Insight Enterprises, Inc. (NSIT) Q4 2016 Earnings Report, Transcript and Summary

Hello, ladies and gentlemen and welcome to Insight Enterprises Fourth Quarter 2016 Operating Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to Chief Financial Officer Ms. Glynis Bryan. Please go ahead.

Thank you. Welcome everyone and thank you for joining the Insight Enterprises conference call. Today we will be discussing the Company's operating results for the quarter and full year ended December 31, 2016. I'm Glynis Bryan, Chief Financial Officer of Insight. And joining me is Ken Lamneck, President and Chief Executive Officer. If you do not have a copy of the earnings release that was posted this afternoon and filed with the Securities and Exchange Commission on Form 8-K, you will find it on our website at insight.com, under our Investor Relations section. Today's call, including the question-and-answer period, is being webcast live and can be accessed via the Investor Relations page of the website at insight.com. An archived copy of the conference call will be available approximately two hours after completion of the call and will remain on our website for a limited time. This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, February 08, 2017. This call is a property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Insight Enterprises is strictly prohibited. In today's conference call, we will refer to non-GAAP financial measures as we discuss the first quarter and the full year 2016 financial results. When referring to non-GAAP measures, we will refer to such measures as adjusted. Adjusted measures discussed today will exclude the gain recorded in the second quarter of 2016 on an asset held for sale, severance and restructuring expenses recorded in all periods, and acquisition related expenses recorded in 2016 as well as the tax effects on these items. You will find a reconciliation of these adjusted measures to our actual GAAP results included in the press release issued earlier today. Also please note that, unless highlighted as constant currency, all amounts and growth rates are discussed in U.S. dollar terms. And please note that the results today do not include the results of Datalink Corporation as that acquisition closed on January 6, 2017. Finally, let me remind you about forward-looking statements that will be made on today's call. All forward-looking statements that are made in this conference call are subject to risks and uncertainties that could cause the actual results to differ materially. These risks are discussed in today's press release and in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2016 and other reports we filed with the SEC. With that, I will now turn the call over to Ken. Ken?

Hello everyone, thank you for joining us today to discuss our fourth quarter and full year 2016 operating results. I am pleased to report that our global team closed the year strong with solid top and bottom line results reported by each of our operating segments. For the fourth quarter of 2016 consolidated net sales were 1.5 billion up 6% year-over-year and up 8% in constant currency with constant currency growth in each region. Gross profit was 191 million in the fourth quarter up 6% year-over-year and up 9% constant currency with gross margins steady year-to-year at 13.0%. Consolidated selling and administrative expenses were $145 million in the fourth quarter, down 2% year-over-year and up 1% in constant currency reflecting modest investment across the business. Adjusted earnings from operations increased 37% to 45.9 million or 3.1% of sales. On a GAAP basis, earnings from operations increased 33% to 40.7 million. And diluted earnings per share were $0.72, on a GAAP basis, diluted earnings per share was $0.59. Within these results the North American business reported 6% top line growth and the hardware category sales increased 8% driven by strong server and storage sales as well as growth from networking and device solutions. In the software category sales increased 1% year-over-year in the quarter reflecting a higher mix of software sales reported on a net basis. And in the service category the acquisition of BlueMetal hit its one year anniversary on October 1st while the team delivered 7% year-over-year organic growth for the quarter. By client group our top line growth was driven by increased volume with large enterprise and SMB clients while sales to public sector clients softened particularly in the states and local space. Gross profit in North America in the fourth quarter grew 6% and when combined with continued tight expense drove adjusted earnings from operations up 36% year-over-year. In the fourth quarter we announced the acquisition of Datalink which closed at January 6, 2017. We're really pleased to have Datalink organization join the Insight team. We believe that our strong foundation built on strategic and operational discipline combined with Datalink’s deep technical talent and complementary offerings will help us develop and deliver solutions for our clients in the future while driving economic value for our shareholders. We’re a few weeks into the integration process and are very pleased with the progress so far. As we look back in North America business for the full year of 2016 there are quite a few areas that we're excited about. Hardware sales grew 5% year-over-year getting market share from competitors according to independent third party data and reflecting good growth in data center solutions as well as devices. Our software business in North America reported sales flat year-over-year due to a higher mix of cloud and maintenance sales reported on the net basis. Despite the top line optics we're really pleased with our progress helping clients assess and integrate cloud solutions into our business which is driving gross profit growth much faster than sales. And our services business grew 10% in 2016 reflecting organic growth and the integration of BlueMetal into our business. From a profitability perspective gross margins in North American in 2016 increased 10 basis points year-over-year. The effective higher services sales, good execution and the partner incentive programs and more software sales recorded a net basis more than offset lower margins on buying with large enterprise clients. And when combined with tight expense control adjusted earnings from operations in North America increased 17% to 124 million, adjusted earnings from operations margin was 3.1% up 35 basis points year-over-year. In EMEA net sales increased 70% year-over-year in constant currency in the fourth quarter of 2016 reflecting double-digit growth in hardware, software, and services for the quarter. Gross profit grew 14% year-over-year in constant currency contracting 30 basis points year-to-year due to higher sales to large enterprise clients. But expenses grew slower than gross profit and the operating leverage drove adjusted earnings from operations up more than 40% year-over-year to 10.3 million. For the full year of 2016 in constant currency our EMEA business grew top line business by 4% and gross profit by 7% compared to 2015, executing very well in the core business while continuing this transformation to a cloud and solutions company in the region. By client group our team continued to drive very strong growth with service providers, a faster growing end market for emerging hardware and cloud technologies while delivering at or above market in corporate and enterprise clients. Software sales grew 6% year-over-year in constant currency with solid growth in business productivity solutions on premise and in the cloud. For the full year 2016 we believe that we lead the market in cloud adoption with our largest software partner in EMEA. And services sales in EMEA grew 22% in constant currency as we expanded our software licensing and cloud consulting services across the region. Currency exchange rates continued to dampen our reported results in 2016 but despite the currency headwind our teams delivered top line growth at expanded gross margins and controlled discretionary spending which drove adjusted earnings from operations up 25% for the full year. In Asia Pacific, fourth quarter net sales increased 5% year-over-year in constant currency. During the quarter we saw lower hardware and software sales primarily in Australia but our services category grew significantly year-over-year partly due to the recent acquisition of Ignia and partly due to organic growth across the region. Strong gross profit growth drove double-digit earnings from operations in the quarter compared to last year. 2016 was a good year for Asia Pacific business overall. Top volume results reflect more than 30% growth in hardware sales and services sales more than doubled for the year assisted by the acquisition of Ignia but also reflecting expanded software license and cloud consulting engagements. The growth reported in hardware and services was offset by decline in software sales due to a higher mix of software maintenance and cloud sales which were recorded on a net basis in our financial statements. This led to flat year-over-year performance on top line in constant currency. Gross profit however grew 14% in constant currency in 2016 reflecting the strong underlying growth across the business. Our team continued to execute our strategy to expand our cloud and professional services offerings and grow hardware sales and portfolio combined with good expense control was able to adjust to drive adjusted earnings from operations up more than 30% for the full year. I will now hand the call back over to Glynis who will discuss our full year 2016 financial results in more detail. Glynis?

Thank you, Ken. For the full year 2016 consolidated net sales were $5.5 billion, an increase of 2% year-over-year in U.S. dollars and 4% in constant currency. North American net sales increased 4% to just under $4 billion reflecting 5% growth in hardware sales and 10% growth in services sales while software sales were flat year-over-year. In EMEA net sales decreased 2% year-over-year to $1.3 billion dollars in U.S. dollars and constant currency net sales increased by 4%. Hardware and software sales in EMEA grew 1% and 6% respectively, our services sales grew nicely at 22% all in constant currency. In Asia Pacific net sales of 175 million were down 2% year-over-year in U.S. dollars and flat year-over-year in constant currency. Our top line results in 2016 were negatively impacted by a higher mix in sales recorded on a net basis primarily driven by the adoption of cloud offerings by our clients. Please recall that cloud and software maintenance sales are recorded net in our financial statements where gross profit earned on the transaction equals the sales amount. This treatments effect reported top line results but has no impact on profitability. Despite the impact on the top line we're pleased with the growth we are seeing in our cloud business which now makes up approximately 13% of our gross profit. Full year 2016 consolidated gross profit was $543 million up 4% in U.S. dollars and up 6% in constant currency. Gross margin in 2016 was 13.5% up 20 basis points year-over-year. This increase was primarily driven by increase in consolidated [ph] sales which are transacted at higher gross profit than our corporate average and a higher mix of software account sales reported on a net basis in our financial statement. Selling and administrative expenses for the full year of 2016 was $585 million, flat year-to-year in U.S. dollars and up 2% in constant currency. In North America SG&A increased 1% year-over-year due primarily to higher headcount related expenses including much higher health benefit expenses partially offset by the expense reduction actions in second quarter 2016. In EMEA SG&A expenses were down year-to-year in U.S. dollars and up 3% in constant currency in 2016. In the Asia Pacific expenses increased 7% in constant currency due to an increase in headcount and related expenses and to the Ignia acquisition completed in September of 2016. Also in 2016 we incurred $4.4 million in acquisition related legal and professional expenses associated with our acquisition of Datalink and Ignia. As a result of restructuring activities in North America and EMEA we recorded severance and restructuring expense of $4.6 million in 2016 compared to $4.9 million in 2015. All of this led earnings from operations of $149 million in 2016 up 18% from 2015. Adjusted earnings from operations were $158 million or 2.9% of net sales up 19% year-over-year from $132 million or 2.5% of net sales in 2015. Our expected tax rate in 2016 was 39.3% compared to 36.4% in 2015. The increase was primarily due to the effective change in tax law and active in December of 2016 related to taxation of foreign currency translation gains or losses arising from qualified business units and also to the non-deductible acquisition related expenses mentioned earlier. And finally diluted earnings per share came in at $2.32 on a GAAP basis. Adjusted diluted earnings per share were $2.52 up 19% from $2.12 -- $2.11 reported in 2015. Moving on to cash flow performance, for the year ended December 31, 2016 our operations generated $96 million of cash down from $181 million in 2015. These 2016 results reflect the collection of single large receivable of approximately $160 million in the fourth quarter of 2016 towards the payment of a supplier that was still unpaid in January of 2017. In the fourth quarter of 2015 we had a similar experience with a $60 million receivable collected in the fourth quarter towards the payment for the supplier was then made in the first quarter of 2016. Excluding the effects of these individually significant timing differences, cash flow from operations would have been nominal for 2016 as we use more working capital in the fourth quarter as the sales growth was related in the last few months of the year and for the full year we invested about $30 million in inventory towards plus the client engagements will be completed in 2017. For the full year 2017 we expect working capital expense will return to normalized levels and we'll see a positive contribution from the Datalink equipments. A positive cash flow to these activities will be partially offset by $160 million payment I just mentioned and for the full year of 2017 we expect consolidated cash flow from operations to be between $20 million to $40 million. Also in 2016 we invested $12 million in capital expenditures down from $13 million in 2015. We also spent just under $11 million to acquire Ignia in the third quarter of 2016 and we used $50 million in 2016 to purchase 1.9 million shares of our common stock. All of this led to a cash balance of $203 million at the end of 2016 of which $108 million was residential in foreign securities [ph] and $39.5 million of debt outstanding on our debt facilities. This compares to $188 million of cash and $89 million of debt outstanding at the end of 2015. From a cash flow efficiency perspective our cash conversion cycle was 14 days in the fourth quarter of 2016, a decrease of 6 days year-to-year as a result of high DPO in North America primarily driven by a $160 million single payment I mentioned earlier partially offset by higher DIO. Before I hand the call back over to Ken I want to take a moment to outline my expectations regarding the impact of the Datalink acquisition on our financial results. We expect the Datalink business to contribute approximately $600 million to our top line results in 2017. Datalink gross margins have historically run between 21% to 22% of net sales. We expect SG&A as a percent of sales to be just under 20% for the full year including expected intangible amortization expense of about $20 million and the impact of expense synergies but excluding the effect of acquisitions and integration related expenses. As mentioned in our last conference call. We’ve also borrowed approximately $200 million to fund the acquisition and our current average borrowing rate is approximately 3%. I will now turn the call back over to Ken to review our 2017 operating priorities and outlook.

Thank you, Glynis. Moving now to our 2017 operating plans. Across the markets where we do business industry analysts expect flat to low single-digit growth in hardware sales in 2017 and mid single-digit growth in software and services sales. Our plans for 2017 are focused on driving growth in excess of the market across our operating segments. Where we’re given continued weakness and major global currencies against U.S. dollar we expect that our reported growth in U.S. dollars will be in the low to mid single-digit range before giving effect to the addition of Datalink to our business. As previously discussed we expect Datalink will add an additional 600 million in net sales in 2017. The IT industry is stable and yet constantly changing which provides opportunity for Insight to continue to bring value to our clients, partners, teammates, and shareholders. We believe that the investments we made organically and through recent acquisitions combined with our global scale, strong data center, software and services capabilities position us well to compete the marketplace in 2017. Our operating priorities in 2017 are clear. In North America our core business is helping in growing the 2017. We will focus on accelerating that momentum getting to 2016. We’ll continue to invest and leverage our best in class digital marketing platforms and field sales engagement models or a new enterprise clients and more business with existing clients with our competencies around supply chain, software, cloud, and to bring additional value to our technical and consulting services capabilities. Our strategy includes the development of more mature offerings around work play services, hybrid cloud, internet of things, cloud, and acts as a service for both domestic and global clients. In addition we will continue our initiatives to improve and scale our Insight’s sales business. In the back half of 2016 we added approximately 180 teammates to our Insight sales model in Conway, Arkansas. In 2017 we will continue to invest in sales and marketing resources in Conway and other U.S. locations as well as sales enabling platforms that drive digital marketing, predictive analytics, web automation, and Cloud aggregation all aimed at improving the productivity of our sales teams. And we will be focused on integrating Datalink seamlessly into our organization. Our first priority is to ensure stability of the business operations and retention of talent. To ensure we meet this objective we are approaching integration on two fronts. The first is centered around the sales, marketing, and service delivery parts of the business. Sean O'Grady previously Chief Operating Officer of Datalink has joined Insight as Senior Vice President and General Manager of the Datalink business within Insight. Sean will lead the integration efforts working with Steve Dodenhoff, President of the U.S. business. Together they are focused on ensuring that operationally the business continues with as little disruption as possible while they access the sales and profitability opportunities of the combined business. The second is focused on integration of systems and back office functions. We've completed quite a few IT integration system projects over the last few years including integrating all the more recent acquisitions and our Asia Pacific and Canadian business onto our SAP platform. We believe we have model supported by cross functional teams across the business that has proven it works well for these projects. We expect to convert the Datalink business to our common systems in the first half of this year. Moving on to EMEA, our EMEA business has been on a multi-year journey to transform to a cloud and services oriented business. In order to fund these initiatives the team is focused on improving the sales execution and profitability of the core business. Over the past few years the EMEA team has more than doubled the earnings from operations of the business and revitalized the sales engagement model. At the same time they've expanded their services offerings around license and cloud consulting services and introduced new managed services offerings across the region. In 2017 our EMEA business continues with the same strategy with a focus on getting new clients, share, and market relevance in key markets, scaling solutions and selling more broadly in region, driving high performance sales organization, and improving the performance of certain underperforming markets. And finally our Asia Pacific business will stay the course on its strategy to selectively expand hardware capabilities across the region and to deepen its relevance to new clients and its relationship with existing clients have broadened the cloud and services offerings we bring to market. In support of this strategy we recently completed the acquisition of Ignia in Perth, Australia. With this integration into our business expands our capabilities in areas of application design, [indiscernible], mobility and business analytics. In 2017 we will extend the Ignia operations to Eastern Australia for new and existing Insight clients. Moving on to our outlook for 2017, for the full year 2017 with the addition of Datalink which we acquired on January 6, 2017 we expect our business to deliver sales growth of 12% to 15% compared to 2016. We also expect adjusted diluted earnings per share for the full year of 2017 to between $2.80 and $2.90. This outlook assumes amortization expense associated with acquired intangible assets of 16.7 million, effective tax rate of approximately 37%, and capital expenditures of $15 million to $20 million. This outlook does not assume any severance and restructuring or acquisition related expenses. Thank you again for joining us today. I want to thank our teammates, clients, and partners for their dedication to Insight. That concludes our comments and we will now open up your lines for questions.

Thank you. [Operator Instructions]. And I am showing we have a question or comment coming from the line of Adam Tindle with Raymond James. Your line is now open.

Okay, thank you and good evening. Congrats on 2016 particularly in EFO dollar growth line. Wanted to ask in particular on the operating margin in Europe that was probably the biggest surprise in the quarter for me. It was at multi-year highs. Can you talk about some of the drivers underlying this performance, do you think this is a region that can operate above 2% in 2017 on the EFO line?

In the fourth quarter Adam we have one very large significant transaction that drove that outstanding performance that we had in EMEA and that is not expected to be duplicated in 2017. So as a significant transaction it was very profitable, it drove that bottom line in EMEA. I think we have an expectation that EMEA business will over time get to greater than at 2% likely not in 2017.

Got it, okay. Well maybe digging a little bit more into the 2017 guidance on the gross margin line, I think the inclusion of Datalink should lift gross margin above 14% and I was hoping to confirm that. Are you anticipating any partner program change headwinds like we've seen in the past?

I think you're correct on the -- Adam on the margin front and yes, we will exceed the 14%. So we're excited about that. On the partner program changes there's no indications that we will have any changes coming into this year. Of course that's to the partners discretion to do that but there's been no indications to that. So we feel pretty good about that at this stage.

Okay and then I think if I run that through I think that it's implying that EFO margins might just see flattish to modest growth year-over-year in 2017. So was hoping that you could maybe talk about the puts and takes particularly on EFO margins in 2017 given it seems like gross profit dollars will be growing?

Yes, so when you look at the EFO, you are correct it is going to be modest growth in EFO margin expansion in 2017. We would anticipate a little bit greater margin expansion in 2018 as we get to the full run rate of synergies around the Datalink acquisition. So when you look at 2017 we have $12 million of incremental intangible assets, intangible amortization associated with Datalink. We just have or getting maybe 50% of the expense synergies associated with the Datalink acquisition and despite the growth in margins we are not seeing all of that flow through to the bottom line. In our North America business we are seeing some margin expansion but we're also investing in seasonal capability to drive our SMB -- some growth in our SMB businesses for the Conway operation as well as our Insight sales. So we have some strategies that we're making investments in such that in 2017 we don't anticipate that we'll see significant margin expansion at the EFO line.

Okay and you bring up the digital capabilities in the SMB business, I think that’s an interesting point because your main competitors is also re-shifting lets go to market and investing in digital and e-commerce tools which I think is something that you guys have been doing for a couple quarters now. I was hoping that maybe you could talk about why you think this is becoming more of a focus now across the industry, is your competitive set changing, are you running into more of the Amazon’s of the world in this space?

No it is a -- Adam it really is just -- it's the way to really prove return on investments that we make. Digital marketing is incredibly measurable, it's very targeted. So I don't think it has anything to do with the likes of any of the e-commerce sort of providers out there. It is just a journey that we've been on for actually last two years plus and it's starting to gain some really nice traction and we're able to see the results. And our partners they’re certainly moving this way as well. So they're encouraging us to continue to lead in this fashion. But it's all about really been able to target the message very specifically to individual clients and to be able to track them and measure that through the entire system from the point we generated a lead all the way through the actual closure. So it gives us really good feedback as to exactly what mechanisms are working the best and, how we continue to invest in those areas so that's really what is continuing to drive it. The consumer side has been doing this probably ahead of the B2B side for a while and I think it's to the B2B community just adopting these trends again that are very targeted.

Okay, it makes sense.

And I think our partners would say that they think that we have a best in class platform that shows them quite clearly the returns that we’re getting for the dollars they are putting in.

Yes, the key to that Adam really is twofold and we know this from our personal lives when we go on site. And the fact that first and foremost you have to have a really outstanding content that clients obviously want to consume. And the second part is you really have to have very sophisticated systems and tools. It's a combination of a multitude of different tools sets that we use in order to be able to provide this information to our sales teams in a very timely fashion and to be able to apply the measure. And things now are done in seconds not in days so, if you don't have both of those great content and really sophisticated e-commerce platform with all the associated tools you can't really deliver on the digital marketing promise.

Okay, that's helpful. Thanks and best of luck.

Thank you.

[Operator Instructions]. We have a question from the line of Matt Sheerin with Stifel. Your line is now open.

Yes thanks. I actually jumped on the call a little late so you may have talked about this already but for your revenue growth assumption for first 2017, what's the assumption for Datalink. I know you've talked about 600 plus revenue I think when you announced the closing of the deal, is that there's still the assumption in terms of your growth outlook for the year?

Well, first if we took -- we will do it in two pieces Matt, for Datalink we’re assuming a $600 million revenue, just around $600 million for 2017. We're looking at somewhere between a 21% to 22% gross margin assumption against that. In general the SG&A at around 20% that would include the intangible amortization of the $12 million that we discussed. It would exclude any acquisition related costs that are still to be incurred or that we incurred in the first quarter. And then when you look at our core business, when you look at the core business what we anticipate in the core business that's going to be low single-digit growth in actual dollars and mid single-digit -- mid to high single digit in constant currency. That’s because we have an impact associated with Euro and the GDP primarily that's about 8% headwind in 2017. Given what the average exchange rates were in 2016 well let’s say to the forecast out there currently for the exchange rates are going to be for 2017. So those two pieces impact the revenue growth line and then we talk about the fact that our margins will get a bump ultimately from the combination with Datalink since they've higher average margins than we would have. Adam in his question mentioned somewhere in the 14% range and that we would be making certain investments as you heard towards the end probably in digital marketing, our website and some sales headcount to drive our SMB lines of business by Insight sales. So the bottom line for Insight in total will get EFO dollar expansion but EFO margin will be nominal.

Got you, that's very helpful, and in terms of the synergies that you talked about, that incremental 12 million -- no, I'm sorry there was an incremental number for next year that’s 10 million and part of that is integrating the IT systems. Can you just walk me through some of the heavy lifting that used to take place between now and the end of year before you start to realize some of those savings next year?

So the critical piece ultimately will be the systems integration. So we're working -- we've been working on that with the Datalink team, our IT team, we have a whole integration team that is focused around the systems integration, getting the marketing tools, the services tool, and all the other aspects that Datalink uses to actually run the business understanding that how we integrate with tools that we have here currently. Our current expectation is that we will migrate Datalink onto our SAP system in the first half of the year. So, probably Mayish ultimately because we don't like to do things in June and the last month of the quarter. So we say in the first half of year it will likely be sometime in the May timeframe. And from there we start getting a lot of the synergies and expectations that we have around synergies, specific hedge related to the back office and expense takeout facilities with redundant functions that go away once we are all on the same platform. That's a big part of it. Immediately we're getting the benefits from and the SEC cost, CEO, CFO not duplicating those functions. We get those cost immediately and then as we go throughout the year we anticipate that we will consolidate facilities and pick up some cost there as well throughout the rest of this year. And then we’re still on track ultimately to get into the $20 million run rate as we see it now with regard to 2018. When we exit 2018 we have that $20 million run rate expense synergy takeout.

Okay, got it and thank you. And then just jumping around on your North America business, you continued to have pretty strong growth in hardware which is countered with some other companies the channel have been seeing. Maybe talk about the mix there and demand maybe by product and if you look at this year there are resellers and distributors are basically talking about a little bit more optimism particularly from North America customers in terms of potential pick up in IT spending, I know your overall growth assumptions are relatively soft partly because of the FX issues. But what is your outlook Ken in terms of North America outlook, are you starting to see your customers a little bit more optimistic about spending as well as other companies are?

Yes, so just the first question, the growth in Q4 was very nice in the hardware front as we indicated. Not that it came from really data centers. So we're very focused on the data centers you know. In fact that was one of the prime reasons for the Datalink acquisition because that's their sole purpose. So they're going to really add even more skills to that as we see most of our clients really going to hybrid cloud. So the private data centers and converged and hyper converged infrastructure we see a nice release trajectory in growth. So we have substantial growth in server storage in Q4. As far as the to address the question, next year we actually feel that the guidance that we're giving certainly is above market growth. What's muting it just a little bit is as you indicated really was the impact that currency is having there. So we're actually pretty optimistic with where the market is. We don't see a softening. We see the market continue to be pretty stable and continue to grow and our expectation is that we’ll continue to slightly outperform that market from a share point of view.

Okay. That’s it for me. Thanks very much.

Thank you. And I am showing no further questions at this time. So with that said, I would like to thank everyone for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.