Copart, Inc. (CPRT) Q2 2016 Earnings Report, Transcript and Summary

Excuse me everyone, we now have our speakers in conference. Please be aware that each of your lines are in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask a question. I would now like to turn the conference over to Mr. Jay Adair. Sir, you may begin. A. Jayson Adair - Chief Executive Officer & Director: Thank you, Jennifer. Good morning, everyone and welcome to the Second Quarter Earnings Call For Copart. On the call with me this morning is Jeff Liaw, our CFO, and Will Franklin, our Executive Vice President. We're going to ahead and start with Jeff. He'll be passing it to Will. And then, we will open it up for questions. So, if you have a specific question that is for one us, you can call us up by name. It'd be great. With that, I'll pass it to Jeff. Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Thank you, Jay. Good morning, everyone. I'll start with the Safe Harbor. Our remarks today will contain forward-looking statements, including statements concerning our views of trends in our business. These statements are neither promises nor guarantees and are subject to risks and uncertainties that could cause the actual results to differ substantially from those projected or implied by our statements and comments. The company expressly disclaims any obligation to update or revise these statements or comments. For a discussion of the risks that could affect our business, please review the risk factors contained in our most recent 10-K, 10-Q and other SEC filings. With that, I'll provide brief comments on our second quarter financial results. And I'll start first with the postmortem on the Dutch Auction we completed at the end of last year. We completed an acquisition of 8.3 million shares on December 30 at $39 per share for a total purchase consideration of approximately $325 million. Between the Dutch Auction in December as well as our purchase of shares in July, we ultimately purchased 14.8 million shares over the past 12 months, representing 11.7% of our shares outstanding. I'll shift gears now to the second quarter. I'll talk first about the income statement and then also the balance sheet as well. Our revenue was up $23.4 million year-over-year, reflecting 8.5% growth. This was driven largely by substantial unit growth, for example, 13.2% unit growth in North America, offset by softer ASPs and the relative strength of the U.S. dollar. I'll describe both of those phenomenon in a little greater detail. Unit growth was driven largely by strong industry demand trends as well as our growth in non-insurance channels. But first, for example, within the insurance segment, we observed unit growth year-over-year in all of our top 10 sellers. The root causes of these volume increases are the same factors we've described in the prior calls, vehicle age and salvage rates, which Will will elaborate on later today, as well as an increase in miles driven. With continued low gasoline prices we have observed a increasing vehicle miles according to U.S. Federal Highway Administration. Miles driven grew even over the course of 2015. I'll also note here that other participants in our industry broadly including, for example, insurance carriers, have cited in their own earnings releases and presentations the trend of increased accident frequency and severity caused by low fuel prices, miles driven and distracted driving. With the expectation these trends will continue, we are observing similar phenomenon in our own business. On the question of ASPs, they have declined year-over-year due to several factors. First, low scrap values, according to American Recyclers Crushed Auto Body Index, January scrap values are at five-year low at approximately 68% below their post-recession peak in September 2011. We've talked previously about the strength of the U.S. dollar affecting our international buyers' purchasing power. For currencies like the euro and the Mexican peso, the USD is near its 10-year high. International buyers purchase approximately 20% of the units we sell in our North American auctions and generally purchase somewhat higher than average value cars. Lastly, ASPs have been affected by mix shift. We have continued to penetrate non-insurance categories which can affect our overall averages. Auto macroeconomic factors like metals pricing and currency are of course difficult to predict. Our own recent data does indicate a stabilization in ASPs. Shifting gears to speak briefly about currency, the detrimental revenue of effective exchange rate changes represented approximately $3.5 million in revenue effect for the quarter versus the prior year. Purchased car revenue grew slightly by $1.5 million, or 4% year-over-year, principally a growth in non-insurance units as described previously. Our service revenue was up $21.9 million, or 9.2%, a reflection of the same unit growth described a moment ago. Our yard operations expenses increased by $12 million, also a reflection of addressing the higher unit volumes through our system. Our general and administrative costs declined by $2.5 million year-over-year due principally to efficiencies in our spending on technology. As we've indicated in prior quarters, we do expect modest increases in G&A spending over time to accommodate both domestic and international growth. We are, as always, focused on the efficiency of our spending and driving the appropriate returns from it. Lastly, other income of $4.4 million was driven principally by gains on currency translation. Shifting gears to the balance sheet, quarter-over-quarter, we observed substantial investments in – or we made a substantial investment in working capital; specifically, almost $50 million, or thereabouts, in accounts receivable and inventory, a reflection of growing demand as inventory year-over-year was up 16.9% worldwide. Capital expenditures of almost $58 million for the quarter were driven largely by land acquisitions, land developments and lease buyouts. Those three factors are cumulatively 85%, or thereabouts, of our CapEx for the quarter to enable us to meet this rising unit demand, with the balance of the expenditures on software development and other maintenance CapEx. Will will provide more color on some of these investments in his commentary. Lastly, we completed the quarter with $141 million in cash and more than $225 million in available funds on our credit facility as we enter the third quarter. With that, let me hand it off to Will Franklin.

Thank you, Jeff. I'm going to provide a little more color on our performance during the quarter, as well as what we're seeing in the industry. First off, let me say how pleased we are with the results of our second quarter. The 8.5% growth in our revenue, as Jeff said, resulted primarily from growth in volume in both North America and the UK. In North America, beginning in the second half of our fiscal 2014, we began to see what we believe to be an increase in salvage frequency. By salvage frequency, we mean the rate at which cars involved in accidents are deemed economic loss and totaled as opposed to being repaired. We believe this trend is continuing, yet not accelerating. The trend is driven by several factors, the most important of which are the combination of rising repair cost and the increase in the average age of cars on the road. Growth in repair costs, we believe, has resulted from industry consolidation as more independent repair shops are being purchased by MSOs and, probably more importantly, the greater complexity of new cars from exotic and light-weight materials, complex construction sensors, cameras, and other electronics, all of which demand that shops employ new equipment, tools, and training as well as requiring more replacement parts per repair. Concurrent with this rise in repair cost, the average age of cars on the road has grown. At the end of 2015, the average age was 11.5 years, and it is expected to increase going forward. In addition to the growth in salvage frequency, we're now seeing an increase in accident frequency as lower fuel prices and higher employment trends are leading to an increase not only in the miles driven, but also the average speed of travel leading to more, and more severe, accidents. We also see this trend continuing. In North America, in addition to the growth in insurance volume, we've also seen growth in our non-insurance market. This growth was led by increases in charity and donation cars, broker cars, and cars from municipalities. In fact, non-insurance volume grew at a faster pace than insurance volume, representing 19.9% of total North American volume as compared to 19.4% in the same quarter last year. In North America, sales volume grew by 13.2% and inventory was up by 16.7%. To accommodate this significant increase in volume as well as the anticipated future increase, our operations and land teams have been extremely successful in obtaining new capacity. Some locations that have been historically difficult to address, we've been able to obtain facilities. In the next 12 months, we expect to open 15 new yards including a 22-acre facility in a prime Southern California location, addressing a capacity need that has existed for over 20 years. In addition to the new yards, we're actively working on the expansion of 18 existing facilities. Now to the UK in which we saw a similar growth in volume increasing by 10.5%. The insurance volume grew to increases in both market size and market share. However, almost half of the total growth in volume came from non-insurance sellers as the whole car dealer and the whole car direct purchase programs grew in both volume and profitability. In total, our worldwide volume grew by 12.9% and our worldwide inventory grew by 16.9%. We're also extremely pleased at our efforts to control both our operating cost and our general and administrative cost. We've been focused on spending our dollars efficiently with an eye on returns. In the last five quarters, our consolidated G&A spend has averaged $30.1 million. In the five quarters prior to that period, our average quarterly G&A spend was $36.8 million. In addition, in the last 10 quarters, we have been successful in controlling our operating cost in a very challenging environment, all leading to the operational leverage that generates relative growth in margin and EBIT that outpaces our growth in revenue. That concludes my brief comments. Jennifer, now we'll turn the control of the call back over to you for Q&A.

Thank you. At this time, we will open the floor for questions. Our first question comes from Bob Labick with CJS Securities.

Good morning and congratulations on a very nice quarter. A. Jayson Adair - Chief Executive Officer & Director: Thank you, Bob. Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Thank you.

I wanted to start, last quarter on the conference call, you mentioned a larger-than-normal RFP wins or some market share in that regard. When do those – are those volumes flowing through in this current quarter or are they coming into your yards and impacting expenses in this quarter? Could you just give us a sense of how that's going to impact the P&L and if it had any impact on this quarter?

Sure. Bob, it really didn't have much impact at all this quarter. That contract, we began collecting those cars deep into December. And that really didn't allow for enough time for those cars to cycle through to the auction process. So, we anticipate those to have an impact next quarter. They really had very little impact in the current quarter. A. Jayson Adair - Chief Executive Officer & Director: And Bob, I'll just add to that. To your point, when Will says next quarter, that's Q3. And to your point, the cost associated with receiving those cars was in Q2. So there was cost associated with building the inventory.

Okay, great. Thank you. And, you've accelerated the yard opening. I think last quarter, you mentioned 6 to 12 locations. You said up to 15 now in the next 12 months, and you have those locked in? Can you give us a sense of the CapEx you'll be spending over the next year? Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Bob, thanks for the question. I think the – we expect the expenditures to be substantial forecasting more precisely difficult in the realm of land and land development spending is episodic, the exact timing it's tough to pin down. So we don't have a forecasted number. We'd broadly say approximately $100 million over the next 12 months.

Okay.

Let me just add to that, that's for these particular projects. There is always other needs that come up but addressing just the ones we identified in this call, that's the figure.

Got it. Right. You've obviously just spent a bunch in the last quarter as well as you highlighted. Okay. And then just from your website, I noticed that your increase in the frequency of auctions in some of your Canadian yards as well, is that industry growth share wins and do you need more yards up there as well? Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Yeah. Actually that's in response to a market win in that location and we see volume growing in Canada as well. So, yes, I would assume that over the course of time maybe not 12 months but over the next year or two, we'll need more facilities in Canada.

Okay. Great. Last one from me. I'll turn back in queue. I promise. And then you had your first auction in India, I think in October and you've opened the second location since then as well. Could you just give us a sense of what you've learned from the experience of opening up in India and how that will help you in other international market, are rollouts coming?

Sure. So just to be clear, we have one permanent location that's North of Delhi. The location in Chennai is in response to some floods are taking place in that region and we have yet to decide whether that will be a permanent location or not. As you said, we're just entering that market and entering in any far market requires a learning curve, and not just cultural, but technically and processes. And so we're using these initial auctions to become familiar with how to best address that market. We don't talk about it in much detail, because it's not a major contributor at this point. Although, we think our international strategy will generate meaningful growth going forward, at the current time, it's not. And so, we just – we don't really focus on it during these calls.

Okay. Thanks very much.

Thank you. Our next question comes from Bill Armstrong with C.L. King & Associates. William R. Armstrong - C.L. King & Associates, Inc.: Good morning, gentlemen. The 15 yards that you're planning to open over the next 12 months, are these still in markets where you don't have a presence, or is it more maybe bulking up your presence within markets? Or maybe just give us a little color on how you're looking at this expansion. A. Jayson Adair - Chief Executive Officer & Director: Go ahead.

Yeah. Bill, we really have a fairly complete network. Most of these yards that we're looking at are to address capacity needs in those areas. But a byproduct of that, as always, we become more efficient on our self hauling. When you have more locations, you tend to reduce the average haul distance. William R. Armstrong - C.L. King & Associates, Inc.: Right. Okay.

I can't think of any of these that we've targeted a market we don't currently address. William R. Armstrong - C.L. King & Associates, Inc.: Right. That's – I thought you had a pretty comprehensive coverage. And as far as G&A, it was pretty low in the quarter. Were there any non-recurring items? And as we look forward, what sort of run rate ought we be sort of expecting going forward? Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Hi, Bill. This is Jeff speaking. I think every quarter we'll encounter blips in both directions. I think if you take our fiscal year so far, in combination with Q1 and Q2, I think that's reasonably representative of our starting point. We do provide the guidance that with these elevated volumes, with international expansion, we do expect modest increases over time. So, I think if you take Q1 and Q2 as a starting point, that's a reasonable base line. William R. Armstrong - C.L. King & Associates, Inc.: Great. Understood. Thank you. Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Thanks, Bill.

Thank you. Our next question comes from Ryan Brinkman with JPMorgan.

Hey. Great. Thanks for taking my questions. Firstly, just on the pricing environment, can you maybe remind us of how much of the gross price of your vehicles you auction is tied to scrap metal prices versus used car prices versus strength of the dollar? And then, as the gross price of those vehicles changes, how does that impact your ASP? I know you charge a percentage of the transaction price, but I think there's another portion maybe that's fixed. And is there any room in the market to respond if transaction prices fell by, for example, increasing the percentage rate that you charge?

So, let me – there are several questions there. Let me start with the ones I can remember. The scrap metal pricing affects the majority of the cars that we sell. It affects cars that are recycled, cars that are crushed and cars that are dismantled. Even once the valuable parts are harvested, the carcass needs to be recycled. And so, I would say that it has a meaningful impact on our total auction volume. What was the – give me the second question.

So as the transaction price – so, for example, the scrap metal prices are being pressured here. Can you offset that to maintain average selling price for Copart by increasing percentage rate, for example? Is the market – can it bear that?

No. We really don't discuss specific pricing strategies on the call. I will tell you that with the scarcity of land, we're very sensitive to the nature of the cars that we process and we've become more selective in that area.

Okay. That's helpful. And then just last question, Will, did I hear you say that half of the increase in volume this quarter stemmed from non-insurance cars? Is that right? Because I think that that's a pretty small portion, so it must be increasing rapidly. What's the driver of that? And can you give us an update, where do you stand with regard to whole cars versus – whole cars and non-insurance salvage cars? What percentage of the vehicles that you auction are comprised of those two types of vehicles?

Sure. That (20:32) was specific to the UK. So it was actually about 45% of the volume growth in the UK was from non-insurance cars. In the U.S., it's far less. My point in the United States was that the growth rate in non-insurance cars, while it represents just slightly less than 20% of our total volume, it's faster than our growth rate in our insurance volume; at least, it was year-over-year.

Okay. Very helpful. Thanks a lot. Congrats.

You're welcome.

Thanks.

Thank you. Our next question comes from Craig Kennison with Baird. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): Good morning. Thanks for taking my questions as well. Will, starting with you, could you give us an idea for the key drivers to your SG&A cuts? And maybe the sustainability of the new lower SG&A?

Yeah. I think we've become more efficient in our technology spend will be the primary driver there. I would say that's the primary, but it's not the sole, so we've actually gone through every function within our G&A to make sure that it produces value. And we've made changes, and it's not necessarily reflected in head count. It's reflected in programs and consultants and initiatives that don't lead to new cars. That's kind of like our goal standard for should we spend the dollar? And the answer is, if it's going give us more cars then we tend to lean towards spending it. If the answer is that it doesn't, then we have to question again why we never want to spend that dollar. And that's kind of a process and a filter that we've employed in analyzing all of our costs in G&A. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): If you look – pardon me. A. Jayson Adair - Chief Executive Officer & Director: I really can't be more specific than that because it's more of a cultural philosophy that we now have. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): If you look at it on a per car basis, do you feel like there's very little you can take out from here in terms of your cost to process the vehicle?

Look, if you're talking about operating cost as opposed to G&A... Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): Correct.

We benefit from a fixed cost model, so the most important measurement for us is how many cars we process per yard. That being said, we have pressures in the other direction. So, one of our measure is not to measure cost of processing every car is the sub-haul cost. And while we've benefited from the lower fuel prices, the higher demand has actually offset that benefit where we're paying slightly more for our self-hauling cost. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): Thanks. And then, Jay, if you could give us an update on the non-insurance side. What are you doing to drive volume there and to what extent can you leverage your salvage resources to grow the business, and to what extent is that counterproductive if you have capacity constraints in some markets? A. Jayson Adair - Chief Executive Officer & Director: Well, the good news is the non-insurance business is a high turn business. So, it's got a little cycle time, taking up less capacity of our facilities. And these are, in many cases, as Will mentioned, a donation fleet, but also dealer business. So, the differentiator is really showing the results, the data, so it's – we've got a great sales team, and we then back them with the tools they need to go out and show the data to articulate the return that we're delivering at auction. So, right now, it's an interesting time because you've got this extremely strong dollar. I don't know. I haven't looked at the peso recently, but I think the last time I looked at it, it was MXN 17 or MXN 18, something like that to the dollar. The peso a year or two ago was closer to MXN 10. So we've got this extremely strong dollar right now, and yet we're still averaging above 20% international sales. So, it is down some, but it's still a meaningful number to the company. And that drives returns. So, if you can show potential clients the actual numbers, the actual results, the returns that we're getting, you will drive volume. And there's been a very successful push in that area both on – U.S. about non-insurance, but both on non-insurance and on insurance business. So, we've had a significant – we had a significant year in terms of gains through new business, but we've also been fortunate in the respect of having an industry that's growing right now. There's a lot of – we've talked in previous calls. There's a lot of natural hedges at Copart. So if the dollars were to weaken, ASPs would go up. Fuel prices typically would be higher in a weakened dollar state. So, we make more per car but we process less volume. Right now, it's the exact opposite of that. So, we're processing a lot more volume as a company, making less in a per unit basis but in absolute terms making more. So, yeah, things are good. Craig R. Kennison - Robert W. Baird & Co., Inc. (Broker): Great. Thanks for taking the questions. A. Jayson Adair - Chief Executive Officer & Director: You bet. Thank you.

Thank you. Our next question comes from Elizabeth Suzuki with Bank of America.

Good morning. Just a question on leverage, at the end of the quarter, it looked relatively high compared to historical levels given that you just completed the large tender offer. Do you have a target leverage ratio that you're aiming for and would you rebuild some cash before doing additional acquisitions or buybacks or is there some room to lever up a bit further? Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Thanks for the question, Elizabeth. This is Jeff speaking. As you noted, the cash balance declined substantially versus the prior quarter as we completed the Dutch Auction. We don't manage the business specifically to a target leverage ratio. I think we do expect to generate operating cash flow in the third quarter as we typically have done in terms of our seasonal performance. So, we won't necessarily govern how we think about investments in land and so forth as Will was describing a moment ago based on our balance sheet. We have $140 million of cash, more than $225 million in our revolver. So, that won't be a near-term or medium-term constraint on how we think about investing in new opportunities of that sort. Regarding, I think, your embedded question about share repurchases, that's not something we'll comment on in a call like this. We'll continually evaluate that in the quarters and years to come how we think about the – our balance sheet in the aggregate.

Great. Thanks. And given that you have operations in the UK, can you just talk about how much exposure you have to the British pound and if you have any way to hedge against that exposure, or what impact you think that might have on your next few quarters of operations? Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Sure. I'll start there, and then Will and Jay can jump in as well. So in terms of the standalone operations themselves in the UK, that the costs and the revenues are in British pounds, so we don't have any mismatch within the four walls of the operations in our UK business. In terms of the translation exposure, we do have a general inclination to take the pounds we generate and convert them to U.S. dollars for our own holdings' sake. We don't have a hedge in place today regarding the translation risk for the UK – for the pound in terms of revenue and earnings. So there is some volatility there. It can obviously work both ways.

Okay. So it's more translation risk and less actual (28:26) economic risk. Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Right.

Okay. Thank you. Jeffrey Liaw - Chief Financial Officer & Senior VP-Finance: Thank you.

Thank you. Our next question comes from Bret Jordan with Jefferies.

Hi. Good morning, guys. A. Jayson Adair - Chief Executive Officer & Director: Good morning.

A question on the inventory build, you said you had added some inventory starting in December attached to this new insurance contract. How much of your inventory growth was that contract? Just trying to get a feeling for how much is going to flow through in the current quarter.

I don't know. I haven't measured it. It's not a significant... A. Jayson Adair - Chief Executive Officer & Director: Less than 10%.

Yeah, less than that.

Okay. And then, I think Will made a comment about the North American salvage frequency, and I think you said it was continuing and maybe accelerating. Is that something you're seeing in the current quarter or is that sort of a bigger picture comment?

That's more of a bigger picture comment. But we are seeing it in the quarter. I mean, we've seen it for some time and the impact is, as you can see, in the increased volume. So, I mean, we've got both those influences working in the direction of sending more volume to us: accident frequency and salvage frequency.

Okay. And then, one final question. Sort of on the foreign exchange side, a year ago you saw a lot of your rapid strength in the U.S. dollar. It's gotten a little bit more stable relative to peers, although still high. Are you seeing foreign buyers showing more interest now that there's less foreign exchange shock? Even though their currency is worth less, are they participating more at the auction?

Yeah. Actually, on a sequential basis, we did see foreign participation up. So, I don't know if that's a result of recovering from shock or other influences, but we did see a sequential increase.

Okay. Great. Thank you.

Your welcome. A. Jayson Adair - Chief Executive Officer & Director: Thank you, Bret.

Thank you. Ladies and gentlemen, at this time we'll be taking our final questions. Our next question comes from Gary Prestopino with Barrington Research.

Hi. Good morning. This is Matt Gall filling in for Gary. Thanks for taking my question. A. Jayson Adair - Chief Executive Officer & Director: Good morning, Matt.

Good morning. Most of the questions have been answered. I just wanted to touch on maybe some comments that Will provided. Just want to make sure I had the numbers correct. For the consolidated volumes in inventory, can you repeat what those percentages were as far as the increase?

Yes. It was 12.9% on sales volume, and it was 16.9% on inventory volume.

Okay, great. I was writing it down quickly. I just want to make sure I had that correctly. And then, again, most of the questions have been answered, maybe just something that you had mentioned, with salvage and accident frequencies both up and then kind of the emergence of collision avoidance technology equipped on vehicles over the coming years, maybe just what your thoughts would be as far as how collision avoidance might impact some of those frequencies.

I think that over the course of time, it will have a negative impact on accident frequency and a positive impact on accident and salvage frequency. So, as I said, these cars are packed full of electronics and complex materials. And any time you have a car involved in an accident that has – we just heard that if you replace a window in a Mercedes Benz, you have to reset several sensors in that Mercedes Benz that you didn't have two or three years ago. So as the cost to repair goes up, and Jay talked about this. These are the natural hedges in our business. So, we think that, as expected, we'll have fewer accidents. We also think that those accidents result in a higher percentage of cars being towed. A. Jayson Adair - Chief Executive Officer & Director: If I can add to that, you're also – Matt, you're also putting more vehicles on the existing infrastructure in the U.S. So, as we see population increase, more vehicles aging, the cost of those vehicles is lower. Access to vehicles goes up. More people drive, more people driving, more people on the road causes more accident. So, there's a number of moving parts here. We don't subscribe to the belief that vehicles are going to be self-driving, at least not in my future. I can't see how that's going to happen. That's too far out. As for a collision avoidance, for sure there's going to be more of that. But it's very analogous to anti-lock brakes in the 1980s. We saw anti-lock brakes installed in cars. At the same time anti-lock brakes went in, it reduced the number of accidents. They put airbags in cars. And when the airbags went in, they increased the total loss frequency. So, to Will's point, there's going to be a lot of additions to the vehicle that is causing the cost of repair to go up. It will be offsetting that collision avoidance.

And Matt, let me make with one final comment. So, the outlook I gave was long term. If you looked at industry sources, I think that they are suggesting that at least through 2020, they expect a growth in accident frequency.

All right. That's great color. Thanks for that. That's it for me. Congrats on the quarter, guys.

Thank you, Matt. A. Jayson Adair - Chief Executive Officer & Director: Thank you.

Thank you. At this time, I would like to turn the conference back over to Mr. Jay Adair. A. Jayson Adair - Chief Executive Officer & Director: Thank you, Jennifer. Again, thank you, everyone, for attending the call. We're really happy with the results. We look forward to reporting on the third quarter on the next call. Thanks again. Bye-bye.

Thank you, everyone. At this time, this concludes today's teleconference. You may disconnect now.