Nautilus, Inc.
Q4 2014 Earnings Call Transcript

Published: 24 Feb 2015

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Nautilus Inc. Q4 2014earnings call. [Operator instructions.] As a reminder, this conference call is being recorded Monday, February 23, 2015. I would now turn the conference over to John Mills. Please go ahead.

[John Mills:]

Great, thank you. Good afternoon, everyone. Welcome to Nautilus' fourth quarter 2014 conference call. Participants on the call from Nautilus are Bruce Cazenave, Chief Executive Officer; Sid Nayar, Chief Financial Officer; and Bill McMahon, Chief Operating Officer. Our earnings release was issued earlier today and may be downloaded from our website at nautilusinc.com, on the Investor Relations page. The earnings release includes a reconciliation of the non-GAAP financial measures mentioned in today's call to the most directly comparable GAAP measures. Remarks on today's conference call may include forward-looking statements within the meaning of the securities laws. These statements including statements concerning the company's current or future financial and operating trends, anticipated new product introductions, available supply of certain products, planned and anticipated results of new product and channel development initiatives, expectations concerning future income tax payments, and forecasts related to sales performance of individual products and in international markets. Forward looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those statements. For more information about these risks, please refer to our quarterly and annual reports filed with the SEC as well as the Safe Harbor statements in today's press release. Nautilus undertakes no obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances after they are made, or to reflect the occurrence of unanticipated events unless otherwise indicated. All information and comments regarding our operations results pertain to our continuing operations. With that, it's my pleasure to turn the call over to Bruce. Go ahead, Bruce.

[Bruce Cazenave:]

Thank you, John. Good afternoon everyone, and thank you for joining our call today. On today’s call, I would like to start by providing a general overview of the fourth quarter and year and then we’ll turn it over to Sid Nayar to review our financial results in more detail. Bill McMahon will then add some details on each business segment, as well as updates on product activity. I will then close with some summary remarks before we open up the call for questions. We are pleased to report another strong quarter and year for our company. Throughout 2014, we clearly benefited from the successful execution of our key strategies, that is, a continuation of the formula that has worked well for us over the past several years. In the fourth quarter, we delivered revenue growth of 23%, reflecting higher sales in both our direct and retail segments. For the full year, our consolidated net sales increased 25% over prior year. This strong top line performance was driven by a number of factors, but is mostly attributable to successful development and marketing of new products. Since its launch early in January of 2014, the Bowflex MAX Trainer product line has performed extremely well and contributed significantly to our top line growth. We are very excited by the positive consumer response to this product line and expect that it will continue to be an important part of our product portfolio in coming years. We also benefited from strong retailer acceptance of our lineup of retail products, which really is a continuation of the positive momentum that began with the launch of the new cardio products in the third quarter of 2013. The revenue growth and new product success, along with continuing to leverage operating costs across higher sales volume, enabled us to deliver a 44% increase in pretax income in the fourth quarter over prior year and an 88% increase on a full year basis in 2014. At this time, I’d like to turn it over to Sid Nayar, our chief financial officer, who will provide some additional details about the fourth quarter financials. Sid?

[Sid Nayar:]

Thank you, Bruce. I would like to review the details of our financial results for the fourth quarter and full year of 2014. Net sales for the fourth quarter totaled $94.9 million, an increase of 23.1% as compared to the same period in the prior year. Net sales for the full year ended 2014 totaled $274.4 million, up 25.4% as compared to net sales of $218.8 million for fiscal 2013. Fourth quarter gross margins increased 440 basis points in the direct segment and were down 220 basis points in the retail segment to 64.6% and 25.2% respectively, when compared to the same quarter last year. On an overall basis, total company gross margins for the 2014 fourth quarter improved to 51.1%, up 350 basis points versus the same period prior year. For the full year 2014, total gross margins improved to 51.2%, up 260 basis points as compared to 2013. Total operating expenses for the fourth quarter as a percentage of sales increased to 35.8% from 34.5% in the same period last year, reflecting higher media spending related to the direct segment and marketing and merchandising investment to grow the retail channel. Operating expenses for the full year 2014 as a percentage of sales totaled 40.2% as compared to 41.5% for the prior year. General and administrative expenses were $5.6 million, or 5.9% of sales, for the fourth quarter of 2014, which compares to $4.9 million or 6.3% of sales in the same period last year. The increased dollar spending in G&A primarily reflects higher spending for patented trademark registration, higher personnel related costs, and IT infrastructure costs. The improvement in G&A as a percentage of sales highlights favorable operating efficiencies and our ability to leverage the existing operating base as the business expands. General and administrative expenses for 2014 as a percentage of sales totaled 8.1% as compared to 8.5% for 2013. Research and development costs for the fourth quarter of 2014 were $1.9 million, or 2% of net sales, compared to $1.8 million, or 2.3% of net sales in the same period last year. The dollar increase reflects our ongoing commitment to invest in the product development and engineering resources required to innovate and broaden our product portfolio through new and refreshed products. Research and development costs for 2014 totaled $7.2 million or 2.6% of net sales as compared to $5.6 million or 2.5% of net sales for 2013. Operating income for the fourth quarter of 2014 increased to $14.5 million, as compared to income of $10.1 million in the same quarter of last year. The increase reflects higher sales and gross margins in the direct segment, combined with improved operating leverage of sales and marketing and general and administrative expenses. Operating margin for the fourth quarter of 2014 improved to 15.3%, compared to 13.1% for the same period last year. For 2014, operating income totaled $30.2 million or 11% of net sales, up 92% compared to 2013. Pretax income from continuing operations for the fourth quarter of 2014 was $14.6 million, or $0.46 per diluted share, compared to pretax income from continuing operations of $10.2 million or $0.32 per diluted share in the same period last year. Pretax income from continuing operations for 2014 totaled $30.2 million, or $0.95 per diluted share, compared to $16 million or $0.51 per diluted share, in the comparable period last year. Beginning in the first quarter of 2014, the company started to record income taxes at a normalized rate following the partial reversal of its valuation allowances in 2013. We believe that pretax income comparisons provide a useful metric to gauge the underlying business performance. Given the company’s U.S. net operating loss carryforward position, we expect to continue to have minimal cash tax payments in the near term. Net income from continuing operations for the fourth quarter of 2014 was $10.5 million or $0.33 per diluted share, as compared to $8.4 million or $0.27 per diluted share for the same period last year. Net income from continuing operations for 2014 totaled $20.4 million or $0.64 per diluted share, as compared to $48.1 million or $1.53 per diluted share for 2013. The full year 2013 numbers included a onetime income tax benefit of $33 million or $1.05 per diluted share due to a partial reversal of a valuation allowance recorded against the company’s deferred tax assets in 2013. Total net income including discontinued operations for the fourth quarter of 2014 was $10.4 million or $0.33 per diluted share. This includes the $0.1 million loss net of taxes, or less than $0.01 loss per diluted share from discontinued operations. This compares to the fourth quarter last year, where we reported total net income, including discontinued operations, of $8.5 million or $0.27 per diluted share, which included income from discontinued operations of $0.1 million net of taxes, or less than $0.01 income per diluted share. Total net income for 2014 was $18.8 million or $0.59 per diluted share, compared to $48 million or $1.52 per diluted share for the same prior period, including the onetime income tax benefit previously mentioned. Turning now to our segment results, net sales in the direct business totaled $58 million for the fourth quarter of 2014, a 34.9% increase over the same quarter last year. Direct segment sales benefited from continued strong demand for our cardio products, primarily driven by sales of the Bowflex MAX Trainer product line that launched during Q1 2014. This growth was partially offset by the continued decline of strength in other products in the direct channel as we continued to see some of these products cascade into the retail business. Net sales for 2014 in the direct segment totaled $175.6 million, up 28.5% over the same period last year, driven by incremental revenue from Bowflex MAX Trainer, partially offset by declines in strength in other product categories. U.S. credit approval rates rose to 43.5% for the fourth quarter of 2014, up from 39.7% for the same period last year. This is attributable to several factors, including the launch of the Bowflex MAX Trainer, which has thus far attracted consumers with better credit scores, along with our media strategy focused on driving quality customer leads and an expanded lender base. Gross margin for the direct business improved to 64.6% for the fourth quarter of 2014, compared to 60.2% in the second quarter of last year. The direct business gross margin benefited from overall overhead operating efficiency and product cost improvements, coupled with favorable product mix. Operating income for the fourth quarter of 2014 in our direct business was $11 million compared to $5.6 million in the same quarter of the prior year. Operating income benefited from higher gross margins and improved leverage of operating expenses as a percent of sales in the fourth quarter of 2014. Net sales in our retail segment for the fourth quarter of 2014 were $34.6 million, an increase of 7.9% compared to $32.1 million in the fourth quarter of last year. The improvement reflects continued sales strength of the company’s new lineup of cardio products launched in both the fall of 2013 and 2014, partially offset by weaker sales experienced in Canada in the fourth quarter of 2014. For 2014, net sales for the retail segment totaled $93.2 million, an increase of 21.4% over the same period last year. Gross margins for the retail business declined by 220 basis points to 25.2% in the fourth quarter of 2014, as compared to 27.4% for the prior period, impacted by higher customer allowances, product mix, and discontinued inventory liquidation. In the fourth quarter of 2014, operating income for the retail business totaled $5.8 million, as compared to $6.5 million in the same period of last year, the decrease attributable to lower gross margins and higher marketing and merchandising expenses. Our retail operating margins have been negatively impacted in the short term as we seek to accelerate growth through investments in new product categories and channel development. Now turning to the consolidated balance sheet, cash and investments totaled $72.2 million as of December 31, 2014, with no debt. This compares to $41 million in cash and no debt at December 2013. Inventories were $24.9 million as of December 31, 2014, compared to $15.8 million at December 31, 2013. The increase in inventory versus year-end 2013 reflected the higher sales levels associated with the addition of the Bowflex MAX Trainer launch, launch inventory associated with the nutrition line, and inventory stocking of our new distribution center in Ohio. Trade payables were $47.6 million as of December 31, 2014, compared to $37.2 million at the end of 2013. Capital expenditures totaled $0.6 million for the quarter and $3.2 million for the year, with spending primarily on IT infrastructure, product tooling, and warehouse leasehold improvements. At this time, I would like to turn it over to Bill McMahon, our chief operating officer, who will provide additional insights into our business and key products. Bill?

[Bill McMahon:]

Thank you, Sid. I’d like to provide additional background on our fourth quarter results and the overall position of our business as we enter 2015. Starting with our direct business, as Sid just outlined, during the peak selling season, we delivered another solid quarter of revenue and operating income growth, largely driven by the Bowflex MAX Trainer. Consumer demand has been very strong for this product, as it continues to receive favorable reviews across the industry. Through this point in its life cycle, the performance of MAX Trainer has exceeded our growth projections. MAX Trainer revenue growth and media performance over its first year in the market has beaten all prior historical product performance in terms of pace of growth, media return on investment, and creative efficiency. Our research shows the customer satisfaction with the product is high and our return rates are low. Given these factors, we anticipate continued strong growth in our direct business for at least the first half of 2015. We will continue to increase our investment in media to drive MAX Trainer growth, as always, with a focus on profitability and revenue. Even with the growth of MAX Trainer, TreadClimber remains the key platform in our direct product lineup. TreadClimber continued to be the largest single category for our company in 2014. In the fourth quarter, sales of TreadClimber declined in line with our expectations as we continue to see a reasonable amount of cross shopping between MAX Trainer and TreadClimber from visitors to bowflex.com’s website. It’s important to point out that MAX and TreadClimber are two distinct products that are appealing to different customer bases. However, there will naturally be some cross shopping between our cardio offerings, especially in the digital ecommerce environment, where our customers and potential customers have visibility to our entire product line. In short, while TreadClimber sales have been impacted due to the introduction of a new cardio product from Bowflex, the vast majority of growth in MAX Trainer sales is due to attracting new, interested consumers to the product. Our confidence in TreadClimber as a platform remains strong, and we anticipate sharing news later in 2015 regarding the next generation of TreadClimber products. We continue to experience favorable gains in consumer financing approval rates, which improved to 43.5% in Q4, as Sid stated. These gains continue to be driven primarily by our efforts to deliver strong through-the-door credit quality via our creative and media positioning. The performance of our account portfolio has led our partners to approve at a cautiously higher rate. It’s important to note, though, that direct sales growth is not confined to consumer financed orders. In fact, for Q4, our sales completed using credit card as a payment method grew at a significantly faster pace than even the growth of our financed orders. We continue to place high priority on growing the business in a healthy, balanced payment manner and not becoming overly dependent on consumer financing for our revenue. As has been the case for the past several years, we continue to see a decline in direct strength category sales as the natural life cycle of these legacy products plays out via cascading of sales through our retail channel. For comparative purposes, it’s important to keep in mind that these declines in actual dollars are becoming a very small percentage of our direct business overall. Our direct business is well-positioned for continued growth in 2015, and we are very pleased to be generating strong gross profit margin in this segment while delivering significant top line growth. Turning now to our retail business, retail customer response to our new lineup launched in the fall of 2013, as well as our products launched in September of last year, continue to be positive. We believe that across much of the retail environment, the fourth quarter and holiday selling season was relatively challenging, so we are particularly pleased to grow our retail business in light of this. We attribute our ability to gain additional position on the floors of our key retail partners to our improved product assortment. That said, our growth in Q4 for retail was slower than our recent run rate. There are two primary short term factors driving this. First, as we reported in November during our Q4 earnings call, our retailers did accelerate some of their buying of our high-velocity Schwinn products into Q3 versus historical Q4 purchasing, which impacted our results in Q4. Taken as a whole, our retail business grew 13% in the second half of 2014, which is very strong versus industry average. Some of our retail partners were also impacted by the ongoing slowdown at West Coast ports, and this slowdown has led to a delay in some replenishment orders, which in turn potentially impacted our fourth quarter sales. We anticipate some headwinds in this area until such time the labor dispute is settled and the port backlog is cleared. In fall 2014, we launched our new line of Nautilus cardio products, as well as our first entries into the very large treadmill segment. We’re very encouraged with the performance of these product launches. Our treadmills in particular are receiving strong reviews. These products are meeting our expectations, and we feel they will provide a key platform for growth in the second half of 2015. Turning to international sales, we previously stated that our desired goal in 2014 was to double our sales in the international market, which we define as sales outside of the U.S. and Canada. We are happy to report that our sales internationally grew 141% in 2014, exceeding our targets. That said, those sales still remain a small percentage of the overall global fitness market, and we continue to expand our focus in this area, most recently at the ISPO International Fitness Product Showcase in Munich, earlier this month. There, we showed our Nautilus cardio products as well as our international version of MAX Trainer. We anticipate beginning to sell MAX Trainer in international markets late this year. Before moving on, I’d like to briefly discuss retail channel gross margins. Our margins decreased in Q4 year over year. This decrease can be attributed to several factors, such as timing and one-time events, the introduction of lower-margin treadmills as a category, and a near term unfavorable mix of domestic versus factory fulfilment related to the port situation. The reasons are important for us to understand, but only to the extent that they help us address the problem. Growing revenue while losing margin is counter to our long term objectives, and we are very focused on turning that trend around. We feel we have initiatives and progress to do so, and in the long term view, we remain confident that we can grow retail margins. That said, over the next two quarters, we would anticipate some amount of margin challenge in our retail business. I want to emphasize, though, that the retail business overall remains quite profitable to Nautilus and will continue to be so while we address the issue. As Bruce said, ongoing product innovation continues to be a primary area of focus for our team. We continue to invest in research and development, with the objective of maintaining a robust product pipeline, and we will continue to enhance those capabilities with the opening of our new product innovation center adjacent to our headquarters in Vancouver, Washington, by midyear. Additionally, in our Q1 earnings results call in May, we plan to discuss new product introductions anticipated for the fall of this year. We continue to look at new product introductions over a three-year time horizon and intend to maintain a regular cadence of new product launches for the foreseeable future. Along with our fall 2014 fitness products, we also recently launched a nutrition line, Bowflex Body. Many of our current direct to consumer customers are using some kind of shake supplement or meal replacement strategy, and our line of nutrition products is intended to provide a solution with no confusion from a trusted brand. Our launch was small, defined as no television and relatively conservative marketing, primarily focused on existing customers. Our desire in the early phase has been to determine if the product will be seen as of high quality and effective by those who purchase it. We’re very pleased to see that our customers to date are quite impressed with the product. While it’s still very early, we have seen enough from our initial phase results to continue forward with our efforts in the coming year. Finally, turning to our supply chain and operations, as noted in our retail channel comments, the current condition in the West Coast ports has led to delays in product delivery in both of our segments that we have been working around the clock to mitigate. On average, our inbound product shipments have been delayed 17 to 24 days. We maintain strong relationships with our third-party partners throughout our global supply chain, and our operations team is doing incredible work in mitigating this situation as best as possible. Some of our solutions will involve routing our products to alternative ports such as the East Coast. Our recently opened Columbus, Ohio distribution center will help provide us with alternative distribution models depending on where we can route our inventory to best serve our customers. In the interim, we will likely own an elevated level of inventory due to extended in transit periods. We also anticipate some longer promise periods for high velocity products within the direct channel until such time as the ports return to normal operations. To date, we have not experienced a material negative impact on submitted orders or customer interest due to these promise periods. While we’re encouraged by the news that there is a tentative labor agreement in place to address the port slowdown, we are also aware that it will take several weeks to even a few months before port operations are fully caught up and our supply chain returns to normal. We will continue our mitigation efforts in the short term. In summary, I’d like to note how proud of our team we are and thank them for their impressive work in 2014. We are not resting on our laurels, though, and we know that with 2015 upon us, we’ll need to continue our efforts to maintain a profitable growth trajectory driven by compelling products. We have a great product lineup in both the direct and retail businesses, and we continue to focus on developing additional products that will further diversify our portfolio and drive that growth. And with that, I’d like to turn the call back over to Bruce for his final comments. Bruce?

[Bruce Cazenave:]

Thank you, Bill. Before opening up the call for questions, I’d like to make a few final summary comments. We are excited about the progress we’ve made in the business last year, which has positioned us well for another year of profitable growth in fiscal 2015. It’s still early in the year, but we are pleased to see that the growth trends that we realized in the fourth quarter of 2014 in direct, and to a lesser extent in retail, have continued into the first quarter of 2015. Going forward, our plans remain centered around the three key areas of focus that have served us well

[Operator:]

[Operator instructions.] And our first question is from Lee Giordano with CRT Capital.

[Lee Giordano:]

Can you talk a little bit more about the gross margin opportunity in 2015? Just trying to get a sense of if the overall can continue to rise, despite the retail margin pressures that you’re seeing. And also, on the retail margins, how much of that is one-time in nature? It looks like you’re doing some special promotions on discontinued inventories. Just trying to get a sense of how much that’s just temporary.

[Sid Nayar:]

Let me address the retail margins first, and then I’ll come back to your original question around the overall gross margins. The retail margins were impacted in Q4 by a variety of factors, sort of including product mix, lower sales in Canada, where we have slightly higher margin, and the disposition of the discontinued inventory. I would say some of these are onetime events, like disposition of the discontinued inventory and the sales in Canada, but we do need to address some product mix issues as we see increased pressure on margins from the growth in the treadmill category. We believe we have, or will be taking the steps necessary to regrow those channel margins over the next couple of quarters, and we feel that, again, for the full year, we should be, with some of the steps clearly with growing the international channel as well, where we will see higher margins that we should get back to the margin levels in the retail channel that we’ve discussed before. When you talk about overall margins for the company, again, on the direct side, we do believe that the gross margins in the direct segments are optimal where they are, sort of in the low to mid 60s right now. And as we grow the direct business faster than the retail business, if that were the case, you know that the overall company margins will be higher, and obviously vice versa. We’ve had quarters where the retail business has grown faster than the direct. So I would say clearly, the impact in Q4, we were able to offset the retail margins because of the incredible growth that we had in the direct channel.

[Lee Giordano:]

[Indiscernible] so far about the treadmill launch. It seems like you’re pretty happy with what you’re seeing. Any other color you could provide on how that’s going?

[Bill McMahon:]

On the treadmills, as you’ll recall, we went out with a controlled launch, and those areas where we’re testing the treadmills, they’re performing quite well, both from an on the floor performance standpoint as well as just in customer reviews, which we’re quite pleased with early on. So we’re hopeful that we can then this fall expand our treadmill presence while addressing some of the margin challenges that Sid talked about, but we definitely would say that our controlled entry into treadmills is paying dividends for us already.

[Operator:]

And our next question is from the line of Frank Camma with Sidoti.

[Frank Camma:]

I was just wondering, when you talk to retailers, you had mentioned that the retail environment was still challenging this year, but obviously you still had a pretty good growth rate there. Two questions on that. How do the retailers themselves feel about their inventory levels, and have they kind of indicated whether they’re becoming a little bit more optimistic about the retail environment with obviously the savings that the consumer is going to reap from the fuel levels?

[Bill McMahon:]

Two responses there. In regards to our own product, we know that our retailers are not in fact overstocked with much of anything. The port slowdown situation means just about everybody’s running lean, unless you have products that aren’t selling. And we do not have that challenge. In regards to their outlook, I’d say many of them are investing in their fitness area. Certainly, the national sporting goods retailers are investing in their floor space for fitness and looking to get back on a growth trajectory there. But they’re taking the long term view of that, so we’re optimistic that we can be a part of that solution going forward.

[Frank Camma:]

And just to kind of address some of the bells and whistles that you’ve put into the products recently, do you think the connectivity aspect, especially with things like the Apple built in…

[Bill McMahon:]

The Health Kit?

[Frank Camma:]

Yeah, the Health Kit.

[Bill McMahon:]

Yeah, Health Kit, and Google, and Google Health, and even Under Armour’s entering that space as well. We believe those are critical elements of our products. We believe it’s important that our products have connectivity to those tools. Certainly, the major players. I don’t know that there’ll be a lot of people springing up. I don’t know if we’ll be able to be compatible with everyone, but it is a desire of ours, and in fact, we place a lot of product line focus on our technology side and connectivity. We think it’s one of the key elements of the success of our recent product launches.

[Frank Camma:]

Yeah, it seemed like you've got a lot of good reviews on your treadmill from some of that. And the final question, just on the tax rate going forward, is the full year tax rate indicative of where we should model? Or should it be a little higher? Just kind of surprised at where that was.

[Sid Nayar:]

Yeah, as I think we pointed out, we did have a valuation allowance reversed out in the fourth quarter, which helped bring down the tax rate in Q4. We would continue to model it around the 35% to 38% on a full year basis.

[Operator:]

And we have a question from the line of Andrew Burns with D.A. Davidson.

[Andrew Burns:]

Just a question on international. Can you talk about the primary growth drivers here in 2015, and your ability to substantially grow that business as you did in 2014? And then looking beyond, how big of a needle mover can MAX Trainer international be? Can you experience a similar sort of quick ramp that you saw domestically?

[Bruce Cazenave:]

The biggest drivers in international is continuing to create products that are compatible internationally. And at the show in Munich that we talked about in the prepared remarks, we did show our full line of Nautilus products that are internationally compliant, and that is really the tool that’s going to let us re-enter markets and begin to sell product on a wider basis internationally. In regards to MAX Trainer, given the success in the U.S., it’s potentially projectable to be a strong product internationally. It remains to be seen, but we are growing optimistic that there’s certainly a successful product platform here that’s leverageable across the globe.

[Andrew Burns:]

And then in terms of your commentary about [porter to date], in terms of direct and retail, is that to say there’s a similar year over year growth rate that was evidenced in the fourth quarter as continued into the first quarter?

[Bruce Cazenave:]

I would say that a lot of the strength that we saw in the fourth quarter is carrying into the first quarter for direct, and to some degree, a lesser degree, for retail. And we could talk a little bit more on that on our follow up calls, but fair to say through the first two months here, through February, we continue to see strong demand, particularly on the direct side.

[Andrew Burns:]

In terms of the media spend for MAX Trainer, can you give us any analogies in terms of what the spend level looks like compared to, say, a peak product spend? Is it half of what, looking back prior product successful launches? Is it half what it could be a quarter or three quarters? Any color there would be helpful.

[Bruce Cazenave:]

As you know, we don’t break out media spend by individual product category, so I’m hesitant to give too much color here. What I can say is we have not spent on MAX Trainer near what a peak product would potentially sustain. I can say that we continue to spend against and grow our spend against MAX Trainer, and it continues to meet and exceed our expectations as we do that. So even if I could tell you how high it could go in comparison, we don’t know that yet. We intend to find out, so we’ll continue to smartly spend against MAX Trainer in the coming year, and we’ll see where it reaches its peak level of performance. But it’s definitely still in growth phase right now.

[Operator:]

I believe those are all the questions we have for today. I will now turn the call back to you, Mr. Cazenave.

[Bruce Cazenave:]

Thank you. Thanks again, everyone, for your participation and interest in our call today. We are planning to attend a few investor events over the next few months, and are scheduled to present at the upcoming Roth annual conference in California. We hope maybe to see you at some of these events, and in either case, look forward to speaking with you on our first quarter conference call in May. Have a great rest of the day. Thank you.