Smith & Wesson Brands, Inc. (SWBI) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Smith & Wesson Holding Corporation Earnings Conference Call. My name is [Colby] and I will be your operator for today. [Operator Instructions]. And as a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Liz Sharp, Vice President of Investor Relations. Please proceed, ma'am.

Thank you and good afternoon. Our comments today may contain predictions, estimates and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding sales margins, expenses and earnings for future periods, our product development and strategies and liquidity, and anticipated cash needs and availability. Our forward-looking statements represent our current judgment about the future and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings, including our Forms S3, 8-K, 10-K and 10-Q. You can find those documents as well as the replay of this call on our website at smith-wesson.com. Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements contained herein. Our actual results could differ materially from our statements today. Now I will turn the call over to our President and CEO, James Debney.

Good afternoon. Thank you for joining us and for your interest in our company. With me on the call today is Jeff Buchanan, our Chief Financial Officer, who later on will provide a recap of our financial performance and an updated outlook. Today we are very pleased to report that we delivered yet another strong quarter, one that clearly demonstrates the results of our focus on and our commitment to our core firearms business. With a strong consumer market for firearms and a solid portfolio of both established and newer product all aligned to consumer preferences, our team made great progress on executing several key strategic and operational initiatives. In the process, we delivered results that again set a number of new records for company performance. With that, let me provide some of the highlights from our first quarter. We again delivered record sales, another quarter in which our operations team did an excellent job accelerating our planned increases in manufacturing capacity, and working closely with our suppliers to enable them to ramp up to higher volumes. All of our combined operational activities contributed to record profitability, as reflected in net income and record earnings per share from continuing operations. Our newest addition to the M&P family, the M&P Shield, remained in very high demand by both consumers and professionals, and backlog for this product continue to grow. Our overall backlog remained strong at $392 million. We used our cash position in the quarter to purchase some of our bonds in the open market. And lastly, we concluded the sale of our discontinued operations. Overall, in the first quarter we demonstrated that we have the key components in place to deliver on opportunities for future profitable growth. These components include a strong portfolio of products that consumers desire, an operations team and suppliers that can deliver excellent performance, and an organization that has an ongoing commitment to lowering our costs and increasing our efficiency. Based on our continued focus on firearms, our successful results for the first quarter and our current outlook for the business, we are increasing our full-year fiscal 2013 guidance. With that, I'll ask Jeff to review the financial results.

Thanks, James. Please note that this is only a discussion of our continuing operations. Therefore, when I refer to net income, this is only net income from our continuing operations. And when I reference EPS, I'm referring to earnings per diluted share from continuing operations. For the results of our discontinued operations, the sale of which was completed this quarter, please refer to our 10-Q which field this afternoon. Revenue for the quarter was a record $136 million. This is an increase of $44.3 million or 48.3% over the prior year. We exceeded our revenue expectations by bringing forward capacity increases and working with our suppliers. Our gross margins were 37.7%, nearly nine full percentage points higher than the first quarter of fiscal 2012. Gross margin was helped by a favorable production mix that included increased volumes of our strategically important M&P line, resulting in our corresponding improvement in manufacturing absorption. We also saw some one-time benefits in manufacturing and purchasing variances, including euro exchange rate benefits. Even without those one-time benefits, however, we have solid margin gains as a result of our focus on cost-saving efforts and manufacturing efficiencies. Therefore, we now expect that our gross margins will be above 34% for the rest of the year. Our operating expenses in the quarter totaled $20 million or 14.7% of revenue versus $21 million or 22.9% of revenue last year. Thus, even though we had greater profit sharing and incentive expenses, actual SG&A costs were lower because of company-wide cost-saving efforts, as well as the timing and phasing of the selling and marketing expenses. As we focus on increasing market share, however, we do expect to see future increases on our selling and marketing expense. Our operating income percentage for the quarter was 23% versus 6% last year. Net income in Q1 was a record $18.9 million or an EPS of $0.28, compared with net income of $2.3 million or an EPS of $0.04 last year, a seven-fold increase. Our trailing six-month EPS is now $0.55. Adjusted EBITDA was a record $36.1 million compared with $12.2 million last year. Our trailing six-month adjusted EBITDA is $67.3 million and our trailing 12-month adjusted EBITDA is $92.3 million. The reconciliation of non-GAAP adjusted EBITDA to GAAP net income can be found on our SEC filings in our updated Investor Presentation which has been posted on our website. And for reference, our six-month-trailing net income from continuing operations was $36.7 million and our 12-month trailing net income was $43 million. Now I will discuss a few balance sheet items. At the end of the quarter, we had $118.4 million in working capital, sequential quarterly increase of over $11 million. We had no borrowings under our credit facility, and free cash flow for the quarter was $3 million, not including the $5.5 million in cash we received from the sale of our discontinued operations. Our cash balance at the end of the quarter was $60.5 million. Capital expenditures were $6.3 million and were focused primarily on capacity expansion. CapEx in this fiscal year will include capacity expansion investments as well as significant investments in the maintenance and health of our infrastructure and systems, particularly in operations and IT. We expect to further intensify our efforts on capacity expansion and we believe capital expenditures in fiscal 2013 will be in the range of $30 million to $35 million. As I noted on our last call, we went into the bond market at the beginning of this quarter to purchase our 9.5% bond. Although the market in our bond is very thin, we did manage to acquire $6.4 million worth. We will continue to look for more opportunities to purchase our bonds, but of course we'll always evaluate the best use of cash based on relevant circumstances at any particular time. Based on our cash balance of $60.5 million and our long-term bond obligation of $43.6 million, we have a net cash position that is the highest in our history as a public company. As we continue to grow, however, we do expect that working capital needs will increase. And with that, I'll turn the call back over on to James for a discussion of our operational results.

Thank you, Jeff. The first quarter demonstrated the ongoing strength for both our business and the overall US consumer market for firearms, as measured by adjusted mix or FBI background checks in the period and by ongoing high levels in our backlog. Excluding Walther products, our unit sales of firearms into the consumer channel for our first quarter on a year-over-year basis increased 30.1%. This compares favorably to unit growth of adjusted mix of 23.5% for the same period, leading us to believe that we not only kept pace with the rapid expansion of the market in Q1 but that we took market share. In terms of dollars, total sales in our domestic consumer channel during the first quarter, again excluding Walther products, was strong at nearly $111 million, which is almost 55% higher than last year. With over 90% of our net sales derived from the consumer market today, it is clear that our strategy to deliver products that address consumer needs, wants and desires is delivering excellent results. This is especially apparent in the strong sales growth of our M&P platform of products. Turning to our professional and international channel where our efforts to satisfy the requirements of BG users translates to higher product performance to consumers as well, first quarter revenue was $12.6 million, a slight decrease compared with last year, largely due to the timing of orders. Turning to backlog, and I want to remind everyone, as we often do, that backlog is cancellable until shipped. Backlog at the end of July totaled $392.4 million, an increase of $243.6 million or 163.7% compared with the end of first quarter of last year, and a sequential decrease of $46.6 million or 10.6% compared with the end of the fourth quarter of fiscal 2012. We believe the sequential decrease is due somewhat to our increased capacity and therefore our improved ability to ship product, as well as to the seasonality that appears to be typical for this time of the year. That said, this decline in backlog is the smallest percentage decline that we have seen in the past three years. As we look beyond fiscal 2013 and as we remain focused on our core firearms business, we continue to see multiple opportunities for increasing revenue and reducing costs, as well as implementing efficiency enhancements across our business. We intend to continue to drive revenue growth by leveraging our popular existing product portfolio and adding new products designed to meet consumers' evolving preferences. We intend to continue our focus on lowering costs, driven not only by leveraging our scale but also by ongoing attention to process improvements and cost reductions throughout our operations. And lastly, we intend to further enhance our efficiencies by improving the processes we use to operate our business and distribute our products in the market. As a consumer-centric company with the goal of taking market share, we plan to step up our presence and visibility with the US consumer through a number of incremental advertising and marketing activities that will occur in the balance of the fiscal year. We will also be working to replenish buffer inventories of finished parts for our most popular products, an action that is being made possible by recent capacity increases both internally and with our supplier base to better improve our customer service levels. As we remain focused on executing against these clearly-defined strategic initiatives, we believe we will further enhance the performance of our firearms business. Over time, we believe that our business has the ability to deliver gross margins of 38% to 40% and operating income of 20% to 22%. Before I turn the call back over to Jeff, I want to mention that the new August mix numbers came out this week with the 27th straight month of year-over-year adjusted mix increases. August adjusted mix increased by 27.8% compared with last year's 13.5%. Despite the fact that August tends to be one of the slower months of the year, these new August results are higher than any of those of any month during 2009, which as we all note was a particularly strong year for the firearms industry. And with that, I will ask Jeff to provide our financial outlook.

Thanks, James. We expect sales in the second quarter of $130 million to $135 million, which would represent quarter-over-quarter revenue growth in excess of 40%. We have been adding manufacturing capacity, which is why we are estimating that revenue in Q2 will nearly equal the revenue in Q1, even with the lost manufacturing days from our annual two-week August shutdown. For the quarter, we estimate EPS to be in the range of $0.19 to $0.21. For the full year, we are significantly raising our guidance based on the acceleration of certain capacity increases and the strong demand for our products. We now estimate net sales of between $530 million and $540 million, which would result in approximate 30% sales increase. This estimate takes into account our current capacity limitations. For example, due to holidays in November and December, our capacity in Q3 will be similar to our capacity in Q2. We estimate our tax rate at 37% and our share count at 67 million. So, taking into account my previous points regarding our expectations of gross margins and operating expenses, we now estimate our EPS for the year will be between $0.85 and $0.90. James?

Thanks, Jeff. Before I turn the call over to questions, please note that we will be attending the C.L. King Best Ideas Conference in New York on September 13 and we'll be hosting our Annual Shareholder Meeting on October 1 in Phoenix, Arizona. Finally, I want to thank the entire Smith & Wesson team for delivering another exceptional quarter of continued growth and improved profitability. That concludes our prepared remarks. So now let's open the call to questions from our analysts.

[Operator Instructions]. Your first question comes from the line of Reed Anderson with Northland Securities. Please proceed. Reed Anderson – Northland Securities: Good afternoon. Can you hear me okay?

Good. Thanks, Reed. Reed Anderson – Northland Securities: Hi. Congratulations. Terrific quarter, and great job executing. A couple of questions. First, I want to start off, James, just looking at kind of the capacity and that sort of thing. I know you don't want get too precise there, but is it -- two questions on capacity. One is, if you look at where guidance was for revenues coming out of the fourth quarter and where you are today, it's a, you know, call it a 7% increase in what you're going to talk in terms of revenue. Is that a fair analogy to look at that as sort of -- similar to what you might be doing for capacity or is that -- is there too many other factors to consider there?

No, I think you can roughly use that. That's a good approximation and won't be far off at all. Reed Anderson – Northland Securities: Okay.

Yeah. And Reed -- Reed Anderson – Northland Securities: Go ahead.

As James mentioned, it's also adding -- we are planning to add buffer stock also. So, you know, our capacity, as our finished goods go up, hopefully our capacity is actually increasing above just the revenue increases. Reed Anderson – Northland Securities: And the buffer stock, that's largely internally produced components or is that some external as well?

No. It's back to the hybrid model that we have for capacity increases, which is a balance between obviously our internal capacity, the base capacity we have here, mainly in Springfield, and our external capacity that we have with strategic partners. Reed Anderson – Northland Securities: Perfect. Okay, good. And then the other question on capacity is, you know, James, maybe you could just give a little more color on some specifics towards your getting that. Is it people, is it processes? Are you able to add some lines, whatever? But just maybe a couple of anecdotes would be helpful.

Yeah, it's difficult to go into too much detail. But yes, it's pretty much everything you listed. It's equipment, it is base capacity, it's also tooling to increase our flexibility, it's also again retiring assets, older assets, we're bringing newer technology which again will give us a bit more efficiency as well. Again, there's a certain ramp-up with our external sources, I mentioned our strategic partners. So they supply the ramping, I mentioned that in the prepared remarks earlier on as well. Reed Anderson – Northland Securities: Okay. And then another question on margins, that was a stunning number that 37.7%, and I guess, Jeff, you'd said there was a couple of one-timers in there. I wonder, you know, if you didn't have those, is it around that 34% number you were kind of talking where you're comfortable for the year, or was it better than that? Just give us a sense of what that impacted the first quarter by.

Right. Well, in the first quarter, you know, between six and seven of that percentage point increase over the comparable quarter of last year related to manufacturing and efficiency improvements, between one and two related to TC and the move that we made and about a little over 1% related to kind of you can call one-times. And so in this quarter, the one-times only took us down to around 36%, but there are other factors that are changing, you know, this is the time of the year that we roll our standards, our spending is different this time as mix changes. There's just a lot of things that were good in this -- especially good in this quarter, but -- and will continue. But going forward, we're forecasting it at 34%. Reed Anderson – Northland Securities: Okay, good. And then last question, James, you talked a little bit about kind of ramping up some, I think you said -- called them advertising, your marketing initiatives in the second half, you know, to really continue to drive this theme for consumers. Anything notable there relative to either channel or to medium? I'm just curious kind of what you might be focused on as we might be seeing something different or just -- you're going to just amplify the message in the same way you've been doing?

It's really more of the good stuff that we've been doing, so, certainly more advertising, print, internet-based, you will definitely observe that. In terms of supporting dealers, more of armorer's training, more merchandising tools for them to use, and everything of course with a strategic focus that we have on the M&P platform, in particular, the polymer pistol. As we've said before, that's the big runway for growth for us going forward, we're in third place at the moment when it comes to the M&P brand with that polymer pistol, and it's our goal to be number over time. Reed Anderson – Northland Securities: Terrific. Terrific job. Best of luck. And I'll jump off, let somebody else on. Thank you.

Thank you.

Your next question comes from the line of Cai von Rumohr with Cowen and Company. Please proceed. Cai von Rumohr – Cowen & Co.: Yes. Thank you. Very good quarter, guys.

Thanks, Cai. So, doing my math, it looks like a little over $2 million of one-timers. Could you tell us what were they? And should we see any one-timers in the remainder of the year?

The one-timers, a large chunk of it was foreign exchange, benefits with the euro, as I mentioned. Everything else was just a lot of things, you know, reserves, the adjustments where we had to like release reserves, just a variety of areas. You couldn't really point to one. Going forward, I don’t have any planned one-times. The thing about one-times is that they're usually unplanned, so our -- my guidance takes into account that we won't have any more one-times and that the run rate will be at 34% or higher. Cai von Rumohr – Cowen & Co.: Okay. And then you mentioned timing was a factor for sales and marketing, which was lower. Where should we think about sales and marketing and R&D and G&A for the year? How should we think --

OpEx was quite low this quarter, especially if you take into account the fact that incentive compensation and profit sharing are much higher than they were last year. But it's really just the answer that James gave last time which is it's going to be in a variety of areas but it's mostly consumer-oriented, you know, sales and marketing activities, advertising, product promotion, et cetera. In terms of the -- it's done all with the eye towards share gain and obviously share gain in the M&P. As far as rate, we haven't really specified the actual run rate, but it will definitely be higher than what we've done, probably in the last seven or eight quarters. Cai von Rumohr – Cowen & Co.: Okay. And then, I mean does it just ramp up in that second quarter? Because --

Well, I mean, there's a lot of things in process right now, actually it is hard to get this all ramped up at once.

Yeah, it certainly will be phased. We're entering a busier period, let's say, for firearms sales, so we're coming out of the very cool summer months. There's a lot more interest during this period in purchasing firearms. So we have to play to that. And market share gains don't come cheap. The plan is to be fairly aggressive, but fairly intelligent about it as well, we hope. And as we come into Christmas especially, again there is a lot of consumer purchase activity, we want to be in the forefront of the consumer's mind. Cai von Rumohr – Cowen & Co.: Okay. And then, you know, you had a significant increase in terms of your longer-term goal of 35% up to 38% to 40%, I mean 300 to 500 basis points. Maybe give us a little bit of color. I think you were talking about, I recall, you know, you needed 25% sales gains. So here you've basically done it in a much shorter period. What's really different? Why were you able to raise that number as much as you did?

Really it's largely to do with the ramp of our capacity. We feel that we're better-positioned, we're beating our own expectations internally as to lay down that capacity. We've increased our projection on the amount of capital that we'll spend, we feel very confident spending that capital. And remember, we do insulate ourselves with our hybrid model when it comes to capacity increases, so we still have the outsourced layer of capacity that really does help us protect the internal base capacity as well. We're very much more flexible in terms of what we're doing with that base capacity as well, and that's increasing our efficiencies. And we have to think about new products going forward as well. The pipeline still looks very robust. That's another reason that we're spending capital as well as we launch new products. Again, it's going to all add incremental revenue. Cai von Rumohr – Cowen & Co.: And then your cash position, obviously balance sheet continues to get better. I mean, what sort of free cash flow should we look for, for the year? Is it $40 million to $45 million? And then, what do you intend on doing with this newfound wealth?

Well, we haven't really forecast our free cash flow, but I did, you know, we're in a fairly strong growth ramp, and that takes working capital. I mean, as we've mentioned before, our AR like balances have been relatively low because customers are paying faster to get more product. So I don’t think that's going to last, you know, that will consume cash. I raised the CapEx guidance up to $30 million to $35 million. That will certainly use a lot of cash. We also talked about wanting to build inventory. So we really, if you look at finished goods inventory, it went from 14 to 16, and that's really just the stuff that's probably basically on the trucks. So if we really want to be more customer-oriented, we need to have more available stock and we need to build that inventory.

Absolutely, because we are under-serving the market at this moment, we all know that, and that's a great opportunity going forward for us.

And then with regard to your question of, you know, what we're going to do with any excess cash, we've always said we [want to analyze it] at any given time, with respect to externals and internals, we've already indicated that we've bought some bonds. We have -- still have about $46 million -- sorry -- outstanding. So there's -- so, basically haven't specified I guess. Sorry about that. Cai von Rumohr – Cowen & Co.: Okay. Terrific. Thank you very much.

[Operator Instructions]. Your next question comes from the line of Mike Greene with the Benchmark Company. Please proceed. Mike Greene – Benchmark Company: Hi, James; hi, Jeff. Congratulations on another great quarter.

Thanks, Mike. Mike Greene – Benchmark Company: So, James, you mentioned you were still in third place in polymer pistol market share. Do you believe you gained any ground on that front this year or is most of the growth we're seeing an expansion of the overall pie?

Yeah. To be clear, when we say we're in third place, we're only counting our M&P polymer pistol family, so we don't count, you know, the [STVE], the Bodyguard 380 and everything else. So, a little hard on ourselves in that respect. But yeah, in terms of, are we gaining ground, for sure. The launch of the M&P Shield, as we know, went very, very well. It's been extremely well-received. We're continually told by dealers and distributors it's one of the hottest products that they've seen for some time. Definitely taking share. So we count that as well. So when you look at the whole family for M&P, we're definitely starting to get some traction and make some headway. And as I said before, as we think about where we're investing our capacity, that's runway for growth, that's a strategic direction that we're taking. We get right behind that. Mike Greene – Benchmark Company: Great. And then on the backlog, do you have any concerns about double booking distribution, trying to get products? And if so, do you have any efforts to weed that out?

No concerns really in that respect. I want to say no concerns because the way that we look at backlog is we really don't take it to the bank. We have to remember it can be canceled. We always have that in our mind. We're very pleased with the level of backlog obviously. But for us, the most important thing and the news for us, it's a really good indicator of what products we should be making, how we should be investing and how we should be loading up the plant. In terms of it shrinking, are we concerned about that? No. That was fully expected as well. If someone had asked me on the last earnings call where I think it would go, I'd have said I expect it to decline as we go into the cooler summer months. Given it's the smallest percent decline, as I said earlier, is quite refreshing as well. That's good news for us. Mike Greene – Benchmark Company: Great. And I'm not sure if you've gone over this previously, but can you remind us if you have a new product release policy? Are you going to continue trying to release new products timed around large industry events as you did with the Shield in April?

No. I mean for us no. It's very much launch strategically. That's largely, first, you've got to be ready and capable, and there's a number of criteria we have internally that you have to meet. And then it's, when's the best time? So we may choose to just sit on a new product for some time and not launch it until we think we're ready. Because the last thing we want to do is launch a new product, and somewhat we felt this with the Shield, launch a new product and not be able to satisfy the demand without eating into the base capacity and starving other products. So it's a careful balance. And again it's largely going to be about timing. Mike Greene – Benchmark Company: Great. That's great news. And then one last quick question. On your slides, you mentioned that pistols are 82% on the handgun segment in the quarter. Would you be able to give us what percentage that was in Q1 last year?

Sorry, Mike, say again. You broke up a little bit. Mike Greene – Benchmark Company: I apologize. In the slides, you mentioned that pistols were 82% of the handgun segment in the quarter. Would you be able to --

Oh, in the investor presentation, yup? Mike Greene – Benchmark Company: Yes. Would you be able to give us what that was in Q1 last year?

Yeah, it was --

We're just looking up, Mike. Mike Greene – Benchmark Company: Sure.

I don’t think we break it out that way. Mike Greene – Benchmark Company: You haven't recently, but the fact that it was in the slide there, I figured that out.

Okay. It's the overall industry we're looking at, isn't it, in terms of our investor presentation?

Yeah.

Not our business.

Right. Mike Greene – Benchmark Company: I apologize. I must have read that incorrectly.

Yeah. Mike Greene – Benchmark Company: Thanks very much and congratulations again.

Thanks, Mike.

Your next question comes from the line of Scott Hamann with KeyBanc Capital Markets. Please proceed. Scott Hamann – KeyBanc Capital Markets: Hey. Thanks. Good afternoon, guys. Just in terms of the retail volume numbers that you gave us, can you give us an order of magnitude on the tactical rifle side versus the handgun side?

Didn't understand the question. Do you want to -- you want to repeat the question? Scott Hamann – KeyBanc Capital Markets: Yeah. Tactical rifles, did they grow at a higher rate than your handgun business?

Okay. I think -- you broke up again, but I think you were asking about the growth rate of handguns over modern sporting rifles, is that right? Scott Hamann – KeyBanc Capital Markets: Yeah, the retail volume of the modern sporting rifles for the quarter versus the handguns.

Right. So, quarter-over-quarter modern sporting rifles were 144% and handguns were, not including Walther, were 26.4%. Scott Hamann – KeyBanc Capital Markets: Okay. And then just in terms of the -- I know you don’t give profitability kind of by segment, but is it fair to think that the tactical rifle stuff is more profitable on a unit basis than the handguns?

Yeah, we've never specified that. Scott Hamann – KeyBanc Capital Markets: Okay. All right. In terms of price, had there any pricing actions you've taken recently or have seen in the industry? And is there anything you're kind of thinking about or, you know, you expect in your balance of your fiscal year?

Nothing material. Scott Hamann – KeyBanc Capital Markets: Okay. And then just clarification on the 20%, 22% operating margin target. Is that based on the same revenue targets that you laid out previously?

Yeah, we kind of changed our approach. And so what we've said is that it's based on growing at the industry growth rate, the historical industry growth rate. So, since 2005 that's been around 11%. And so like what we're seeing in order to hit the model in three years is to keep on growing at the historical industry growth rates. Scott Hamann – KeyBanc Capital Markets: Okay. And then just finally, from last quarter, if you kind of look to your guidance, and this quarter when you kind of revisit your guidance for the earnings release, was the increase, would you kind of quantify as a little bit more frontend-loaded versus backend-loaded or is it kind of looking at the year in kind of two parts, or is there any reason why you would think that, versus your prior expectation, which I know you didn't disclose, that the back half of the year would be better than you thought it was 90 days ago?

No, actually it's, you know, the forecast is basically, it's based on our view of the demand against our capacity. And we obviously were able to bring forward some capacity this quarter, which has the effect of raising the whole year if we assume that everything else is the same. But of course that affects also Q2 and Q3, and we've, I said, that -- I gave the forecast for Q2 which was nearly the same as Q1, and I said that Q3 on capacity is about the same. So, based on that, you can sort of angle your way into each quarter. Scott Hamann – KeyBanc Capital Markets: Okay, great. Thanks a lot.

At this time, there are no further questions in queue, so I will return the call to management for closing remarks. There are no further questions appearing in queue.

Just a moment please.

Sorry about that. Technical hitch. In closing, thank you, operator. Thanks everyone for joining us today, and we look forward to speaking with you the next quarter.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.