WD-40 Company (WDFC) Q2 2017 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing-by. Good day and welcome to the WD-40 Company Second Quarter Fiscal Year 2017 Earnings Conference Call. Today’s call is being recorded. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, we will conduct a question-and-answer session. [Operator Instructions]. I would now like to turn the presentation over to the host for today’s call, Ms. Wendy Kelley, Director of Investor Relations and Corporate Communications. Please proceed.

Thank you. Good afternoon and thanks to everyone for joining us today. On our call today are WD-40 Company’s President and Chief Executive Officer, Garry Ridge and Vice President and Chief Financial Officer, Jay Rembolt. In addition to the financial information presented on today’s call, we encourage investors to review our earnings presentation, earnings press release, and Form 10-Q for the period ending February 28, 2017. These documents are available on our Investor Relations website at investor.wd40company.com. A replay and transcript of today’s call will also be made available at that location shortly after this call. On today’s call, we will discuss certain non-GAAP measures. The descriptions and reconciliations of these non-GAAP measures are available in our SEC filings, as well as our earnings presentation. As a reminder, today’s call includes forward-looking statements about our expectations for the Company’s future performance. Of course, actual results could differ materially. The Company’s expectations, beliefs, and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished. Please refer to the risk factors detailed in our SEC filings for further discussions. Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today’s date, April 6, 2017. The Company disclaims any duty or obligation to update any forward-looking information whether as a result of new information, future events, or otherwise. With that, I’d now like to turn the call over to Garry.

Thank you, Wendy. Good day everyone and thanks for joining us for today's conference call. Today we reported net sales of 96.5 million for the second quarter of fiscal 2017 which was an increase of 2% from the second quarter of last fiscal year. Additionally we reported operating income of 18.9 million which was an increase of 5% from the second quarter of last fiscal year. Although we do not normally discuss operating income on these calls, we thought it was worth mentioning because there are some non-operating items which are distorting our net income and diluted earnings per share for the quarter. Net income for the second quarter was 12.4 million compared to 13.7 million in the second quarter of last fiscal year, a decrease of 10% year-over-year. Our net income was negatively impacted as a result of fluctuations in some non-operating currency related items period-over-period as well as an adjustment that was rerecorded to our income tax expense in the second quarter of this year. Diluted earnings per share for the second quarter were $0.87 compared to $0.94 for the same period last fiscal year. Now let's start with a discussion about our strategic initiatives. Strategic initiative number one is to grow WD-40 Multi-Use product. Our most important strategic initiative is to take the blue and yellow can with a little red top to more places for more people who will find more uses more frequently. We believe we can grow WD-40 Multi-Use product to approximately 600 million in revenue by the end of fiscal year 2025. In the second quarter global sales of multiuse products were up 4% driven by increased product sales in all three trading blocks. In addition WD-40 EZ-REACH Flexible Straw continues to perform well in the U.S. and we have just launched this product offering in Australia in the second quarter. Strategic initiative number two is to grow WD-40 Specialist product line. Once we build our brand equity and established the power of the shield in a particular geography we can leverage the brand recognition to develop new product lines like WD-40 Specialist. We believe we can grow WD-40 Specialist to approximately 125 million in revenues by the end of fiscal year 2025. In the second quarter sales of WD-40 Specialist was 5.5 million which represents a 1% increase over the second quarter of last year. Year-to-date global sales of WD-40 Specialist was up 17%. We continue to launch new Specialist categories in markets around the world although each market, country, and segment experiences different short-term trends relating to the sales of WD-40 Specialist product line due to the timing of promotions in the building of distribution. We continue to believe that WD-40 Specialist will be a significant revenue and earnings growth engine for many years to come. Strategic initiative number three is to broaden the product and revenue base. [Indiscernible] under this initiative is to leverage the recognized strengths of the WD-40 company to derive revenue from new sources and brands. We continue to expand the product offerings within our 3-IN-ONE, GT85 brands as well as WD-40 BIKE. WD-40 BIKE continues to gain traction and global sales of the product line increased 40% in the second quarter with particular strength in EMEA where we've experienced solid growth for WD-40 BIKE. We see a lot of opportunity with these maintenance products. Strategic initiative number four is to attract, develop, and obtain outstanding tribe members. [Indiscernible] under this initiative is to attract, develop, and retain talented tribe members. At the end of the second quarter we had a total of 445 tribe members globally. Our long-term target under this initiative is to grow employment and employee engagement to greater than 95%. In support of this objective, early this fiscal year we completed the acquisition of a new building that will house our WD-40 San Diego based tribe members. We are currently in the process of renovating the property and expect to make a total investment of approximately 18.5 million in this facility. This includes 10.7 million for our recent purchase of the land and building and the remaining cost being associated with building improvements as well as the purchase of new furniture, fixtures, and IT equipment. This dovetails nicely into strategic initiative number five operation excellence. We are continuously focused on optimizing resources, systems, and processes as well as applying rigorous commitment to quality assurance, regulatory compliance, and intellectual property protection. Part of the investment in the new facility is being made on information technology infrastructure equipment which will enhance our ability to operate more effectively as a tribe. We look forward to providing you updates on these initiatives throughout the remainder of this year. That completes the update on the strategic initiatives, so let's move on to the details of the second quarter results starting with sales. Consolidated net sales were 96.5 million in the quarter up 2 million versus last year. If we were to remove all foreign currency exchange impacts, our consolidated revenue would have been about 98.6 million up 4% compared to the second quarter of last year. This 2.1 million difference is due to the fact that in the second quarter we generated approximately 40% of our sales in currencies other than U.S. dollar and changes in foreign currency exchange rates continue to negatively impact our consolidated results. Translation of our foreign subsidiary results from the functional currencies to the U.S. dollar had an unfavorable impact on sales. On a constant currency basis total net sales would have been 102.9 million, an increase of 9% compared to the last year. In the second quarter our net sales were reduced by about 6.4 million due to the strengthening of the U.S. dollar against the functional currencies of our subsidiaries. That is what we refer to as translation related exposures and it impacts reported results from Canada, Australia, China, and the EMEA segment. However due to the changing foreign currency exchange rate our consolidated net sales were actually improved this quarter by 4.3 million due to transaction related impacts. This currency exposure only impacts reported results in EMEA segment and was primarily due to the impact of the strengthening of the euro and the U.S. dollar against the pound sterling. Now let's take a closer look at what's happening in the individual segments. We will start with the Americas, consolidated net sales in the Americas which includes the United States, Latin America, and Canada decreased to 45.1 million in the second quarter, down about 1% from last year. Sales of maintenance products in the Americas increased just over 1% in the second quarter primarily due to a 25% increase in sales of maintenance products in Canada. This quarter's results in this region can be linked to some of the successful promotional programs and the improving market and economic conditions and we're very pleased to see this improvement in our Canadian market. We believe that we've reached a turning point in Canada and that this market will continue to see growth in the coming quarters. Maintenance product sales in Latin America were down 3% in the quarter primarily due to the continuing uncertain business conditions in Mexico as a result of the current political climate. Though maintenance products sales in the United States were relatively flat in the second quarter, our WD-40 EZ-REACH Flexible Straw product continues to make good traction and favorably impacted sales in the U.S. during the quarter due to added distribution. As a reminder our maintenance products exclude our home care and cleaning products. We continue to consider our home care and cleaning products particularly those in the U.S. as harvest trends that continue to generate meaningful contributions and cash flows but I generally expect it to become a small part of the business over time. Sales of our home care and cleaning products in the Americas decreased 10% in the second quarter compared to the same period of last year. Now on to EMA, consolidated net sales in EMEA which include Europe, Middle East, Africa, and India increased to 36.2 million in the second quarter, up 2% from last year. EMEA's reported results in the second quarter were negatively impacted by foreign currency exchange headwinds. On a constant currency basis sales in EMEA would have been 42.6 million, an increase of 7 million or 20% compared to the last year. However, these constant currency numbers do not kind of complete currency pictures since we experienced favorable impact of 4.3 million from the transaction related exposures in the second quarter. We think the best way to give you a complete look at how market is performing is to look at our results in local currencies which we conduct sales transactions in our direct markets in EMEA. Although the overall sales in direct markets decreased 2% in U.S. dollars in the second quarter, sales in our Europe based direct markets increased by 7% driven by growth in continental Europe mainly due to the expanded distribution. These sales increases were more than offset by a sales decrease in our pound sterling base market of 5% primarily due to decreased sales of the 1001 brand as a result of loss distribution in the UK. Now EMEA direct markets accounted for 64% of the region sales. The remaining 36% of the EMEA sales during the quarter were generated by our EMEA distributor markets. Distributor market sales increased 10% in the second quarter due primarily to an increase of 20% in sales in Russia. Although the market conditions in Russia have began to stabilize and sales have increased in the second quarter of fiscal 2017, our year-to-date sales have not returned to the level we experienced prior to the political and economic crisis in Russia. We would like to remind our investors that the political and economic instability in the region makes it difficult for us to predict what level of sales we will have in this market in the future. Now let's pop down to Asia Pacific. Consolidated net sales in Asia Pacific which includes Australia, China, and other countries in the region increased to 15.2 million in the second quarter, up 14% from last year. In Australia net sales in U.S. dollars were 3.9 million in the second quarter flat compared to last year. Changes in foreign currency exchange rates had a favorable impact on these results and its functional currency, the Australian dollar sales were down 2% for the quarter primarily due to the timing of promotional activities and certain promotional programs that were conducted in the second quarter of last year but not repeated this year. In China, sales in U.S. dollars were 3.4 million in the second quarter up 17% compared to last year. Changes in foreign currency exchange rates had a negative impact on these results. In its functional currency, the Chinese RMB sales were up 25% in the quarter. The growth in China was due to new distribution and increased promotional activities. We continue to remain optimistic about the long-term opportunities in China although we expect a lot of volatility along the way due to the timing of promotional programs, the building of distribution, and shifting economic patterns and varying of industrial activities. In our Asian distributor markets net sales was 7.9 million in the quarter up 21% compared to last year. The sales increases were driven primarily by higher levels of promotional activities particularly in Indonesia, the Philippines, Malaysia, and Thailand and the timing of some customer orders. Our Asian distributor markets are not impacted by currency since we will -- we sell that product in U.S. dollars in that region. I will pull out now, and turn over to Jay who will continue to review the financials.

Thanks Gary. First let's review our 55, 30, 25 business model, the long-term targets we use to guide our business. You may recall the 55 represents gross margin which we target to be 55% of sales. But 30 represents our cost of doing business which is our total operating expenses excluding depreciation and amortization. Our target is to be at 30% of sales and finally the 25 represents EBITDA. First the 55 of our gross margin, in the second quarter our gross margin was 56.4% compared to the 55.4% in the second quarter of last year. Changes in foreign currency exchange rates positively impacted our gross margins by 160 basis points. This is because in EMEA our cost of goods are sourced primarily in pounds sterling. While approximately 45% of our revenues are generated in Euros with 25% in U.S. dollars and only the remaining 30% are generated in pound sterling. The combined effect of the strengthening of both the Euro and the U.S. dollar against the pound sterling caused revenues in total to be worth more in sterling thus improving our gross margin. Additionally advertising, promotion, and other discounts that we give to our customers decreased compared to the last year in our Americas segment and positively impacted our gross margin by 30 basis points. These improvements to gross margin were partially offset by sales and exchanges and other miscellaneous costs which negatively impacted our margin by 70 basis points. Primarily due to product mix shifts in the Americas and the fact that a larger portion of our sales in EMEA were made within our lower margin distributor markets. Also negatively impacting our gross margin this year were changes in the cost of the petroleum based specialty chemicals in aerosol cans which together impacted our gross margin by just 10 basis points. We experienced positive impacts on gross margin from costs in the Americas but these were more than offset by some unfavorable impacts in EMEA and to a lesser extent in Asia Pacific. Well cost of petroleum based specialty chemicals for our EMEA segment are sourced in pound sterling, the underlying inputs are denominated in U.S. dollars. As a result of the overall strength in the U.S. dollar against the pound sterling from period to period resulting in a significant increase in the cost of goods in pound sterling. Gross margin was also negatively impacted by 10 basis points due to some higher warehousing and inbound freight costs primarily associated with the Americas. And that completes our discussion on gross margin now we will address the 30 or our cost of doing business. In the second quarter our cost of doing business was approximately 35% and flat as a percentage compared to last year. While our target is to have our cost of doing business at 30% of net sales, we plan to continue to make thoughtful and deliberate investments in support of our fifth strategic initiative operational excellence and to support the long-term growth objectives of the business. And this includes investments in quality assurance, regulatory compliance, intellectual property protection in order to safeguard the blue and yellow can with a little red top. We expect to move closer to our long-term target of 30 over time as revenues continue to grow. For the second quarter 78% of the cost of doing business came from three areas, people costs or the investments we make in our tribe, the investments we make in marketing, advertising, and promotion. As a percentage of sales our A&P investment was 5.2% in the second quarter. And then finally freight cost, the cost to get our products to our customers. And that brings us to EBITDA, the last of our 55, 30, 25 measures. EBITDA was 21% of net sales in the second quarter compared to 22% last year. That completes our discussion of the 55, 30, 25 business model for the current quarter. Now I will discuss a couple of other items worth noting. Operating income was 18.9 million in the second quarter compared to 17.9 million last year reflecting a 5% increase year-over-year. Again Gary mentioned earlier we typically don't discuss operating income but thought it was worth noting because of the non-operating items which were affecting our net income and diluted earnings per share in the quarter. One of the items impacting net income this quarter was a significant variance to the prior year in other income and expense of which the majority was related to large foreign currency gains which were recorded in the second quarter of 2016. Also impacting net income this quarter is the provision for income taxes which was 32.8% in the second quarter compared to 28% last year. The increase in the effective tax rate from period to period was primarily driven by an adjustment that we recorded in the second quarter associated with the tax impacts from unrealized foreign currency exchange losses. We expect our tax rate for the full fiscal year however to be close to 30%. Net income for the second quarter was 12.4 million versus 13.7 million in the prior year. Changes in foreign currency exchange rate had an unfavorable impact on the translation of our consolidated results. On a constant currency basis net income would have remained relatively flat compared to the same period last year. Diluted earnings per common share were $0.87 in the second quarter compared to $0.94 in the same period last fiscal year. And diluted weighted average shares outstanding decreased to 14.1 million from 14.4 million shares a year ago. Now a word about our capital allocation. Our capital allocation strategy includes a comprehensive approach to balance investing for long-term growth while providing returns to our stockholders. We target maintenance CAPEX of between 1% and 2% of net sales and as Gary mentioned earlier on our call in addition to the maintenance CAPEX in the current year we're making an investment of approximately 18.5 million to buy and renovate a new office building to house our San Diego based tribe members. In the first quarter of the fiscal year we closed ESCROW on the property and invested 10.7 million in the building in the San Diego neighborhood of Scripps Ranch. We are currently in the process of renovating this building and plan to relocate there later this fiscal year. In addition we continued to return capital to our shareholders through regular dividends and share repurchases. On March 21st our Board of Directors approved our regular quarterly cash dividend of $0.49 per share payable April 28th to stockholders of record at the close of business on April 14th. Based on today's closing price of 106.95, the annualized dividend yield is 1.8%. So far this fiscal year we have repurchased approximately 174,000 shares of our stock at a total cost of $18.7 million under our current $75 million share repurchase plan which was approved by the board in June of 2016. At the end of the second quarter we had 56.3 million remaining under the plan. With that let's turn to guidance. While net income and EPS guidance has not changed we have revised some of the other components of our fiscal 2017 guidance. Net sales growth is projected to be between 2% and 4% with net sales expected to be somewhere between $390 million and $395 million. Gross margins for the full fiscal year is expected to be above 56%. Advertising and sales -- advertising and promotion investment is projected to be below 6% and net income will be projected to be between $51.3 million and $52.3 million. Diluted earnings per share is expected to be between $3.64 and $3.71 and that is based on estimated 14.1 million weighted average shares outstanding. As a reminder this guidance doesn't include any future acquisitions or divestitures and assumes foreign currency rates and crude oil prices will remain close to current levels for the duration of 2017. And that completes the financial overview. Now back to Gary.

Thanks Jay. So let's sum up on the call and what did you hear from us on this call today. You heard that globally maintenance products sales grew 4% in the second quarter. You heard that our operating income grew 5% in the second quarter. You heard that our diluted earnings per share and net income were negatively impacted as a result of fluctuations in some non-operating currency related items period-over-period as well as an adjustment that we recorded to our income tax expense in the second quarter of the year. You heard that foreign currency exchange rates continued to be a headwind and on a constant currency basis reduced our net sales by approximately 6.4 million. Additionally you heard that the reduction in sales was significantly offset by 4.3 million in transaction related impacts in the EMEA due to the strengthening of the Euro and the U.S. dollar against the pound sterling. You heard that our sales was strong in Canada and that we believe the market will continue to see growth in the coming quarters. You heard that our sales were strong in Asia with a 21% sales growth in our distributor markets and a 17% sales growth in China. You heard we are maintaining our net income and EPS guidance for the fiscal year but we revised a couple of other components of our fiscal year guidance. In closing I'd like to share this thought with you which I originally wrote in our 2015 annual report to shareholders. The vision crushing ritual of quarterly earnings is no measure of success. The company must have a clear and compelling vision and a set of cold values that drive the culture. Values must be clearly acted upon, a clear set of strategic drivers must determine how time, talent, treasure and technology are invested to achieve the state of outcomes. I believe as long as we continue to execute against our strategic initiatives and stay focused we will deliver on our 2025 vision. Thank you for joining us today and we would be pleased to now open the conference call to your questions.

[Operator Instructions]. Your first question comes from the line of Liam Burke from Wunderlich. Please proceed with your question.

Thank you. Good afternoon Gary, good afternoon Jay.

Good afternoon Liam.

Gary could you give us a little update on how you're rolling out the EZ-REACH delivery system outside of the North American markets?

Surely, and currently the only market that it has gone into outside of the U.S. is Australia and that launched there in the second quarter. We would expect that later in the year we will see it go into EMEA, maybe not later in this fiscal year. We've just completed the work to order made one of the machines that make the core element which has given it the increased capacity that we wanted to be able to take it out into other markets. So, for the rest of this fiscal year primarily U.S. and some for Australia.

Okay, I think I got this right, you mentioned that the WD-40 BIKE product in Europe or EMEA was up 40%, is that…

Yes, that is correct.

Is that doable in other regions or is that just unique to Europe and how does that make you think about other brand extensions?

Well, there are a lot more BIKE centric markets in Europe. Thinking of places like Denmark and whatever so there are a number of markets over there that we have been able to build distribution a little more widely than we have in the U.S. because they're not as modernized as the U.S. but we are very -- we are pleased that we've now been able to -- with the line of bike product determine which of the SKUs that are most important to us. We've also had really good success with BIKE in Canada. We now have BIKE products distributed through Canada, right through our Canadian Tire which was a great win for us as well. So it's a long-term play but it's coming in to what we wanted to and that's to be part of the family and it's seasonal too as you know. So, that's something that we deal with that's not normal for us.

Okay, thank you Garry.

Thanks Liam.

Our next question comes from the line of Linda Bolton Weiser from B. Riley. Please proceed with your question.

Hi, how are you?

Good.

So Garry, I think when you guys originally gave the guidance for the fiscal year you listed off quite a few growth initiatives, I thought it sounded like a lot for this year including well, I think you are expanding the BIKE line into the U.S. and then on RV line for under 3 and 1 for the U.S. and things like that. So can you just remind us what these things are and what the timing is so, I'm trying to look for confidence that you can have decent sales growth in the second half even though your comparisons in the prior year actually get quite a bit harder.

Okay, sure. In the U.S. the two major initiatives were the launch of WD-40 Specialist Grease and that launch started in November. It has full distribution now in Home Depot and we're actually coming into the Grease season now and it’s being, the distribution is moving out into other retail chains and other customers. But Grease is very seasonal, it's a lot stronger through spring and summer as people start to put their boats in water and whatever. So that was one, the second is WD-40 Specialist degreaser product line. We had expected that to be a little more dominant in the second quarter. We had a delay in our launch in that and in fact are only now starting to ship that and you'll start to see that in shelves through the third and the fourth quarter. The other initiatives were in Europe. They are the products going into distribution but that won't have a huge impact on us. That's a small part of the business. In Europe one of the major growth impacts was the increasing of WD-40 Smart Straw and we're starting to progressively convert more countries to a greater percentage of Smart Straw. We started that in Denmark and now moving into that in the UK in quarter three and four. And then on top of that of course is the overall growth of the MUP product, the blue and yellow can and particularly in regions like China and some of Asia and through some of the distributor markets. And I think those were the major Jay, Wendy did I miss any of the major.

No, this is the kind of the key initiatives.

Okay, and then well what about, I mean you mentioned the strength of the - I think that's the motorbike line, right, not regular bikes. Motorbike in Europe -- so is the motorbike line rolling out in the U.S.?

Yes, we are going to start shipping motorbikes in the U.S. in the third quarter. And it will be initially going into a couple of customers. As we get confident that the SKU offering we have developed, even though our research tells us it's right we like -- as you know we like to pilot things a little bit so we are going to roll that out and then it will become fully into distribution late in the latter part of the year and into the early part of next year.

Okay, thank you that's very helpful. And then when you look at the gross margin guidance I mean you kind of just kind of modified the wording such that it's a little bit more favorable for the year in the sense that you said above instead of around I think was the words before. So, it looks to me like FX and the oil comparison - oil is about the same as it was last quarter when you reported, so what makes you change that to be a little more favorable on the gross margin guidance?

Well, the impact from currency was quite significant this year certainly through where we are today and it looks like we should be able to continue maintaining the gross margin where we're at, unless currency rates change quite a bit. The other aspect is that most of our costs that we are going to see in our cost of goods are already in our system. By the time we have the -- are affected by any change in costs it is about three to four months maybe. So we're going to see we've got I think a much better view of our ability to achieve that in the second half.

Okay, so it's more like a confidence level more than something majorly changing.

Right.

Okay, I got you. And then just on the A&P ratio, it is sort of like I mean if you've been a little bit struggling to achieve your targeted top line growth I wonder about the idea that you're actually lowering the plans for advertising and promotion spend. I mean is that kind of a dangerous strategic way to approach it, it seems like you might want to spend more if you're having trouble generating top line?

We're not deliberately making any short-term or long-term changes to our execution. We are finding some efficiencies and as you know a lot of our marketing is not advertising. It is other activity; sampling, trade shows. In fact only a small portion of our business is -- or our marketing is what you would call traditional advertising. The other thing is that because we are broiling the brand under the WD-40 brand as well we're making sure that we're getting good efficiencies there. And through the year if you look at where we are through the year we have to substantially increase to even get to the 6% for the year. So we will come in below 6%. We are not saying how far below of course because we're not there yet but we felt it was -- this was not a decision we made to preserve the bottom line. This was an outcome probably more of a confidence thing as well as saying well, here's where we are now, where do we think we will be for the rest of the year.

Okay and then finally look in terms of the lowering of the sales guidance, you know I mean because actually Canada was pretty good in the quarter and you've got these other initiatives that are going to be kicking in, in the second half. And FX hasn't really changed all that much so I mean what is it that's really different, like what are the key things that are different in the outlook that makes you lower that sales line?

Mexico is not going to get any better. So we know that now and we're tracking a couple of million for the year behind in Mexico. And the mix of sales is a little different. In fact we're getting more revenue out of Europe as a percentage than before and that revenue now is translating into a lower consolidated number because of the pound. So there's a little mix going on there and then there's a few other markets that when we looked at the full year we thought it was prudent to just trim a little bit. But mainly it's a mix of sales out of Europe, a little bit out of Mexico, well that is not a little bit, a couple of million out of Mexico probably and then the balance is just getting sure about the year.

Okay, alright thanks so much Garry.

Well the other thing two into two is when you look at the performance of homecare products we don’t talk about it but they are down and we talk about them being down. When you look at the core business which is our maintenance products it was up 4% in the quarter and we're happy with the way that all of that is tracking. So, the homecare products does have an impact on the top line.

Right, thank you.

Our next question comes from the line of Daniel Rizzo from Jefferies. Please proceed with your question.

Hi everyone, how are you doing. I was just wondering if it is -- why it doesn't make sense maybe to go from the Multi-Use product to straight to the EZ-REACH Straw, why you take the step to go to the Smart Straw first. I mean would it make more sense just to go I guess the more advanced product?

No, the people in the homes don't want that. The EZ-REACH is being developed for our heavy end users that's why we only put it into one size of one can. But all the people who have cans under the sinks in homes don't want to pay for the extra flexi straw because it doesn't add value to them. It adds value to people who want to get the product to an unusual places more often. So it is not either the whole.

Okay, thank you very much.

Okay.

Ladies and gentlemen that does conclude our allotted time for questions. We thank you for your participation on today's conference call and ask that you please disconnect your lines.