Ladies and gentlemen, thank you for standing by, and welcome to the KAR Auction Services, Inc. Q1 2020 Earnings Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mike Eliason, Treasurer and Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thanks, Cheryl. Good morning, and thank you for joining us today for the KAR Global First Quarter 2020 Earnings Conference Call. Today, we'll discuss the financial performance of KAR Global for the quarter ended March 31, 2020. After concluding our commentary, we will take questions from participants. Before Jim kicks off our discussion, I'd like to remind you that this conference call contains forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties that may affect KAR's business, prospects and results of operations, and such risks are fully detailed in our SEC filings. In providing forward-looking statements, the company expressly disclaims any obligation to update these statements. Let me also mention that throughout this conference call, we will be referencing both GAAP and non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the applicable GAAP financial measure can be found in the press release that we issued this morning, which is also available in the Investor Relations section of our website. Now I'd like to turn this call over to KAR Global's CEO, Jim Hallett. Jim?

Great. Thank you, Michael, and good morning, ladies and gentlemen, and welcome to our call. This is certainly a unique call in that we are hosting this call, while many of us are working under stay at home orders and many other restrictions on our normal business and our personal lives as well. What I want to cover today is I want to review key items impacting our first quarter performance. I wanted to talk about our top priorities top four priorities that I'm focused on right now. And even though we're unable to provide guidance on our expected results for 2020, I would like to comment on what I see as the major influences on our performance for the remainder of the year and beyond. First, let me speak to the first quarter. As we reported this morning, our operating results were well below the prior year. However, this does not tell the complete story on how we were performing throughout much of the quarter. Starting with ADESA, North American volumes were 7% ahead of 2019 through the end of February. The strong performance in the first two months was driven by our digital platforms, OPENLANE and TradeRev. Physical auction volumes were up 1% through the first two months. We are also making good progress against our strategic priorities discussed on our prior earnings calls. Starting in the second week of March, we saw a rapid deterioration in volumes as people began to shelter in place and retail activity slowed at an amazing pace. We saw volumes decline across all of our sales platforms physical and platforms being OPENLANE and TradeRev for the month of March compared to the prior year. In fact, our North American volume, excluding TradeRev, was down 45% the week beginning March 16 and down…

Thank you, Jim. Let me start by providing more details on our cash burn during the period of our auction shutdown and where our cash burn is today. In late March, when we closed all 74 auction locations and did not run our Simulcast sales during this period, we were burning over $25 million of cash per week. We took a number of actions to reduce our cash burn as we saw our business activity reduced to minimal levels. Our first move was to furlough employees beginning April 3. We also reduced pay for a large portion of our remaining employees. We were able to reduce our weekly payroll and related costs by about $20 million per 2-week pay cycle beginning with the April 17 payroll. We also discontinued use of third-party vendors throughout the organization. This includes outsourced services at the auctions in the recon and body shops, staffing provided briefly by temporary labor firms, independent contractors, unless they were integral to critical IT projects, and we canceled or delayed all capital expenditure projects at our physical auction locations. These actions allowed us to lower our cash breakeven point substantially. I am pleased to report that we had a major milestone last week. We were able to have our first cash breakeven week since mid-March. To give you some context around what we have accomplished, our breakeven volume levels prior to our moves in late March and early April was about 45,000 vehicles sold per week in the U.S. and Canada. This time of the year, we would expect to sell 65,000 to 75,000 vehicles per week in those regions. These numbers include vehicles sold on all of our wholesale auction platforms. We have now reduced our breakeven point to about 20,000 vehicles in the U.S. and Canada per…

[Operator Instructions] Your first question is from the line of Bob Labick with CJS Securities.

Good morning, thanks for taking the questions. Thank you very much for a lot of great detail and information as well. You talked about physical auction changes coming out of this and streamlining operations. Wondering if you could give us a sense of the biggest changes that you see and how long it will take to implement them? Because obviously, as you mentioned, this could help reduce costs in the new business model as you emerge?

Yes, Bob, a great question. First of all, let me say that this whole digital transformation is something that I've personally been very focused on for a long time. I'm on the record with the auction association as saying, first, what we have to do is we have to make our auctions a safer environment. We've had over the years, we've had, unfortunately, casualties in our business, and I've become increasingly concerned about that. And KAR Adesa has always been the leader in safety, and I want to continue to promote safety. But aside from the safety aspect of it, there are significant advantages, I think, to both our sellers and to our buyers. A couple of things I'd mention to you is I'm a strictly formal case basis where in dealer aren't coming to the auctions and not congregating at the auctions, we're not running cars through the auction lanes. It creates a lot of efficiencies for both the buyer and the seller. The buyer can buy from any where remotely and, quite frankly, the seller can represent their cars remotely as well and make decisions to sell the cars from a remote location. I think it creates a lot of transparency, our dealers really like the transparency of being able to see where the bids are at, and see where the bids are coming from, and actually who they are bidding against. And they can see this type of thing. We're able to incorporate better data in that in analytics into what we do at our online format. And I think it's just a more efficient, better outcome. And as you know, and as I mentioned in my comments, we were forced to go to a hundred percent Simulcast all those and we started running our auctions, we…

So with that...

Yes. I think I got it there. Some one else just say something?

I think it's still you. You still have the floor.

Okay. I'm sorry. And then just finally, Eric and I both spoke to our cost structure. Digital transformation definitely allows us to reduce the delivery cost to our customers. And then the other opportunity that I didn't talk about is there's the opportunity to consolidate a lot of these SG&A and back-office functions. As you know or may know today, we basically have all these activities taking place at 74 different auction locations around North America. We believe there's an opportunity to consolidate some of these functions, not into maybe a single location, but into a small number of locations, which is going to create efficiencies through the use of technologies and a couple of examples I would give you is just payment and title processing.

Got it. Okay. Great. And then just as it relates to TradeRev, does the TradeRev model potentially change as a result of COVID? Is there an opportunity perhaps to have dealers take pictures and run the auctions like you already do in Canada? Or is there any other potential changes or outcomes to TradeRev from the pandemic?

Yes. Let me tell you, again, we're we see an opportunity for TradeRev here. And if I can just give you a little bit of history here, but not too far back. When we think of TradeRev, we think of it as dealer consignment, and we think of dealer consignment as a segment. And that combines both dealer cars sold at the physical auction as well as dealer cars sold on TradeRev as the dealer consignment segment. In January, we're in January and February, we're seeing very good results at the auction. Actually, our dealer consignment segment was up 6% and both TradeRev and physical dealer business was both showing an increase. And throughout this pandemic, we've seen TradeRev continue to be increasingly used by dealers to transact on. We're seeing more dealers sign up. We're seeing more buyers sign up, more sellers sign up. And I think on a week-over-week basis, we're seeing increases on TradeRev, especially in the U. S. We're seeing more growth in the U.S. right now than what we're seeing in Canada. And in some cases, more recently here, we're seeing stronger results year-over-year than we saw last year. And I think a lot of this goes back to the better together program that we talked to you about, where we put the ADESA sales team together with the TradeRev sales team, and we basically cut those numbers in half. We're doing the same or more amount of work right now and getting the same or better results right now with about 50% of the staff that we had previously. So there is an opportunity for TradeRev here, and we see it as an alternate platform. We also see the opportunity to integrate the buyer bases of all these platforms. So you take the TradeRev platform, the OPENLANE platform, the adesa.com platform and the Simulcast platform, you take all those platforms and we consolidate that buyer base, so that buyer gets to go through, as we say, go through the front door and be able to view all of our inventory on all of our different platforms.

Your next question comes from the line of John Murphy with Bank of America.

Just a first question on the I think, Jim, you're seeing sort of the ultimate Simulcast where everything was automated and you didn't have a live auctioneer. I'm just curious, how much does that necessitate still or still require, I should say, a physical presence? Meaning, are your physical auctions and the processing that they provide either stranded assets, or are they still assets that if we go in that direction will still be necessary and leveraged to run the business?

Actually, we refer to it as Simulcast Plus. I'll tell you, we've used Simulcast Plus. Directionally, I would tell you, we've run over 20 auctions on Simulcast Plus. And quite frankly, it's been it's been very successful. I would say to you, quite frankly, it's exceeded my expectations. As you think about it, we are seeing results now. It depends on the mix of vehicles. And it depends on maybe the location. But for the most part, we're not seeing a big difference in terms of the results in the returns between what we're getting at a physical auction with a physical auctioneer versus the Simulcast Plus auction where there's an automated auctioneer. We're not seeing a big difference or we need more data. And we need to prove it out more, but the early indication is that these results are very attractive.

And John let me add, all of these cars are being sold off of our physical location. They're wholesale ready, meaning they've been reconditioned, an inspection report has been prepared. This is not a remote sale, for example, from a dealer lot, like you might have on TradeRev. So this is a physical auction location selling without the use of the labor for the auctioneer and running the cars through the block. So I wanted to clarify that.

To follow-up on that Yes.

Yes. Sorry, John. One other thing that I was going to add that I think is really important here is this Simulcast Plus, it allows you to sell any day of the week. Traditionally, you have your one sale day, Indianapolis sells on Wednesday and New Jersey sells on Thursday and Boston on Friday, whatever the case might be. With this Simulcast Plus auction, customers can sell every single day of the week. We can have an auction every single day of the week. Not only can you have an auction every single day of the week, you can have an auction that a seller could be selling cars at three or four or five different locations around the country that all these cars are posted and available for sale. So these are really some of the benefits that we have to be able to demonstrate to our customers.

I'm sorry, I just want to follow-up. To be clear, though, Eric, as you're kind of clarifying things is like you still are utilizing your physical land and buildings for marshaling the vehicle, reconditioning the vehicle and processing through pictures and getting frontline ready for Simulcast. Is that a fair statement that, that land is still valuable to you in the process?

Extremely valuable. And it provides a central location for the pickup of the vehicle by the buyers, which is a critical value proposition. The buyers don't want to be running around to pick up 10 cars from 10 different locations, it's inefficient.

Okay. Great. Then just a second question. I mean, there is a backlog of vehicles at your auctions. Obviously, you've been shut down by requirement. There's not a lot of buyers at the moment. But as things start to open up and the sky is clear a bit here, I'm just curious, as you think about your major sellers like automakers, vehicles coming off-lease or the captive fincos, other fleets, dealers, rental car companies. I mean, if you kind of think about the major sellers, how much realization is there that the market is now different? Prices are lower and they're going to have to reset expectations and kind of how fluid do you think that's going to be or do you think there's going to be some hesitance as prices maybe drop in the initial phases here and maybe beyond the initial phases of opening up? I'm just trying to understand how big a lock jam and reluctance there is among sellers to get realistic about market pricing? And how much problems that may create in actual conversion rates?

Yes. So John, first of all, these cars continue to come in. We've got the cars. And as I say, these vehicles are on a one-way ticket. They're not going anywhere else. We know we're going to sell these cars. With that said, we did see reluctance initially where some sellers weren't ready to take price reductions, and they said that they wait for a little bit more clarity in the market and how the market was going to rebound. As I mentioned, we'd shut down for two weeks, and we opened up our auctions a few weeks ago. And since opening up our auctions, I mentioned that we've continued to sell more cars each week. We've continued to see conversion rates go up. I think in some cases, that our larger sellers are starting to accept price reductions to get these vehicles sold. At some point in time, we have to move through this backlog of cars. They're going to continue to come. And I think with what we're seeing now, even as we head into April, we're seeing some pretty positive signs in terms of what's going on in the retail world. We're seeing cars are starting to sell at retail. We've talked with the folks at NADA and people throughout the industry. And there's a couple of points that I would mention to you is that dealers are actually back to selling somewhere between 50% and 75% of their normal volumes that they would have sold. And we're seeing a couple of things, both ends of the scales. On the bottom end of the scale, we're seeing the $5,000 and $6,000 car become very, very attractive. And this is the case that, I think, where people are going back to private ownership, they want basic transportation. They…

And John, I'd like to add one thing for you. In 2008, we experienced something similar. Our value proposition to our consignors is we will hold those cars for them. And so they can release them to the market without putting additional downward pressure on pricing. It may be down, but if they flood the market, and this is the supply imbalance that we're going to have, we have more supply than maybe demand in the short term. And we are there to help our customers manage through that without having to take unnecessary financial burden on the sale of the vehicle.

That's very helpful, thank you very much guys.

Your next question is from the line of Bret Jordan with Jefferies.

Hey, good morning guys.

Hey, good morning.

A question on TradeRev. I guess when you think about its volume growth prior to the second half of March, when everything shut down, could you talk about sort of how that was ramping? And I guess, from a competitive landscape, how do you think that volume compares to the peers in the space, maybe a Manheim express, or what ACV is doing as far as jockeying for units?

Yes. So, all I can tell you, Bret, is I can't really speak to what the competition is doing. We certainly hear lots of anecdotes, but I don't focused on that and really focused on TradeRev. And what I can tell you is that the increases that we're seeing on TradeRev without getting into specific numbers, we're very pleased with the growth that we've seen through January and February. And we're very pleased with what we're seeing here through the pandemic in terms of dealers signing up to use the product. Eric, would you add to that?

Yes, Bret. When we combine the sales force of ADESA and TradeRev to have a dealer consignment initiative. Beyond TradeRev, we were seeing actually strong growth even at the physical auction in the dealer consignment business as well as TradeRev. And we think, to be honest, we had a very successful marketing plan, and it was being well received by the customers. And then as we entered into late March, the one somewhat bright spot is we've seen TradeRev do very well and really be resilient through this. The customers clearly are using it when they can't get to the physical auction. So, it's serving our customers very well as an alternative. If they can't get to the physical auction, or if that's a better way to sell the vehicle. I think it's reinforced our strategy on TradeRev is the right strategy. And our strategy on dealer consignment is the right strategy.

Okay. And then a quick follow-up. I guess as you had a bit of success with Simulcast Plus, is there the possibility to shrink some of the physical footprint? I mean, 74 locations, do you need them just because you need the proximity? Or can you consolidate some of your auctions into fewer footprints and lower fixed overhead?

I think, Bret, Eric mentioned earlier, land is really critical. And having these locations is really critical. We have the inventory vehicles, we have to image them, we have to recondition them, we get to do the ancillary services. We've talked about the revenue opportunities there. And we need a place for dealers to be able to have a central point of receiving these cars and dropping these cars off. So I'd say, land is land continues to be very, very, very critical because dealers need to be able to get these retail ready cars, and that's what happens at these physical locations. Now with that said, with 74 auctions, is there an auction or two that we could take a look at and really consider whether we need that particular auction in that particular location? Is there an overlap, is there a duplication, something of that nature? There's always a chance that there's the onesie twosie, but for the most part, we need land.

And Bret the one thing the technology might permit over time is we'll need the locations, but perhaps the land footprint could compress a little bit as we can move the cars rather than one day a week, multiple days of the week. You could turn them over faster, Jim, and we could maybe have a less need for the amount of land in a location, but that's a longer-term viewpoint.

Your next question is from the line of Ryan Brinkman with JP Morgan.

Firstly, just wanted to follow-up around the discussion on used car prices buy may be if you can remind us of the impact of lower prices on your business, specifically for ADESA. How important is the gross transaction price to the auction fees you're able to generate on the buy-side and the sell-side and in comparison to the other elements of your revenue, which aren't as likely to move with transaction prices, such as the different ancillary services you provide, et cetera?

Yes. Ryan, I'll remind you that we're a transaction company, and we're focused on the transaction. Now listen, we want to get the best economic outcome we can for our customers. But at the end of the day, the selling price of the vehicle is not nearly as significant as the transaction itself. As you know, our fees are not on a percentage basis, they are on a stair-step basis and they stair-step in small increments as they go up in price. So a car has to change pretty significantly in value for it to have any meaningful impact on our prices. And the other thing I would tell you, during the pandemic here, on average, it shifts around a little bit by location and product, but on average, we've seen a price reduction of somewhere in the neighborhood of 10% to 15%. And we think that may even adjust itself here as we go forward to the positive.

And Ryan, let me add one thing. In past when prices dropped because of supply versus demand, we have seen our customers typically spend more money on the reconditioning of the vehicle. Now we're in an odd time where reconditioning services are not open in most of our locations. But as it comes back opening, I think you will see a very positive impact on revenue per unit as they are likely to spend a little more money getting that car retail ready because the retailer will want to buy the car that he can sell immediately when it hits its lot. Is that right, Jim? I mean as a dealer, you would agree with that, typically.

Yes, sir.

Very helpful. And then just finally, I know you sort of specialize in the big institutional sellers, but also that a lot of your buyers and sellers are these small, privately held businesses, like buy here, pay here dealers, non franchise dealers without the support of OEMs and their fincos, et cetera. Just perhaps, many of them have applied for probably the PPP program. How do you think that these smaller businesses are likely holding up during the lockdowns. New vehicle dealers seem to have made a pretty impressive pivot toward these touchless online sales, what GM calls shop click drive, et cetera. But I'm guessing not as many of your independent car dealer customers were able to make that sort of a shift. So just curious how you're thinking about the health of those businesses as might impact AFC or demand at your auctions, et cetera?

Yes. Ryan, I'm going to start that, and then I'm going to let Eric weigh in with some comments specifically about AFC and anything else he wants to add. But I would tell you that right now, we think the health of the independent dealer is good in terms of what we're seeing. First of all, I want to say that when you say we specialize in these larger institutional sellers, let me tell you, we specialize in every seller, and we specialize in every buyer. And every one of them is important to us, and we don't discount any of them. We need them all. Some we just get more volume from than others. But at that with that said, I think the independent dealers are doing well. I think we're hitting a good price point for them. These lower dollar cars, as I mentioned earlier, are really attractive as an alternate means to transportation and private ownership. And I think some of the things, Eric that we're seeing through AFC would indicate that the independent is doing well. Eric, do you want to take that?

Yes. Ryan, one of the things that we look at on a weekly basis is the default rate within the AFC portfolio, and it's actually below normal right now, meaning the dealers are getting through it. Now let's not get fooled by that. We would typically see the health of that dealer show up probably as things start to recovery. And they kind of get through the toughest part and then they get behind the curb a little bit and maybe not get out of it. But we're expecting the dealer group to be healthy overall. Those that have taken the most risk will probably run into some difficulty, more than likely through the summer months. But us and our competitors have provided some relief to them on cash payment until they sell the car. That has helped them, and we are hoping that bridges them back to retail activity, and they'll make it. But I think the dealers, as a whole, are healthier than they were in '08 when we had a disruption. Just across the platform, they have less inventory, they turn the cars faster, and that will give them a higher likelihood of surviving the situation we're in today.

Very helpful. Thank you, Rob.

Your next question comes from the line of Craig Kennison with Baird.

Hey, good morning.

Thanks.

Hey, good morning. Thanks for taking my question. I'm curious what you are seeing in various markets, given that the impact of the virus varies by state and by stay at home orders? And I'd be particularly interested in trends in markets that have opened sooner just to get a feel for what the world could look like in a few months.

Yes. Well, you really have, Craig, a good point, and that's what we're dealing with early. It's if I go back six weeks or so, it was very different. It was very different and I would say it was different by state. It was different by city. It was different by county. It was different by province. Canada was different than the U.S. There was just there was just different ordinances in place as what was essential and what was nonessential and what you could operate and what you couldn't operate and which businesses. And I think it was just a mishmash of a number of variations state by state. And what we had to do is, as I said, we were focused on being safe, and we're focused on being legal. And we're focused on listening to our customers. And so what we did is we paid very close attention to where we're allowed to operate and what we're allowed to operate. And as we've opened back up, we've opened back up with those three things in mind. And for the most part, we're seeing business continue to move forward in terms of the volumes and the sales that I've talked about. Eric, do you want to add to that?

Yes. I mean, Craig, to your point and the types of companies that you follow as well. The middle of the country seems to have not been hit as hard and is opening up maybe a little sooner on the retail side. And I think if you go East Coast, West Coast, they're the extremes because those are also have been hotspots for COVID-19, where stay at home orders are affecting a greater portion of the population than in the middle of the country. And in the middle of the country, there's exceptions when you get to Detroit, Chicago, but overall, it's a more rural environment, and we've seen less impact on retail and wholesale activity in the middle of the country versus the East and West Coast. And Canada is lagging, and Europe is now coming back. We're very excited about what's happening in Europe because we have what we believe would be one of the leading online platforms to serve the European customer, which has been heavily dependent on physical auctions, we still have significant restrictions. While it's just opening up, we're seeing some promising early numbers over there in the online sales and who's interested in using our platform. So again, I think we're well positioned. And each region is different, as Jim said.

Yes. Cheryl, I think we can take one more question and then we'll need to wrap it up.

Your next question comes from the line of Daniel Imbro with Stephens Inc.

Yes. Hey, thanks guys. Jim, I wanted to start on the physical revenue per unit trends, up over $900, impressive growth despite the headwinds. And I think Eric just mentioned, most of the reconditioning services are closed right now. So can you maybe talk about the different factors that drove that? And then longer term, are we approaching an upper bound on ARPU or in prices and services keep moving higher over time?

Yes. So, I'm going to let Eric start that, and then I'll jump in, Eric.

Yes. Daniel, I think here's the thing. The off-premise services, in particular, were not shut down as quickly as the auctions. I think that number for the first quarter is a bit it's not it's an actual factual number. But when I had virtually no physical auction sales in the last two weeks, my revenue didn't stop as quickly, especially in the off-premise area. So, it's inflated over what had been what it would have been had we continued operating all of our auctions through the end of the month. So I would tell you, it's actually higher than it should have been had we continued the auction operations. Is there an upper bound? I'm sure there is, but I don't think we're near it. It's really a function of taking that numerator, which is total revenue other than online sales and dividing by the denominator. And I think our potential for expanding the revenue is tremendous and will grow faster than the volume will grow over time as really the value-added services are a highlight for us and will continue to be. Transportation doesn't require us to move a car that's at auction. We move a lot of cars that aren't at auction. So it's an opportunity for that to grow. Jim, do you have anything to add?

Yes, Eric. And Dan, I would add that when you think about the tremendous backlog of cars that we have, and these are cars that use a lot of our ancillary services, a lot of our reconditioning in the off-lease and the repossessed vehicles. We're going to get to do the ancillary services and drive the ARPU on those cars. And as you think about it, what dealers want to buy today is they want to buy those retail ready cars that I spoke about, cars that they can basically buy at the auction and take-home and put in the front row and sell today without having to do reconditioning for themselves. And I think you're going to and then the other thing, just from a competitive standpoint, they want bidders more attracted to their cars. And the more work they do to these cars, better they recondition them, the more they get them frontline ready, the more attractive they're going to be. So, I'm optimistic about the opportunity for ancillary services as we go through selling these cars over the course of the next two or three, four months.

And then just a real quick follow-up on the balance sheet, Eric. Total net leverage up here almost at four times. How comfortable are you guys, I guess, today with your leverage? If we think past post pandemic should we think about your target leverage? Are you still comfortable running the business like you used to? Or have you learned anything during this that would make you think that your capital structure would be different in the whatever new normal looks like?

Dan, that's a great question. We're very comfortable with our capital structure. And in fact, I think it's been a real asset as we face these uncertain times. Having the term loan B and the unsecured notes is the right structure for us. And three times is the right level, although that we may look at that over time as we grow. I think, you're seeing we're avoiding the use of our revolver as long as we can because we think adding leverage in a period of uncertainty, including leverage available to us imposes risk on the balance sheet that we don't need to take. So managing our cash. So we're comfortable, and we think we have the right capital structure. And we can operate for an extended period of time with this capital structure. And I'm sure glad I have the pieces in place that we have, and we've put in place with our most recent transaction being last fall. So I don't see any change there. And I see us being comfortable in the recovery with this capital structure.

Really helpful. Good luck, and everything else.

I would now like to turn the call over to Jim Hallett, CEO of KAR, for his closing remarks.

Yes. Thank you, Cheryl, and thank you, ladies and gentlemen, for being on our call today. We truly appreciate your continued interest and support in our company. Let me close with reminding you of what I'm focused on. We're really focused on the four things that I talked about is we're focused on preserving capital. We're focused on the safety, not only of our customers, but our employees. And number two, we're focused on the digital transformation of this business and how we can continue to move forward in that direction. And then at the end of the day, as we come out of this pandemic we know we have to come out of it with a different and lower cost structure, and we're very focused on that cost structure. I would just remind you that I feel very good about the business as this is unfortunate times that we've never seen coming, but I can tell you, this is a good business. And I think we're going to be better, and we're going to be stronger. But I'll also tell you, we're going to do things differently as we come out of this pandemic. We're going to be a data technology-driven company, and we're going to certainly be in many cases, we may be a smaller company in terms of overhead and headcount and people, but we're going to be a more profitable company with a higher-margin business as we move forward. So with that, we'll look forward to getting through this pandemic and talking to you next quarter. Thank you for being on today. I appreciate it.

Ladies and gentleman thank you for participating in today’s teleconference. You may now disconnect.