Exponent, Inc. (EXPO) Q4 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Exponent Fourth Quarter and Fiscal Year 2013 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, February 5, 2014. I would now like to turn the conference over to Erica Abrams of The Blueshirt Group. Please go ahead.

Thank you. Good afternoon, ladies and gentlemen, and thank you for joining us on today's conference call to discuss Exponent's fourth quarter and fiscal year 2013 results. Please note that this call is being simultaneously webcast on the Investor Relations section of the company's corporate website at www.exponent.com/investors. This conference call is the property of Exponent, and any taping or any other reproduction is expressly prohibited without Exponent's prior written consent. Joining me on the call today are Paul Johnston, President and Chief Executive Officer, and Rich Schlenker, Executive Vice President and Chief Financial Officer of Exponent. Before we start, I would like to remind you that the following discussion contains forward-looking statements, including statements about Exponent's market opportunities and future financial results that involve risks and uncertainties, and that actual results may vary materially from those discussed here. Additional information concerning factors that could cause actual results to differ from forward-looking statements can be found in Exponent's periodic filings with the SEC, including those factors discussed under the caption Factors Affecting Operating Results and Market Price of Stock in Exponent's Form 10-K for fiscal year 2013. The forward-looking statements and risks stated in this conference call are based on current expectations as of today, and Exponent assumes no obligation to update or revise them, whether as a result of new developments or otherwise. And now I would like to turn the call over to Paul Johnston, President and Chief Executive Officer. Paul, please go ahead.

Thank you for joining us today for our discussion of Exponent's fourth quarter and the fiscal year 2013 results. For the quarter, we increased net revenues by 6% to $69 million and net income by 3% to $8.7 million or $0.63 per share. For the year, we increased revenues by 5% to $280 million, net income by 4% to $38.6 million or $2.76 per share, and generated operating cash flow of $61.8 million. We're pleased to have delivered solid financial results in 2013 with continued revenue and net income growth and strong cash flow from operations. This performance allowed us to continue to return value to shareholders through share repurchases and the initiation of dividend payments. For the year, we had notable performances from our polymer science, mechanical engineering, biomedical, engineering management and construction consulting practices. During 2013, we continued to build upon our leading position in reactive services, where we investigated accidents ranging from the collapse of a major industrial facility to a home fire, evaluated potential product recalls including home appliances and food products and assessed the health and environmental exposures for oil and gas operations. Additionally, we expanded our market recognition in proactive services where we provided design consulting for products ranging from tablet computers to drug delivery systems, assisted clients with regulatory matters involving toilets and cosmetics and worked with clients to develop risk management programs for gas distribution systems. We are pleased that the underlying growth in 2013 was in the high single digits, although this was partially offset by a gradual step-down in a few major assignments and reduced defense consulting and product sales. In summary, we delivered a solid fourth quarter and fiscal year. We are excited about our growth opportunities in both reactive and proactive services for 2014 and beyond. Now Rich will provide a more detailed review of the financial performance.

Thanks, Paul. For the 14-week fourth quarter of 2013, revenues before reimbursements, or net revenues as I will refer to them from here on, were $69 million, up 6% from $65 million in the 13-week fourth quarter of 2012. Total revenues for the quarter were $72.8 million as compared to $72.9 million 1 year ago. Net income for the fourth quarter was $8.7 million or $0.63 per share as compared to $8.5 million or $0.60 per share in the fourth quarter of 2012. EBITDA for the fourth quarter was $15.9 million versus $15.6 million in 2012. Diluted share count decreased to 13.9 million from 14.2 million in the same period last year, as the result of our ongoing repurchase activity. For the 53-week fiscal year 2013, revenues before reimbursements were $280 million, up 5% from $266.6 million in the 52-week fiscal year 2012. Total revenues for 2013 were $296.2 million as compared to $292.7 million in 2012. Net income for 2013 was $38.6 million or $2.76 per diluted share, an increase of 4% as compared to $37.2 million or $2.60 per diluted share reported in 2012. EBITDA increased 4% to $68.8 million versus $66.1 million one year ago. Turning to more details of the quarter and year. In the fourth quarter of 2013, Defense Technology Development had net revenues of $3.2 million and no product sales. In comparison, in the fourth quarter of 2012, net revenues were $4.3 million, of which $2 million was product sales. For the full year 2013, net revenues in Defense Technology Development were $13.1 million, of which $200,000 was product sales. In comparison, for the full year of 2012, net revenues were $17.6 million, of which $3.1 million were product sales. For 2014, we expect revenues from Defense to be lower than in 2013 due to constraints on defense spending and the reduction of forces in Afghanistan. Utilization in the fourth quarter was 66%, which is in line with what we expected for our seasonally slower quarter. The extra week we picked up in the quarter included the New Year's holiday and vacations, which further impacted utilization. This compares to 69% in the fourth quarter of 2012. Utilization for the full year of 2013 was 71% as compared to 73% in the prior year, reflecting a step-down in a few major assignments and a decline in our Defense business. For 2014, we expect our utilization to be slightly lower than in 2013 as we continue to see a step-down in major assignments in Defense business. For the fourth quarter of 2013, billable hours increased 7.4% to 269,000. For the year, billable hours increased 3.4% to 1,079,000. For the fourth quarter, technical full-time equivalent employees, on a year-over-year basis, were up 3.8% to 731, and for the full year were up 4% to 719. For 2014, we expect year-over-year headcount growth to be approximately 3%. Our realized rate increase was approximately 2.5% for 2013. For 2014, we expect to realize a rate increase of between 2% and 2.5%. EBITDA margin for the fourth quarter was 23% of net revenue as compared to 24% in 2012. For the full year 2013, it was 24.6% as compared to 24.8% in 2012. The year-over-year decline is related to lower product sales in utilization. For the fourth quarter, compensation expense, after adjusting for gains and losses in deferred compensation, increased 8% including the extra week. Included in total compensation expense is a gain in deferred compensation of $1.9 million as compared to $130,000 in the same quarter of 2012. Gains and losses in deferred compensation are offset in miscellaneous income and have no impact on the bottom line. For the year, adjusted compensation expense increased 7%, with a gain in deferred compensation of $6 million as compared to $2.2 million in the prior year. Stock-based compensation expense in the fourth quarter was $2.3 million. In the full year, it was $13.2 million. For 2014, we expect this to be approximately the same. Other operating expenses in the fourth quarter increased 6% to $6.5 million. Included in other operating expenses is $1.3 million of depreciation. For 2014, other operating expenses are expected to be $6.5 million to $7 million per quarter. G&A expenses in the quarter were $3.9 million as compared to $4 million in the same quarter in 2012. For 2014, G&A expenses are expected to be $3.7 million to $4.2 million per quarter. Our income tax rate in the quarter was 40.5%. For the full year 2013, the tax rate was 39.7% as we benefited from a onetime tax deduction in the third quarter, which creates a tough comparison for 2014 as we expect our tax rate to be approximately 40.5%. For the quarter, operating cash flow is $28 million. And for the year, it was $61.8 million. At year end, our cash and short-term investments were $156.1 million. In 2013, we repurchased $25 million of our stock for a total of 438,000 shares at an average rate -- I mean, average price of $57.10. We still have $31 million authorized and available for repurchases under our current repurchase program. Additionally, during the year, we distributed $7.9 million to shareholders through dividends. Capital expenditures in the fourth quarter were $1.6 million and $6.2 million for the year. DSOs at year end were at 83 days. For 2014, we expect growth in revenues before reimbursements to be in the low single digits and EBITDA margin to be down approximately 100 basis points from 24.6% in 2013. As we have previously communicated, we anticipate a further step-down in a few major assignments in 2014. Additionally, in 2014, we expect the reduction of forces in Afghanistan will impact our Defense business. Furthermore, our growth in 2014 will be reduced because of having 1 less week as we return to a 52-week year. And as a reminder, in the second quarter of 2013, we recognized net revenues of $1.4 million related to services performed for a foreign client in the prior year, which was recognized upon receipt of payment. I will now turn the call back to Paul for closing remarks.

Thank you, Rich. In summary, we posted a solid fiscal year overall. While we have a difficult comparable ahead in 2014, we remain optimistic about our ability to grow the business at a steady level, continue to hire talented professionals in order to diversify our consulting practices, and address our clients' most important engineering and scientific business issues. We remain focused on generating cash flow, maintaining a strong balance sheet and enhancing shareholder value through stock repurchases and dividends. In turn, we announced today that the Board of Directors has increased our quarterly dividend from $0.15 to $0.25 per share. Finally, I want to thank our shareholders for taking the time to understand and appreciate our uniquely positioned firm. Operator, we are now ready for questions.

[Operator Instructions] Our first question is from the line of Tim McHugh with William Blair & Company.

This is Matt Hill in for Tim McHugh this afternoon. My first question had to do with the expected step-down in margins next year. Is this a result of some of those unique items in 2013 that boosted revenue, the extra week and then that extra revenue that slid into the year? Or is the -- what I'm trying to get at is the underlying business, what are your expectations there for margins?

Yes, this is Rich Schlenker. There are 2 things that are really the impact on margins. First is absolutely the onetime recognition of $1.4 million that we had in the second quarter. Those revenues came through to the firm where the expense for them and the performance of the work occurred back in 2012 and just the revenue recognition was taken into the second quarter. By the way that our bonus plan works, 1/3 of all pretax pre-bonus profits are going to a bonus pool, so the number that flowed down to EBITDA is more like 2/3 of that $1.4 million. The other factor impacting margins is a step-down in utilization from, let's say, approximately 71% down, let's say, to around 70% in 2014. The reason that we feel that step-down is occurring is that as we see a step down in some of these larger projects and continue to develop the underlying business, we feel that utilization -- that we could get a slight step-down in the utilization here, and that also had some of the impact on margins.

Okay. In the press release, I think you called out some notable performances in some of the segments for the year. I'm just kind of wondering how those finished up at the end of the year. Were they still pretty strong? And are you seeing any different trends or any emerging areas where you're seeing some strength coming through?

No, I think that those -- the ones that we noted, polymer science, mechanical engineering, biomedical, engineering management, construction consulting practices, those have continued strong through the year, and I think they are still strong. So I don't see a change from that standpoint.

Okay. And then just one more. On the large projects, did those come in kind of what you were expecting with the step-down in the fourth quarter or did they -- did any of them end up being a little stronger than you thought?

Well, I mean, I think as we went into 2013, we were expecting more like an average of a couple of percent in revenues, each, to step down. They had stepped down a little bit, but we'd expected more step-down. They did all step down some during the year at different stages, but they didn't step down as much last year as we had anticipated, which is why we still feel there's a little bit of residual step-down that is left for 2014 and has affected our guidance.

Our next question is from the line of David Gold with Sidoti & Company. David Gold - Sidoti & Company, LLC: Just a little bit of follow-up there, particularly on the 3 big assignments. Can you give some sense? I know they were obviously different drivers for each, and it seemed like at least one of them was maybe nearing its natural end, while some others have picked up some new life. So I'm not sure if you can speak specifically to them or not. But can you speak about a couple of things? One, give us a sense for, even broadly, where the 3 are and how much of revenue they made up for you in 2013 and what you think they will do for you in 2014?

So I think that -- look, I think what we're seeing is that overall, these 3 areas or 3 particular things are still making up something like -- it's probably a little over 12% of our -- right around, I would say, 12% of our revenues. It's somewhere in that range, maybe a little bit less. So as we've said before, we would think, on average, these projects, large projects, tend to be 2% to 3% of revenues. We have seen them step down into the 3% to 4% of revenues range. And we're continuing to see levels of activity. I think in general, what I would say is the matters that are, let's call it, in litigation, a lot of them are public. And what you see is that there is continual matters that get resolved either through the court process or settlements that come along. And so things have continued to, I would say, step down over time in those areas. I don't know if you have any further thoughts, Paul.

Yes. I mean, I don't think one of those projects we've really -- it's almost difficult to decide how much is part of the assignment because a lot of our revenues have kind of diversified out from matters related to what I might generally call the event itself. But in the other 2, I think they fit more into what Rich is sort of describing. They all have multiple litigations and multiple forums. And some of them have settled and some of them haven't, and there's ongoing work. I think from that standpoint, we're just expecting that overall, that group will go down by sort of 1% each this year. David Gold - Sidoti & Company, LLC: You said 1% each this year?

About 1% each on average. David Gold - Sidoti & Company, LLC: Got you. Got you. Okay. So essentially we'd exit the year with them representing closer to 9% of revenue?

A little less, maybe.

Yes, yes, less. I mean, I think Paul is right. I mean, probably, as I'm describing it, it's really -- those percentages include the fact that we've diversified or -- within those clients. And as such, over time, what is related to the individual matter becomes less clear. But I think that if the numbers, let's say, are in that, let's call it, somewhere between 10% and 12% that are more directly tied in there, you'll see something that's probably more directly tied that would be down in the high single digits range, 7% or so, when you look at it a year later. David Gold - Sidoti & Company, LLC: Got you. All right. So let me ask it in a different way. Are we exiting the year, did we exit 2013 with those projects at a 12%, let's say, revenue run rate?

No. We exited the year with these projects stepping -- that are more in this what I would describe as being around 10% range. Maybe a little -- maybe a little bit less than that. Again, the challenge is, David, things become sort of splintered off, which is the good news. I mean, what we -- just a reminder to everybody, what we've talked about over a long period of time is that clearly you have large matters. They have very intense periods of time. They begin to move along. Examples that we used before is that when you look at work that we've done in the automotive industry, where there's a big, large investigation, that issue tends to be a central issue for that industry and that client for many years to come. And as such, our work in that area continues. And hopefully, our relationship with those clients continues going forward. Maybe not at the same level it was during the intense matter, but it continues on. On the environmental side, we were working on Exxon Valdez issues 15, 20 years later, not at the level that we would have been at the onset or in the early years, but again, there are long tails to these matters. In the utility market, it's really about not only helping people with an individual incident but identifying areas for where they can improve their processes and systems and being able to help them with that. And so in each of these areas, we're in different points of transition there. It just means that while it's not going to go from where it was to 0, it's going to settle somewhere in between. David Gold - Sidoti & Company, LLC: Got you. Okay. And then looking at it a different way, I guess, to your point, Rich, the step-down is something that has come up, I guess, on these conference calls for, I want to say, the last 2 years. How much confidence do you have that we'll truly see some runoff versus maybe more just conservatism as you think about this year's guidance? Or are your -- you're obviously already seeing some movement there. But do you think -- is it more a function of being conservative or are we pretty confident that we're going to see that runoff?

I think we -- look, I mean, we were confident last year we were going to see a certain amount of runoff. It turned we didn't see as much as we had originally thought. But I view that -- look, we try to give our best estimate when we start out the year. Things can change over the year. We tried to do that last year. There were some things that changed, like the sort of step-downs didn't occur as much as we thought. So I'm not going to attribute this guidance to us being sort of especially conservative. I think it just follows our normal pattern of us calling it the way we see it. In hindsight, we appear to have been conservative. But I mean, it's just based on our judgment. David Gold - Sidoti & Company, LLC: Sure. Sure. And I mean, to clarify, I mean, certainly, not a complaint. We'd certainly rather you prepare us as you have. And if there's upside, that's terrific. Just one last, and then I'll turn it over. As you think about the business today, reactive versus proactive, can you give us a sense for how much -- for what the split is and how much that's changed, say, over the last year?

So I think it's actually difficult to measure this change quarter-by-quarter, or even 1 year to the next year just because of projects coming and going. I would say we still very much believe that the proactive side of the business is growing faster than the reactive side of the business. We're not yet ready to change the split that we've sort of recently described, which was 60% reactive and 30% proactive. But it's not that long ago that we were 65%, 25%. So it has moved, and I think it's continuing to move. And we feel that, that's the right direction. We feel there's a huge amount of untapped opportunity on the more proactive side. The reality of Exponent is that it's actually, really, I would say, very well known among many of the large companies and law firms that deal with reactive issues, whether they be product recalls or whether they be litigation. On the more proactive side, we're still working on getting our market recognition. We're well recognized among certain clients, but we've got a long way to go. So we feel like there's definitely more potential on that side. But I can't give you just a sort of a change over a short period of time.

Our next question is from the line of Joseph Foresi with Janney.

I wonder if you could talk about -- if you break down the mid-single-digit growth versus what you're giving for guidance, it sounds like there's a couple of different puts and takes. I'm wondering, how much is -- if you could quantify, how much is Defense creating a headwind? How much is what we just talked about with the step-down in large projects creating a headwind? I wonder if we could just get a feel for both of those pieces in the present guidance that's out there.

Yes. Look, this is where it is. We think that the underlying business is growing in the high single digits. And I think that's what we shared throughout last year, and we continue to feel that way today and as we look at the opportunities going forward. The offset to that is that we had an extra week in the year. That wasn't a full robust week because it had some holidays in it. So I wouldn't call it -- so I look at that week as about 1.25% of revenues type of thing. We have -- that we won't have this next year. So that's part of the offset. It's also part of the gain that we had in the 5% this year. We also had $1.4 million from this onetime revenue recognition in the second quarter. That's 0.5% of our revenues. So those together, let's call it, 1.75% to 2%. We expect that each of Defense, as well as the few each -- the 3 sort of major engagements that we've talked about that are stepping down. So 4 different components there, each sort of coming down about 1% of our revenues. So somewhere around -- it's stepping down about maybe $3 million each as you look at it in that vein. So that's on average what it will be. But that's how we're looking at it. So that's how you end up getting from the high single digits down to the low single digits, by taking into account that, what's approximately 6% differential there. If you look at 2013, you would take off the 53rd week, take off the extra $1.4 million, you're somewhere around -- you're in the 3%, 3.5% range. And that came relative to, again, the fact that we feel we were growing in the high single digits. We ended up having Defense and some of these other -- a few areas step down that, let's call it, 4%, 5% in the year.

So essentially, a 6% headwind from the extra week, the revenue recognition and then the remaining 4 from the Defense and the major engagements. Is that fair?

Yes.

Yes.

Okay. And then you make up maybe 2% or 3% because the core businesses is growing in the high single digits, which gets you to where the guidance is. Is that right?

That's correct.

Got it. Okay. That's helpful. And then on the product business side, we talked about maybe rebuilding the pipeline there. But now it looks -- it sounds like Defense is maybe a little bit more of a headwind than it was before. Have you revisited the military product business at all? And are there any expectations for that going forward? Or given where defense is, we shouldn't expect that to pick up?

Yes. We -- again, the majority of the revenue that we recognize as products revenue over the last several years, it had been related to the sort of surveillance system that we had developed as part of our work for the Rapid Equipping Force. I don't see that coming back. That has stepped down as they're beginning to pull out of Afghanistan and not needing to replenish their supplies there and such. We still are engaged in the ground penetrating radar technology area. That has been an area where more of our work has been around development. While there are systems in place that are being used, our work in those areas has been more on a percent complete or consulting basis, even though we might deliver 1 or 2 here or there. Something in the -- what I would say is that technology has become adopted by the U.K. There are other ministries of defense in Europe and other parts the world that are looking at that technology and how they should use ground penetrating radar going forward for IED detection. But we -- while we expect to continue to support the U.K. and continue to be a recognized consultant in IED detection and in -- specifically in ground penetrating radar, I am not, at this time, building anything into expectations about product sales there. Could something change in that area? Is there an opportunity? Absolutely, there is. But it is too uncertain and lumpy to build that into the expectations at this time.

Okay. And then just lastly from me. Maybe you could talk a little bit -- we've been talking about sort of where the drags are coming from. Maybe you could talk about areas that you're excited about. It sounded like your pro-cyclical business has started to pick up and maybe it was going faster than what was expected. But maybe you could just talk a little bit about sort of what drivers you see out there outside of what you called out on the quarter.

Yes. No, I mean, I think that we continue to be excited about what we're doing in biomedical engineering and medical devices. That area grew really quite fast last year, and we expect continued growth there. We're optimistic about spreading more of our engineering management consulting practice, which, a lot of which is focused toward utilities. And much of that has been focused towards one large utility in California here where we had sort of a major assignment. But we have some opportunities, we think, in expanding that more broadly to other utilities. And so we're certainly excited about that. We continue to be excited about what we're doing in the area of consumer electronics. And we think that there are some further opportunities geographically with regard to what we do there. I think you're aware that we're in China in order to support U.S. companies having products manufactured in China, but they also run into problems in Europe and other places where the products are being used. And they've got a desire for us to help them more broadly. So we think that, that is exciting. And going back to the health side, which -- it wasn't a strong year for us in health. But we are excited about a new -- in particular a new hire that we've made that will help lead us in the direction we've been talking about for some time with regard to the pharmaceutical industry and the health outcomes research. I don't expect that all to click in first quarter. But I think as the year develops, we may be able to do some things there. So continue to have a lot of good opportunities that aren't just really set up for this year. They're set up for this year and beyond.

Our next question is from the line of Tobey Sommer with SunTrust.

Could you describe what your hiring plans are in 2014?

Sure. So I think that, as you're probably aware, our preferred focus on hiring from a long-term standpoint is that we hire people, either straight out of school, coming out of Ph.D. programs, or people a little further along in that, that maybe have got some experience in either industry or government. And from there, we hope to grow them from sort of entry engineer or scientist position all the way up through becoming a principal in the firm. That's our model. We are very active on about 10 campuses around the country in focusing on getting some of that top talent. And we think that we've got a reasonable backlog of acceptance this year as we head into this year. And so we are very much -- even though the sort of overall growth rate for the firm might only be in the low single digits, I think we're looking beyond that with regard to the way we're hiring, which is part of why, I think Rich mentioned, our utilization may drop 1 point. Then on the senior end, we're always looking for senior people who have got a consulting background or book of business who might come in as sort of a lateral into the sort of partnership level or principal level, what we call it, here. And we have actually some retained searches because we've got some particular niches we're looking for there. We've had -- we've made a couple of hires through that. That's -- one of which has already started, one of which will be starting in March. And we'll continue to look for some of those -- some of those senior hires. So we have, I'd say, a very solid hiring plan in place for this year.

Rich, just a numbers question, if you happen to have it handy. If not, we can do it offline. Do you happen to have the revenues by segment?

Yes, I do. So did you want the net revenues or the gross revenues?

Gross, I believe.

Okay. Well, I'll just give both so everybody on the call can have it. So on the total revenues, the gross revenue level for the quarter -- is that what you wanted or the year?

The quarter, please.

Okay. For the quarter, the gross revenues were -- in the environmental and health area, they were $20.2 million. And in the engineering and other sciences, it was $52.6 million. On a net revenue basis, environmental and health was $19.6 million. And the environmental and -- I'm sorry, the engineering area was $49.4 million.

I had a question for you. In prior calls, you described one of the areas that you might want to add some folks was software. Because more and more of the -- whether it's autos or other industries, are relying more heavily on that. I was curious if you could describe what you feel like your capabilities are in that area and if you've improved them over the course of 2013 and then what your capabilities may be in helping customers deal with cyber-related issues.

Yes. So I think the situation -- so we don't really just call it software. We really call it computer science because I think it certainly includes software issues but it includes things beyond just what we would generally consider to be software. So where we are on that is that we believe we have substantial capability in terms of basically sort of evaluating sort of embedded software and products and how that might relate to any alleged failures that might be associated with that. For example, the unintended acceleration issues with regard to Toyota. That was one of the key areas. So we think that's an area that we have substantial expertise in. However, we think that, that's very much a growing field just because more and more products are controlled from a computer science and software standpoint. And so we continue to be looking to add and grow in that area. In things like sort of cyber security, I mean, the reality is we do, do a certain amount of sort of the security work associated with some of the work we do for the U.S. government with regard to smartcards and some other things. So we do have some capability there. We would like to build, and we are trying to build, a much more sort of comprehensive service offering there. But again, to be clear, we don't have in mind trying to -- as it were, create software products or services that we would sell. We are really interested in providing consulting help in those fields. This is also one of the areas where we have retained search, and we're looking for some senior people in this area to help jump start that area.

That was helpful. And my last question is another numerical one for Rich, and I apologize if I missed it. Did you give the bill rate growth and maybe what your expectation would be embedded in your guidance?

Yes. So the average rate increase that we realized on the year was about 2.5%. And we felt that this year that we would realize somewhere between 2% and 2.5% again. The way that works for us is that we do have one rate for each employee for the entire year. So we've gone through that evaluation of rates in the fourth quarter and set our rates for 2014 in January. The average rate that is increased for our existing employees was about 4%. As you bring in more junior people, on average, then the ones that are sort of rolling out, that blends down to a realized rate of 2%, 2.5% for the overall year.

At this time, there are no further questions in queue. This does conclude our conference for today. If you'd like to listen to a replay of today's conference, please dial (303) 590-3030 or (800) 406-7325 and enter access code 4662005. We'd like to thank you for your participation, and you may now disconnect.