of the year, we expect our POS strength to continue.

The most encouraging part of our strong retail performance is that it's coming entirely from base velocity growth, partially offset by slight volume declines in distribution as well as declines in Feature & Display activity.

We believe our strong base velocities are driven by the strategic initiatives we outlined earlier in this year, specifically our new marketing campaign is resonating with and bringing consumers to our franchise.

Our clean label initiative delivers on consumer preferences for fewer recognizable ingredients.

The packaging refreshes improved shelf presence and aisle shop ability.

And several of our recent new product introductions are among some of our highest velocity items already.

Our strong results give us the financial flexibility to invest in the business.

As we discussed last quarter, in the second half of fiscal 2018, we're making incremental strategic investments in marketing, supporting both our brick-and-mortar and e-commerce businesses as well as in brand building initiatives that should drive further topline growth and enable us to carry our momentum into the next year.

Additionally, we're enhancing our organizational capabilities and key functions including preparation for future compliance requirements.

As we entered the fourth quarter, we kicked off a strategic sourcing initiative that we believe will result in significant supply-chain improvements that will enable us to maintain our strong gross margins.

As such, we have engaged with an industry specialist to assist us in the implementation.

The program will be focused on procurement, co-manufacture supply processes and logistics.

We're encouraged to make an implementation cost associated with this program in the fourth quarter as well as in the first half of the next fiscal year.

We anticipated achieving savings for the program in the second half of next year and with this overview I'd like now to turn the call over to Todd Cunfer who'll provide you with some additional financial details.

Todd?

Thank you, Joe, and good morning, everyone.

Let me start with 2 points as it relates to the numbers which will be on the slides to follow.

First for comparative purposes, we will review unaudited financial statements for the quarter and year-to-date ended May 26, 2018, and pro forma financial statements for the quarter and year-to-date ended May 27, 2017, which presents our results as if the business culmination had occurred as of August 28, 2016, including amortization expense based on the fair value of assets after the purchase and interest expense based on the new capital structure.

We believe this discussion provides helpful information on the performance of the business during this period and all financial measures discussed today will be on a pro forma combined basis.

Second, we also evaluate our performance on an adjusted EBITDA basis based on our asset-light strong cash flow model.

We have included a detailed reconciliation from GAAP net income to adjusted EBITDA in today's press release.

We believe this measure is a key indicator of the true underlying performance of the business.

The third quarter results are as follows: Net sales were up 11.1% to $107.2 million, and adjusted EBITDA increased 21.4% to $17.9 million.

The net sales increase was driven by organic core volume growth of 6.5 percentage points, direct trade was at 4.6 percentage point benefit due to a lower promotional activity versus the year-ago period as it focused on higher ROI program.

Gross profit increased 17.7% to $51.3 million with gross margin up 270 basis points to 47.8%, driven primarily by lower direct trading status.

The increase in gross profit was partially offset by other expenses including slightly higher distribution expense, a 13.4% increase in selling and marketing expense, which includes a portion of the incremental investment we discussed last quarter, and a 14.7% increase in G&A to the previously discussed public company cost and accelerated capability expenses.

Due to the Tax Reform Act, our effective tax rate in the third quarter was 28.5% versus an assumed pro forma rate to about 40% in a year-ago period.

We continue to anticipate that the full year tax rate will be around 28%.

As a result, net income increased 31.9% to $7.1 million.

Year-to-date results are as follows: Net sales were up 8.2% to $323.2 million and adjusted EBITDA increased 9.7% to $60.5 million.

Year-to-date net sales increase was driven by organic core volume growth of 6.3 percentage points, additionally the acquisition of SimplyProtein was a 1.3 percentage point benefit and favorable direct trade is 0.6 percentage point contribution to growth.

Year-to-date, gross profit increased 11.1% to $154.3 million with gross margin up 120 basis points to 47.7% due to lower direct trade and favorable product mix.

This was partially offset by other expenses including higher distribution costs, $1.9 million of previously discussed transaction costs, a 7.6% increase in selling and marketing expense and a 12.2% increase in G&A as a result of Wellness Foods, public company cost and accelerated capability expenses.

Additionally, recall our second quarter disclosure of a $29 million gain in deferred tax liability remeasurement and the $4.7 million gain on the TRA.

As a result, net income increased $37.8 million to $58.7 million.

The company continues to benefit from very attractive cash flow characteristics underpinned by our asset-light model, which enabled strong cash flow generation.

Capital expenditures for the first 9 months of 2018 were approximately $1.3 million, driven primarily by investment in our new website and digital media application.

We estimate full year CapEx to be slightly less than $2 million.

Before I move on to the balance sheet, please note that we lack the acquisition of Wellness Foods, SimplyProtein brand in the second quarter.

However, the fourth quarter of Fiscal 2017 includes a catch up for 4 months of Wellness Foods net sales.

Additionally, we do not expect that the third quarter favorable direct trade will repeat in the fourth quarter of 2018.

Moving on to the balance sheet and cash flows.

The company's solid balance sheet and cash flow provides us with financial flexibility to support future growth.

As of May 26, 2018, the company had cash of $88.4 million and a $199 million remaining on the outstanding term loan resulting in a pro forma net-debt to adjusted EBITDA ratio of about 1.4x.

The company also has a $75 million revolving line of credit available with no borrowings outstanding as of May 26, 2018.

Lastly in late May, Standard & Poor's and Moody's reaffirmed the company's debt rate.

That concludes my financial overview.

I would like to now turn it back to Joe for a few brief closing remarks.

Thank you, Todd.

In summary, we remain confident in the growth opportunities for our business moving forward and confident in our ability to execute in the marketplace to deliver on our strategic initiatives.

The incremental investments that we made in the business in the third quarter delivered strong sales and POS growth.

POS in June remained strong, we expect the full year 2018 net sales growth rate to be similar to the year-to-date growth rate.

Including the previously discussed investments in the business, we anticipate adjusted EBITDA growth will be slightly lower than net sales growth.

And lastly, we feel very good about our long-term target of generating annual net sales growth of 4% to 6% and adjusted EBITDA growth greater than that.

We believe our algorithm is realistic, we believe it is achievable and it will result in value creation for our shareholders.

We appreciate everyone's interest in the company.

And with that, Todd and I are now available to take your questions.

(Operator Instructions) Our first question comes from the line of Jason English with Goldman Sachs.

I've got a couple.

First one on the trade spend, the ability to pull out trade spend stands increased to our contrast with the industry overall, which seems to be putting more and more money above the line.

Can you talk about the dynamics there?

What's driving it?

And is there anything transitory, timing related to this benefit that we should be cognizant of, as we think about the forward?

Yes, Jason it's Todd.

So it was really more due to the amount of activity we had last year, that our POS below a little bit in Q2 and the beginning of Q3, we decided to spend some more money in the marketplace, we got some returns for it, not as much as we liked, so as we lacked that coming into this year, we decided with the strength of the core business not to repeat that activity.

So we were really doing a great job managing our trade but that did decline -- was majority just the amount that we put in last year.

Okay.

That's helpful.

And then the new initiative, the strategic sourcing initiative.

Was the Callisto listed have anything to do with the fact that so much of your supply is coming out of Canada?

Is there a risk to contemplate there?

And then, sorry this is a little bit long winded, building on that, I think it was you, Joe, who mentioned that the initiative is designed to sustain strong gross margins, not expand gross margins, so again, I guess this raises the question of whether or not this is in response to some headwinds that you see on the come?

Yes, not -- actually not in response to headwinds and you know our algorithm we do have gross margin improvement of 10 to 20 basis points a year.

So this is just another arrow that we can use in our quiver to find deficiency in our business, how it will play out vis-a-vis inflation in the future, your guess is as good as mine.

We would say right now our basket of goods and services as we look into next year, yet little early for us to be providing a point of view, feels relatively benign.

I mean it's a very dynamic environment given what's going on with dueling tariffs.

But at this point, you know we don't anticipate any significant step up in inflation, at least that we can see from right now.

And in your guidance -- your implicit guidance for the fourth quarter on EBITDA suggests that EBITDA will be flat to may be down mid-singles depending on how you interpret the slightly below sales.

Is the bulk of that related to the implementation cost that you mentioned that some might may spill into next year?

Or do you plan on treating those implementation cost as onetime in nature?

No, they will -- they're embedded in the EBITDA calculation.

So there's really kind of 3 drivers to that implicit EBITDA Q4 that you mentioned.

So it is those implementation costs, it is a continued step up in our marketing investment.

And then just with the recent really over delivering POS and increase in our very strong third quarter, we need to take our set of comp off of this, so that's hitting in Q4 as well.

That's a high-quality problem.

Our next question comes from the line of Matthew Smith with Stifel.

We saw a gross margin benefited from a trade promotion efficiency.

Did strong volume growth also benefit the gross margin or the volume benefits limited by the copacking agreements?

So as you mentioned, the fact that we're outsourced, there's limited leverage from volume.

We do get a little bit of leverage and the fact that the more volume going through our co-mans, we tend to get the higher rebate and lower cost but not your typical in-house manufacturing where you're really leveraging those fixed assets.

Given the strong volume performance on a year-to-date basis and what you expect in the fourth quarter, could you see that benefit accelerate going forward?

Or is it too small to really matter?

It's not a major impact.

Our next question comes from the line of Brian Holland with Consumer Edge Research.

First question I guess, can you help us reconcile, I guess it implied something in the range of 8% topline growth, I understand some of the Canada offsets but that doesn't seem to be too material in the grand scheme of things.

And then scanner data out this morning for you guys, you're now growing at about 16% so obviously, tremendous performance there.

But just trying to understand may be the delta between what's implied by your Q4 topline guidance and what we're seeing in scanner, any other offsets we should just be mindful of at this point?

Yes, so as I mentioned in the call, we do have some headwinds with lapping 4 months of the Wellness Foods business but that's about a percent.

As we've been discussing, we've been having restructuring in our international business and that will be declining in Q4, so that is also an impact.

I just said we got off to a great June in the scanner data.

It's difficult sometimes at year-end because there's lots of things in the bubble between year-end and beginning of next year on promotional shipments and there is new shelf resets and so there's always some noise around there.

So there -- we feel good about the guidance that we've given and I'll leave it at that.

Okay.

Fair enough.

If I could just ask about -- I know that you talked about the top line growth being velocity driven, but I'm curious if we can kind of peel back a little bit to the extent that you guys are tracking metrics such as household penetration servings for buyers, things that you talked about before.

Can you provide any sense of maybe year-to-date how that's performing, maybe the balance of this growth?

Is it all new households coming in and trialing?

Is it a balance of households coming in and servings per household going up?

I know we have data that suggest it's a healthy mix of both, by -- I trust you guys are looking at that pretty closely, so just kind of curious what that underlying consumer behavior looks like?

Yes.

We have both as you mentioned, more buyers buying in the same year-to-date period in the prior year and buy rate is healthy.

So we're getting a combination of both of those things, which is encouraging for our business.

And just to remind folks right, the core to our strategy is, we were targeting programmatic weight loss consumers, they're about 8 million of those, we had about a 40 share.

We're now going after the 31 million lifestyle low-carb, low-sugar, protein-rich consumers.

And we're seeing as we've targeted them with Rob Lowe and the sugars, we're seeing a nice uptick in the consumer fundamentals of our business, which is leading to improving POS results.

And I guess last one from me, you've talked before -- I think you talked last quarter about sort of shifting towards the higher end of maybe a 9% to 10% marketing spend, as percentage of sales, you're a little bit above that 10%.

Given the more focused approach and the returns that you're seeing, should we continue to sort of think about may be the high end of that 9% to 10% range or a little -- may be even a little bit above that as you guys kind of continue to move on this momentum?

Yes, so as I mentioned earlier, we do have incremental marketing in the fourth quarter.

So yes, I think you can expect us to be at the high end for the year and we will continue -- our goal is to grow net sales with marketing at least in the future.

So I think you should in your models continue to think of it in that way.

Our next question comes from the line of Rob Dickerson with Deutsche Bank.

It's Matt on for Rob.

I have two quick ones.

Do you have any timeline updates or early successes you're able to share on SimplyProtein launch?

A little too early to talk about that Matt.

So we're just starting to sell it to customers.

So we -- when we get some POS results that we can talk about, give you some insight into, we'll be more happy to do that.

Okay.

Perfect.

And then just on the M&A environment, from a hypothetical acquisition targets perspective, why join Simply Good Foods over continuing to run a business independently or selling to a larger food company with more resources, history, portfolio diversity et cetera?

I'm not sure I understand your question, Matt, why would somebody sell to us versus the independent or sell to somebody bigger?

Right.

So if -- obviously, the M&A environment I'm sure is pretty competitive in your space given the growth that you guys are seeing, what is attractive about Simply Good Foods that as a potential parent company perspective relative to selling to a larger CPG company?

That's an interesting question.

I mean besides value, we'll put -- set value aside for a second, synergy and all those things.

I think the hardest thing to do in running a business is to maintain a balance of speed and smart strategic thinking and marketing ideas, right?

And I think that we've shown as a management team that we're pretty good at mining consumer ideas, turning them to initiatives in the marketplace and moving quickly to capture those.

Best example I can give you is identification of the self-directive low-carbers, the ability to get a celebrity like Rob Lowe, the concept around hidden sugars is a proxy for eating too many carbs and to execute that in the market place to relatively quick order to get good business results, see those results and then be willing to invest, lean in and invest forward.

So our company that's looking to be able to sell and drive growth, we've shown to be entrepreneurial and quick moving in our ability to capture opportunities in the marketplace and that's not a negative comment on larger company, it's a positive comment about our organization we've been able to do.

So I think that is attractive, especially if you talk to founders looking to want to sell their business, but continue to note that it's going to be in good hands and people are going to nurture it growing, we've shown the ability to do that.

(Operator Instructions) Our next question comes from the line of Bill Chappell with SunTrust Robinson Humphrey.

Just like on the sourcing initiatives, is there kind of a timeline of how quick that will pay back?

It's whenever you'll get the benefits in '19 but didn't know if it's a pretty quick payback or if this is a multiyear type project?

Yes.

I don't want to get into all specificity on the amount that we're spending and the amount that we'll save but as we mentioned Q4 this year, first half of next year is when the expense will be incurred, we will start to get savings from that in the second half.

We anticipate a pretty fast payback on our investment.

I would say the total, it will take us at least 24 months to get the full impact of all the different initiatives that we're going to be working on but we feel really good about the project.

We're not patient people.

I want to look easy with that.

The second -- in terms of I think you alluded to kind of shelf space resets in the fall, which I guess is more normal for your category.

I understand you have a high level of ACV and certainly a high share within your categories, but is it possible you get some meaningful gains in the fall and into next year with kind of where the scanner data is running, with the Rob Lowe kind of expansion?

Is it -- do you see new customers or new shelf space popping up?

Yes.

First I would say it's hard to predict going forward, right?

So that's playing out as we speak even to the fall, we haven't heard what the answers to those things are.

But I like the metrics that we're seeing right now, first and foremost our base velocity, so like items in the store are up in the 20% range.

That is normally a pretty good indicator around the productivity of the -- of your shelf and your ability to get incremental space on the shelf.

So I think I like the line-up of products that we've got, that we've offered to customers to put into the set, starting in the fall.

So I think the combination of those 2 things made us optimistic we could actually make some progress.

Frankly, the results that we're getting make us confident that even in flat distribution world that our business results are going to be strong.

Like what we believe is happening right now is more people are coming to the shelf and buying more products.

Now I'd like to believe that we could put a few new interesting products in front of them and those can perform incrementally better than we would without them, but we feel good about our -- just our core business right now, we feel good about the trajectory of the business and we like the new products we're putting in the marketplace right now.

So we will probably tell you a little bit more about the progress there in the next quarterly earnings.

Great.

And then last one for me, just trying to understand, as you kind of look at -- to Rob Lowe and look to kind of where you're expanding into the new market, is there more you need to do and I guess going back, there had been a talk that clean label was kind of the key and new packaging was the key to really reach this expanded demographic, is that still the case and kind of where do we stand on that whole move?

I love the question and as a CEO, there is always more to do.

So I will tell you the core of what we've been doing has been around talking to the self-directive low-carbers and helping make them smarter about nutrition.

That's the core of what we've been doing.

The packaged refresh, the cleaner label, just lowers the barriers to entry into the brand for people.

But the core of it is, and what we believe has been driving our business is we're giving people better information about how to feed their bodies.

And there is always more that they can learn and there is always more that we can teach.

So that's kind of the path that we think we're going down, that you can rely on Atkins as a -- to provide you good education around what you're putting in your bodies and what you should be putting in your bodies.

And that's kind of the path I think you'll see us continue to press and the encouraging part of it is, it appears to be equally compelling to programmatic weight loss folks as it is to self-directive low-carbers.

So there is an efficiency in that that we really like.

Our next question is a follow-up from the line of Jason English with Goldman Sachs.

I saw your answer to the question on why you may be the preferred strategic suitor was interesting.

You focused a lot on culture and capabilities, which I respect and appreciate.

One area you didn't touch on was the ability, given your size to facilitate a tax advantage deal structure.

So something like an RMT.

It was part of the conversation early on.

I guess my question is why wasn't it part of your answer there?

Is that something that you see a little likelihood of?

If so, why has tax policy changed it?

Any color you can add there?

And then while we're on the topic, if you can give us an update on where your appetite stands for further acquisitions and what the pipeline may look like?

Yes.

So I think if I could paraphrase your question is, where are we fishing?

From a deal standpoint, and as we've progressed throughout the year, I think we've pretty consistently said we like the nutritional snacking space, it's core to our capability, it's core to who we are and it is a preponderance of the assets that we're looking at.

So just because we believe we add significant amount of value there, it's where we're doing most of our fishing.

It's a larger asset tax advantage, larger asset in center of store, other snacking became available, we would absolutely consider it but it's not where we're mostly looking.

And we would consider it based upon a -- using simple criteria, do we like the criteria?

Do we like the brand and the brand position in that category?

And because it would probably be a significant asset, does it have capability and a management team?

Or do we believe that we could recruit capability and the management team?

The sub tax at that is in its current owner, it's probably being under appreciated and we believe we could over appreciate it.

So those are the -- did I answer your question?

Yes.

You kind of -- you answered a part of my question.

The other part of my question is, why aren't you talking more about the tax advantage structure you can offer?

And maybe embedded within your prior answer was the answer to that.

And the nutritious snacking assets are more likely to be standalone businesses where you're just buying them out right rather than carve outs, where an RMT would make sense.

Is that a fair interpretation?

Yes.

And by definition the larger carve outs are more opportunistic.

So you don't fish for those as much as they show up at your boat and you then start talking to them, right?

So where we're looking tend to be more growthy, nutritious snacking assets and that's where we're actively looking at things.

I suspect that a larger, may be less growthy RMT spinout of a larger food company is going to be more opportunistic in nature, but something we can go out and hunt for.

They'll show up when they show up.

And I think even in the conversations early on in this process, if you listened to Dave and to Brian from our board.

They said the same thing, right?

It's very opportunistic, they're going to divest those assets when they want to divest those assets.

They know that we're interested, if those things show up, we'll consider those based on the criteria I talked about before.

Our next question is another follow-up from the line of Brian Holland with Consumer Edge.

Just a question about the competitive landscape.

Obviously, if you're taking share, somebody is losing share.

I don't expect you to comment specifically on a competitor but generally speaking, can you sort of give us some color but behind the type of -- I mean is it broad-based, but you're taking share kind of from everyone?

Or is it the larger more stale brands that may be have been less active then you certainly have been within the past 12 months or so?

Or maybe that's some of these other brands that have been aggressive in spending.

I know you've talked recently in the public forum about being able to be a little bit more rational if your plan is just to basically sell your stuffs on competitive on price, promotion et cetera?

Just given how fragmented that space is, just curious if you could give us some insight on maybe is there a commonality with who you're taking share from?

Yes, first observation is the category has accelerated as we've accelerated.

So the broad nutritious snacking category in that broad competitive set is seeing really good growth.

So if you're a competitor and you're losing share and you're losing volume, that's a concerning thing for you.

But basically what's happening is pretty much all the boats are floating with the growth of the category and I think it's driven by the fact that we're a category that people are coming to.

So there's more household, penetration is increasing, retailers are dedicating more space to the categories.

So I think it's more a win-win situation than it is we're taking share and people are losing.

Now there is some people growing faster than others and I think those are pretty obvious if you see the data.

And there is a few people that are kind of lagging right now, they're pretty obvious -- they're growing but they're not growing anywhere near the rate that some other folks are.

The other observation I make is there are a lot of small brands in this category.

I think we count over 400 of them and those have been slow pretty volatility throughout the years.

So I say right now, there is not a whole lot of people losing, I think there is people winning better than others.

If that's helpful.

Mr. Scalzo there are no further questions at this time.

I'll turn the floor back to you for any final comments.

Thanks again for your participation on the call today.

We look forward to updating you on our third quarter results in November.

We hope you have a good day and rest of the week.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.