ARC Document Solutions, Inc.
Q1 2009 Earnings Call Transcript

Published: 8 May 2009

[Operator:]

Good afternoon ladies and gentlemen and thank you for standing by. Welcome to today’s American Reprographics Company first quarter 2009 results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer. Instructions will be provided at that time for you to queue up for questions. As a reminder this conference is being recorded. And now, I would like to turn the conference over to Mr. David Stickney. Please go ahead.

[David Stickney:]

Thank you, Alex. I would like to welcome everyone to our call today. Joining me are Suri Suriyakumar, our Chairman, President and Chief Executive Officer; and Jonathan Mather, our Chief Financial Officer. The call today will of course provide you with similar insight into our first quarter. The financial results of which were publicized earlier today in a press release. You can access the press release in the Company’s other releases from the Investor Relations section of American Reprographics Company’s website at e-arc.com. A taped replay of this call will be made available beginning about an hour after its conclusion. It will be accessible for seven days after the call. You can find the dial-in number for this replay in today’s press release. Please be advised that we are webcasting our call today. A replay of the webcast will also be available on our website for 90 days from today on the Company’s website. This call will contain forward-looking statements that fall within the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of the Company including the Company’s financial outlook. Bear in mind that such statements are only predictions, and actual results may differ materially as a result of risks and uncertainties that pertain to our business. These risks are highlighted in our quarterly and annual SEC filings. The forward-looking statements contained in this call are based on information as of today, May 7, 2009 and except as required by law the Company undertakes no obligation to update or revise any of these forward-looking statements. Finally, this call will contain references to certain non-GAAP measures. The reconciliation of these non-GAAP measures is set forth in today’s press release and in our Form 8-K filing. At this point, I will turn the call over to our Chairman, President and CEO, Suri Suriyakumar. Suri?

[Kumarakulasingam Suriyakumar:]

Thank you, David and good afternoon everybody. As I mentioned in our press release, I am pleased to evaluate the solids especially into this volatile market conditions. In the first quarter of 2009, we were able to deliver an EPS of $0.17 per share and $22.3 million in cash flow from operations. From an operation’s perspective, this means that we were able to increase of our gross margins from the previous quarter in the face of declining revenues. In addition, this also means that we were able to deliver $2.86 in cash from operations per share over the trailing 12 months. This is a remarkable performance given the tough market conditions. Given the environment we are in, on this call, I will be focusing on our efforts to contain cost and improve profitability. With that in mind, we are going to be very briefly outline the cost-cutting measures we have taken. Provide you with the brief status report on our loan covenants and review a few key financial indicators outside of the press release. After this short review, we will get into Q&A. So, what cost-cutting measures have we accomplished and how did they affect us? Nearly, all of our cost reductions have occurred under what we call our [stay-fit] plans. The first plan was implemented in December and January and was focused on achieving the $30 million in savings by combining reductions in production level, indirect costs, overhead, and SG&A. We will recognize the benefit of these savings in 2009. The second plan was implemented in February and targeted the same categories. We will achieve approximately $17.7 million in savings in 2009 from this program. Our smallest [stay fit] plan was completed in March which will net approximately $2.6 million in savings. The 5% across-the-board payroll reduction announced in March was outside of the [stay-fit] plans. This initiative targeted savings of $6 million in 2009 and we have begun to realize the benefit from these cuts in early March. When we add it all up we eliminated approximately $56.3 million in costs for 2009 by the end of the first quarter. The primary level we have in controlling costs, especially in the light of reduce sales volume, is production level. For example, our first [stay-fit] plan more than $17 million in savings came from staff reductions. More than half of the reductions from the second [stay-fit] plan also came from level savings. From a management standpoint, this kind of downsizing is never easy but without this kind decisive action we would have jeopardized everyone who worked for us. Another area where we can save is reducing our production footprint. To date, we have closed approximately 33 locations for production. This does not always mean we have shut the doors and walked away. Closing operations often take several months for the lease arrangements to end, to relocate equipment and people and so on. But by eliminating production expenses, labor and overhead cost associated with running in actively for shop, we have taken a significant reduction to our costs in these locations. In conversations with our investors, over the past several months, we were often asked to specifically identify when the benefits of our cost control measures will be felt. I would like to emphasize here, as I have in the past, that cost controlled at ARP are not a one-time event nor are they implemented in just one place. They are a process that occurs in dozens of locations sometimes on a daily basis. Therefore, reductions and their benefits do not fall into neatly defined periods but the reductions we have talked about here will all be realized in 2009. I hope the explanation we just ran through, gives you the material information necessary to understand the effect of our cost-cutting initiatives. At the same time, however, I want to be very clear that our management style is to make continuous incremental changes to achieve our goals and objectives. You see of course the primary goals are to continue to generate a healthy cash flow in order to meet our financial obligations and to avoid tripping any one of our debt covenants. By making continued adjustments in our operations, it also allows us the necessary time to discover new ways to manage the business as it changes. A case in point is our continuing ability to service our client base in spite of our operational reductions. By leveraging the digital network we have built across the country, employing new technology’s services such as iShip docks, and pushing existing tools such as Planwell, NEW even further than we have in the past. The vast majority of our plans continue to receive service levels equal to or better than they have in the past. I am now going to ask Jonathan to give you an update on our position relative to the covenants on our senior secured debt. Jonathan?

[Jonathan R. Mather:]

Thank you, Suri. As many of you may know one of the key drivers affecting our loan covenants is trailing 12 months EBITDA. Based on our quarter one EBITDA performance of $30.8 million and our EBITDA predictions for the year, we feel we will remain in compliance with our debt covenants for the remainder of 2009. On our several financial covenants associated with our continuous secured debt. The two we watch most closely are interest coverage ratio, calculated as EBITDA, the R in EBITDA being rent compared to interest expense plus rental expense. The fix charge coverage ratio, which is calculated as EBITDA minus capital expenditures and cash income taxes paid compared to our cash interest expense versus plus scheduled principal payments, our rental payments and earn out payments. The interest coverage ratio must not be less than 2.5 to one and we are currently at 3.2 to one, and our fix coverage ratio cannot be less than 1.1 to one currently we are at 1.35 to one. Before I hand the call back over to Suri, I will provide you with some fourth quarter information that may not be apparent by looking at the financial tables. Our customer mix shifted as we targeted more non-AEC work. Of our total revenue for the quarter, 22% came from the non-AEC segment with 72% coming from non-residential customers and just 6% from our residential customers. Looking at our base of business by product and service segment, facilities management made up 19.3% of our revenues. Digital services delivered 8.4% of our sales, 9.2% of our revenue was from equipment and supplies, while the remaining 63.1% came from our traditional base of reprographic services. There were 63 working days for the quarter and as we noted in the earnings release, we saw a sequential increase in our gross margin month-over-month as we have felt the effects of our cost-cutting efforts gain traction. Days sales outstanding or DSO was at 51 days in the first quarter of 2009, while aging of pass due accounts improved again during the period. Total debt, including capital leases at the end of the first quarter 2009 was $350.6 million down from $361 million for the fourth quarter of 2008. What this means of course is that we paid down more than $10 million in debt during the first three months of the year. The ratio of debt to trailing 12-month EBITDA at the end of the first quarter was 2.3 compared to 2.1 at the end of the fourth quarter 2008. That covers the key points we had on the agenda. So, at this point, I will turn it back to our CEO, Chairman Suri.

[Kumarakulasingam Suriyakumar:]

Thank you, Jonathan. Excellent. Operator, at this time we are available to take our callers’ questions.

[Operator:]

(Operators Instructions) Your first question comes from the line of Kevin McVeigh - Credit Suisse.

[Kevin McVeigh:]

A very nice job in an obviously tough environment. In regard to that Suri, obviously the fourth quarter was very, very challenging from a visibility perspective. I wonder if you could give your thoughts on just the environment overall and obviously visibility and am sure what one of the fiduciary thoughts on the environment overall.

[Kumarakulasingam Suriyakumar:]

Sure. I mean it is not a whole lot of change from the last quarter, Kevin. I mean obviously as we give guidance you realize that we did not talk about the revenue because it was in fact many companies did not even give guidance. What we decided to do was to talk about the cash and the earnings per share and that was our strategy. So, our focus has been that revenue obviously is challenged to revenues that continued to decline and it somewhat stabilized from rate has been, so we are hoping it will stay like that. But given the unemployment situation and the vacant situation, it is very hard to have any visibility as to what how non-residential and residential will react. So, it is a period of uncertainty but what we are able to establish by what we have done in the first quarter is that as promised that we were able to adjust and manage our cost in line with our revenues. So, that is what we are focusing on that is why even in the call we focused on cost reduction and how we are implementing them to give you the snapshot as to how we are managing the call. The challenge or the trick is to quickly reduce the costs in order to make sure that we have a healthy cash flow and the tool that we can meet our financial obligations.

[Kevin McVeigh:]

That is very helpful. Just one other question and I am going to get back in the queue. Obviously, very, very impressive free cash flow in the first quarter about $20 million. If I am right I, in the first quarter of ’08, you generated $18 million and that translated into about $120 million of free cash flow for the full year. I know we just reiterate the $70s million and $90 million, is that being conservative or is your potential upside to the free cash flow as we think about 2009?

[Kumarakulasingam Suriyakumar:]

I think based on the information we have, Kevin, I would say that would be realistic. I would not say it is conservative because they do not have a whole lot of visibility as to how the rest of the year will develop. In the absence of revenue projection, a solid revenue projection, we are enabled to say with any certainty that it is conservative or otherwise. Based on the information we have now, we feel good about it. Needless to say we draw that number really hard and the management did an excellent job. I am really pleased with the results as you can see. It was $22 million in cash. So, we feel good about it. But we also recognize that latter of part of the year could be difficult. We just do not know that. We do not have enough information to predict that. So, therefore, we have been proactive in managing it very aggressively.

[Operator:]

Your next question comes from the line of David Manthey - Robert W. Baird.

[David Manthey:]

Just so we are clear on the cost savings and how does that flow into the quarter, Suri, could you give us an idea of the run rate of benefit you think you saw in the first quarter and then what we might see in the second quarter? I know you said it does not lay out that easy. Could you give us some ballpark idea there?

[Kumarakulasingam Suriyakumar:]

Yes. I mean I would actually just go back and kind of emphasize on what I said. So, fundamentally that we look at David is. We said when we looked at December generally, when we looked at the numbers we realized we needed at least $30 million for the year, because as I said, because we do the same 300 locations with 44 divisions and it involves labor to lease rentals, to equipment returns. It is hard to neatly package it into months or days as to how the numbers fall. So what we did was looked at it and then said “Chief of Operations said okay. We need $30 million savings and we need to get that done in January.” So, what we did is we embarked on that and we made you all the $30 million worth of savings were put in place. In other words, actions were put in place to accomplish the $30 million and our accounting team and the financial team made sure and double checked that it is in place. That does it mean we saved $30 million for 2009, it means that these will be actions in place. So, as January was proceeding, when we were getting closer to February, we realized again the revenues were declining so we decided “Okay we need another $20 million in place.” So, we started working on that and in February what the financial teams ascertained is it is $17.7 million savings were in place because some of them we could not implement for technical reasons, for issues related to operations whatever that might be. So, by end of February we started the revenues stabilizing at the lobby, felt good about it so our Senior Vice President for Operation said, “Okay. In March, I need just about $2.5 million.” And then we went ahead and implemented. So, it is an ongoing process. What is different is that instead of living life quarter-to-quarter we are living life month-to-month or week-to-week or in fact daily. So, we really got daily sales. So, what I want to assure you is management is very aware of the challenging marketplace but we are not frightened or scared, we are saying we know how to deal with it because as I have said in my previous quarter that we have been $500 million Company and still being very profitable. So, we know how to manage. It is just how quickly we can get to those numbers and that is where we are focusing on.

[David Manthey:]

Great, that is a very helpful. So, net-net, it sounds like as you implemented these measures fairly they did not impact first quarter fully and you are saying you hope they will ultimately impact the full year but it is an ongoing process.

[Kumarakulasingam Suriyakumar:]

Absolutely, you had it dead on.

[David Manthey:]

Okay. And then second you talked about the gross margin increasing month-to-month throughout the quarter, I was wondering if you can talk about how sales trended or how revenues trended year to date and even into April.

[Kumarakulasingam Suriyakumar:]

Alright. The sales trend obviously from last year we have some indication has to how much sales dropped. We can talk about that and I cannot get the number. Jonathan, do you have a number of year-over-years?

[Jonathan R. Mather:]

Twenty-eight, that was 26.

[Kumarakulasingam Suriyakumar:]

It is about 26%. We will give the exact number here David, 26% year-over-year. So, that is where the thing is. In April, it does not improve a whole lot or it has not gotten worse a lot. The projections are the 2009 especially non-residential we got the latest report from FMI; it clearly suggests there will be softness in the non-residential sales. So, we do not see or foresee a huge improvement on that. Given some of the largest projects are in jeopardy, the banks are still battling with the financing issues and credit issues. So, we do not see a whole lot of upsides. So, things are pretty weak right now, what we are seeing in terms of gross margins like Jonathan mentioned is that when we wrapped up Q1 full ’08, 36.7 and what I can tell you David is that obviously the gross margins are going down especially with aggressive slowdown in revenues but we were back into 40 range by March, which is the most encouraging thing. Again, that is what I was talking about. How fast can you adjust to your costs and resize your business to make sure you still deliver in that range so that we can protect the cash flow. So, that is the good side of it. In terms of revenue, we do not have a whole lot of visibility other than that it is down about 26% and that is where it is.

[Operator:]

Your next question comes from the line of Scott Schneeberger - Oppenheimer.

[Analyst for Scott Schneeberger:]

This is Ella for Scott. Suri, I guess, first of all, can you just give us some colors on the pricing environment overall?

[Kumarakulasingam Suriyakumar:]

Okay. Ella, on the pricing environment, we are seeing some pressures starting to show up. Obviously, all of the customers given the environment are looking to reduce prices everywhere. So, those requests are coming in. We have not seen significant erosion as such but we certainly see in competitive bids or anything what we do the some amount of pricing environment with pricing pressures starting to show up.

[Analyst for Scott Schneeberger:]

Is it just for the condition of reprographic services or are you seeing that in the digital services as well?

[Kumarakulasingam Suriyakumar:]

We have not done anything in the digital services because those services are unique and they are much limited in nature and if you take it is only about 8.5% of what we do. So, we have not seen that get impacted at all. But in general, across the board customers are looking for the break in everything. I mean at least they are asking for it previously there was not much pressure. But it is no different to what we are doing, I mean whether it is delivery or pickup or rents or to-own services, everything we are looking for a discount. So, that kind of environment we are seeing. From a competitive perspective, we have not seen a significant erosion as yet.

[Analyst for Scott Schneeberger:]

Thanks. Last quarter you mentioned that bad debt, you are seeing some declines in the collections. Can you just give us an update on that?

[Kumarakulasingam Suriyakumar:]

Right. I mean obviously, I will tell to Jonathan to give you a little more color on it. We are being very, very proactive and aggressively collecting so that bad debt does not become an issue because we did whatever cleanup we could do in order to make sure we stayed very sharp in terms of debt collection. Jonathan, would you like to add to that?

[Jonathan R. Mather:]

Sure. Clearly our bad debt reserves, our collections have been good, past year has been down even our bad debt reserved requirement we have seen the expense for the quarter reducing compared to last year. So, at this point, we are feeling better but what can never say in this environment.

[Operator:]

(Operators Instructions) Your next question comes from the line of Franco Turrinelli - William Blair.

[Franco Turrinelli:]

A couple of questions for you, just one on minor housekeeping, Jonathan, do you mind giving us the regional breakout as you have done in the past. It is just helpful to us.

[Jonathan R. Mather:]

Just a minute, regionally, Northern California in Q1 ’09, we did $17.4 million which is a reduction from last year, 32.9%; Pacific Northwest $10.9 million, a reduction of 14.4%; Southern region $37 million, which is a reduction from prior year, 27.8%; Midwest $20.8 million, a drop 21.17%; Northeast region $22.3 million, which is a reduction 18.4%; and then Southern California $28.3 million which is a reduction of 34.8%.

[Franco Turrinelli:]

And not much change in the geographical trend, right Jonathan, really? Sequentially, I mean basically Northern California still very weak, the Northern states maybe a little bit better.

[Jonathan R. Mather:]

Exactly, yes.

[Franco Turrinelli:]

Thanks. For the breakout of the customer mix, do you happen to have what the customer mix was last year?

[Jonathan R. Mather:]

Yes, I do. Again, this is an estimate.

[Franco Turrinelli:]

Yes, yes.

[Jonathan R. Mather:]

Yes. Last year quarter one, the non-AEC business where we had 22.2% this quarter. Last year same time, 19.4% then the residential we had 6%. We were at 9.6% last year and non-AEC was that 71% last year to 71.9%.

[Franco Turrinelli:]

That is great and I think it is encouraging to see the non-AEC go up. I will try to do some math quickly here but it is just kind of running quickly through my mind. I guess unfortunately all of those categories are down in absolute terms year-over-year but obviously non-AEC kind of a leashed, and Suri, I think your comment is very interesting that you are targeting that space obviously we know about a couple of your relationships that were thawing and others. What do you think in this scenario that is gaining some traction for you or you think this can be a good offset over next several quarters?

[Kumarakulasingam Suriyakumar:]

Yes, definitely. I mean a couple of strategies we are employing right now frankly is that one is that on the [color_27.57] area we are finding that more and more of our color area are getting busy with a lot of the retail markets or a lot of the presentation graphics market. We have continued to invest in that area. That is one area we have not slowed down. We have installed new output, new access with the different capabilities in about 16 locations now and they are coming along very nicely. This is all business we have never had before. So, that is part of the expanding and we will continue to push that button for sure. Then premiere accounts we are certainly also looking at the non-AEC opportunities and also the engineering opportunities. We also think the engineering companies are somewhat busier than the architecture land construction companies that list evidence by what we are experiencing now. They are also getting more of the stimulus dollars because of the work they are doing. So we are pushing that button hard as well, and then of course on top of that we are looking at the FM and the digitals. So, we are focusing the identifying sales is a bigger effort right now. We did not talk about in the quarter lot of the call because revenues are in general down and I want to make sure our listeners understood because one of the biggest questions we had in the last quarter was I will be capable of making the adjustments. I will be capable adjusting our business model to put fit the new renewal model we have and we have established that. That is why we were focusing on that. But sales in a huge in the direct two areas, we have not cut our investments. One is technology and the other one is sales, and we are driving both very hard.

[Franco Turrinelli:]

I think certainly there is a good execution going on here. So, actually that was one of my other questions for you. Obviously there was some hopeless, some significant infrastructure investment and I guess to some extent you have already answered whether you are not seeing any of that but let me just ask you again. We are seeing any pickup in infrastructure activity that could be federal or local level.

[Kumarakulasingam Suriyakumar:]

Alright. So, obviously, all these things in terms of activities that are going on how we realize them Franco is that we realize them through engineers. If you know what I mean? Architects have very little to do with constructions relatively to do with it because most of the infrastructure work is done by government agencies. However, they do employ engineers and consultants. So whether it is a water treatment plant or it is a bit of improvement of roads, bridges. The segments of our customers who most receive that kind of work are the engineers. So, that is who we are targeting and if you are getting more work from our engineer that means they are involved in city and country, state related work with related to, really it relates to highway development, bridges or water treatment plants whatever.

[Operator:]

Your next question comes from the line of William Lee - JP Morgan.

[Andrew Steinerman:]

It is Andrew Steinerman of JP Morgan. I wanted to catch your comments that you said before something about in the range of 40% to gross margins in March. Did you say by the month of March ’09 you will back to 40% and what might that mean for gross margin trends go again to second quarter?

[Kumarakulasingam Suriyakumar:]

Right, yes, yes. You are right. You could be right without a doubt. The gross margins for the quarter ending ’08, right, was that the number Jonathan?

[Jonathan R. Mather:]

You are getting in. I am sorry, fourth quarter ’08 was 36.7%.

[Kumarakulasingam Suriyakumar:]

So, obviously January was very soft and February also continued to remain soft. Now, usually we do not give breakdowns like that, Andrew but what I was trying to find out to our listeners is that how fast we were able to make the adjustments required to bring our profitability up? So, for the month of March, we were in the 40% range. We were slightly off 40%. Obviously, we do not breakdown gross margins by number but simply in order to illustrate that we were able to make the changes required immediately to bring our gross margin sub which means we will have better cash, which means we will have better EPS number.

[Andrew Steinerman:]

Right, does that mean that you are heading into the second quarter with a gross margin at approximately 40%?

[Kumarakulasingam Suriyakumar:]

Right. Now, that is true providing the revenues do not move so that is the biggest challenge and we knew obviously people will ask that question and it is hard to answer that question simply because nobody can predict the revenues. The revenues are, we are watching it on like I said we are watching it on a daily basis, it is volatile. It is not consistent. It is really bubbly out there. So, there are days we think we are doing good and there are days that we drop back because of the difficulties in credit and financing projects and so and so forth. It just stops that, stops that. That is the only part. But however, if the revenues stabilize and they do not have significantly go down even if they are inching up, then we will hold our gross margins for sure. We are confident about that.

[Andrew Steinerman:]

Right and what was the 26% drop number? Was that the organic revenue decline in the first quarter?

[Jonathan Mather:]

Year-over-year over year, fuller never decline. Organic was about 28%.

[Kumarakulasingam Suriyakumar:]

Because we have some acquisitions in the tail end of 2008 and also that would have some impact but for all means and purposes, you can ignore that. Fundamentally, we will not have any meaningful acquisitions. So, what is it is that 26 plus point drop in revenues given the market conditions.

[Andrew Steinerman:]

Right and just to go back to another comment that you made earlier about, the revenues are charge but somewhat stabilized. What do you mean by that, there were somewhat stabilized?

[Kumarakulasingam Suriyakumar:]

Right, what I simply was trying to imply, Andrew is that it is not continuing to go down. There was a period of time especially in January and February decent. I mean, yes it actually started, I will go back to November, no October was I think the ballpark. I am just throwing some numbers, $60 million. November we went into 47 ranges. December, we went in 46 range. January we went in 45 ranges. So, it kept on sliding and then just at the end of January, it kind of goes back at that $46 million range and then it was moving around between 44, 447 and 49 that kind of range. So, it is just in that range. It is unsettling but it is not sliding significantly down. That is when I said…

[Andrew Steinerman:]

You mean sequentially, you mean the monthly revenue..?

[Kumarakulasingam Suriyakumar:]

Absolutely.

[Andrew Steinerman:]

January to February, February to March and monthly revenues were similar.

[Kumarakulasingam Suriyakumar:]

Yes.

[Andrew Steinerman:]

And when that translate year over year, does that also translate that the declines are not getting worse?

[Kumarakulasingam Suriyakumar:]

Year-over-year, yes it is pretty much the same. It is just that it drops much more significant. I think like in March, we were $63 million last year. We barely broke $50 million this year. So, what happened is if the conditions sustained, it make sense to compare year-over-year because the conditions are so largely different. We are just going sequentially month over month just to see what the trend is like because that is what also we are using to manage our cost just to be more proactive.

[Operator:]

(Operator's instruction) You have a follow up question from the line of Kevin Mcveigh - Credit Suisse.

[Kevin McVeigh:]

Suri or Jonathan, just to follow up on Andrew's point on the organic growth, the acquisitions obviously, you slowed down the acquisition ramp. How do they impact revenue fro the back half of 2009? Is it anniversarying most of the acquisitions by the third quarter or..?

[Kumarakulasingam Suriyakumar:]

Yes, I would think so. Jonathan, can you add some color?

[Jonathan Mather:]

Very minimal acquisitions in quarter three and quarter four last year that we collect. So, you are really looking at most of the acquisition anniversarying by quarter two this year.

[Kevin McVeigh:]

Okay.

[Jonathan Mather:]

Sorry, we had one in July, the Hudson, New Jersey was in July and Texas one so quarter three. In the quarter three, it was off.

[Kumarakulasingam Suriyakumar:]

Relatively smaller numbers though, Kevin.

[Kevin McVeigh:]

Right, is it fair to say that it took out $5 million of revenue give or take from those acquisitions?

[Jonathan Mather:]

Again, $5 million as in quarter or annual?

[Kevin McVeigh:]

I would think probably quarterly, Jonathan, right?

[Jonathan Mather:]

No, much less, may be $2 million or $3 million.

[Kevin McVeigh:]

So $2 million or $3 million quarterly? Okay, that is helpful.

[Operator:]

And that appears to be all the time we have for questions. I would like to turn it back to our presenters for closing remarks or comments.

[David Stickney:]

Thanks, John and thank you everyone for joining us today. We appreciate your continued interest in the Company. We wish you a good evening. We look forward to talking with you next quarter. Take care.

[Operator:]

And that does conclude today's call. We do thank you for your participation and ask that you enjoy the remainder of your day.