Sunworks, Inc.
Q3 2018 Earnings Call Transcript

Published: 7 Nov 2018

[Operator:]

Greetings, and welcome to Sunworks Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Rob Fink with Hayden Investor Relation. Thank you. Please go ahead.

[Rob Fink:]

Thank you, Operator. Good morning everyone and thank you for joining Sunworks' third quarter 2018 earnings conference call. Participating on the call today are Chuck Cargile, Chief Executive Officer; and Phil Radmilovic, Chief Financial Officer. Before we start, I would like to remind everyone that during this call, management's remarks contain forward-looking statements which are subject to risks and uncertainties. And management may make additional forward-looking statements during the question-and-answer session. Therefore, the Company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by the forward-looking statements because of certain factors not limited to general, economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel, and changes in legal and regulatory requirements. In addition, any projections as to the Company's future performance represent management's estimates as of today, November 7, 2018. Sunworks assumes no obligations to up these projections in the future as market conditions may change. This morning, the Company issued a press release with financial information and commentary and its quarterly SEC filing on Form 10-Q. We encourage you to review both to augment the information provided on this call. With all that said, I would like to turn the call over Sunworks' CEO, Chuck Cargile. Chuck?

[Charles Cargile:]

Thank you, Rob. Good morning everyone and thank you for joining our call. Earlier today, we reported the results for the third quarter of 2018. Our results reflect progress we are making in transforming Sunworks into a business with sustainable profitability and cash generation. Our financial model is improving with higher gross margins and lower operating expenses which drove a positive adjusted EBITDA for the quarter. We are very focused on improving our financial results so much so that on our quarterly investor call, we sometimes overlook the big picture which is the long-term attractiveness of the solar industry in general. In terms of industry evolution, the solar space is still very young and maturing, but it's inarguable that there is a long runway for expansion and there are significant opportunity for Sunworks. The industry will be marked by fits and starts and steps forward and back, but with relentless forward progress. In less than a decade, the solar industry has gone from almost nothing to one that employs a quarter of a million people. And in fact recently in one in every one hundred new jobs created in the U.S. is in the solar industry. Furthermore, as many of us look to decide for the results of mid-term elections and try to discern the opinion of the American people, when it comes to the solar industry, American citizens are in full support. A recent poll by the Global Strategy Group determined that more than three quarters of voters across party lines want to see their electric utilities invest more in solar energy. The poll also revealed that solar energy is the most favored form of electricity. And those polls want more action by the government to encourage the use of solar power. Nine out of ten respondents said that their power company should not be able to stop them from using solar energy. At a time when the public is divided on so many issues, it's exciting to see such universal support for our industry. Turning attention back to Sunworks, our results reflect improved performance. We are still working through a number of older projects that we won a year or longer ago. And these projects were often won at very low margin and often without through estimating and planning from a project management standpoint. In fact, 47% of our Q3 ACI and public works revenue was generated from these older projects. As we flush out old projects and replace them with ones that have been properly vetted, estimated, priced and managed through processes that have been implemented by the current management team. We anticipate improvement in our gross margins. Our estimated gross margin on new project proposals in 2018 is approximately 23%. And projects we won, the gross margin is estimated at 22%. It's also important to note that in the third quarter, we did not experience any significant downward adjustments in project margins, to have tangible evidence that we're more disciplined in pricing proposals and successful and winning projects with higher margins and more efficient in our execution of projects. All of this helping us to minimize or avoid margin slippage. Revenue from our residential business in the third quarter remained at about the $5 million level, but late in the quarter and through the early part of this fourth quarter. We've seen an acceleration in new sales, giving us some optimism for near-term growth in that part of our business. Our total backlog of projects scheduled for installation in the next four quarters remains at a healthy level approximately $52 million, and were poised to have strong orders to close out the year. This morning, we announced a new agreement with a longstanding customer of ours whereby we will provide EPC services for 10 to 15 of their new grocery stores in 2019. This agreement further solidifies our position with this customer and allows us to avoid the RFP process in order to win the project. This agreement is a testament to our relationship with this key national account. Although our improvements in the business have taken longer than I would like. The improvements are real and they are sustainable. As we improve our profit and cash position. We become better positioned to take on new business and resume revenue growth. And as we grow the top line, we'll leverage this revenue growth for enhanced profitability. In short, we're improving business in an exciting and evolving industry. And with that, I'll ask Phil to provide some more specifics related to our financial results in the quarter.

[Philip Radmilovic:]

Thank you, Chuck, and good morning, everyone. The third quarter of 2018 financial results reflects the improvements Chuck has referenced. Most notably, we achieved a positive adjusted EBITDA for the first time in over a year. For the third quarter of 2018, total revenue was $18.3 million, marking a decrease of approximately 3% compared to $18.8 million reported for the third quarter of the prior year. Our public works team had another strong quarter generating $4.6 million in revenue. This is a 213% increase over the third quarter of the prior year. Agriculture commercial and industrial revenue declined from $10.8 million posted in the year ago quarter to $8.7 million in the current quarter. Residential revenue was $5.0 million or 20% of total revenue in the current quarter compared to $6.6 million or 35% of our revenue in the year ago quarter and in line with $5.0 million in the previous quarter. Gross profit for the quarter was $3.4 million or 18.4% of revenue an increase from $3.1 million of gross profit or 16.5% of revenue for the third quarter of 2017. Gross margin of 18.4% is the highest level in five quarters. Gross margins continue to be negatively impacted due to a high percentage of the current period revenue being generated from projects entered into in prior years before internal controls on pricing and estimating were in place. In the current year, new project one carry a higher expected gross margins than those both in prior periods. Gross margins in the third quarter of 2017 were due -- were low due to significant costs incurred to complete several ACI projects exceeding original cost estimates. Any costs in excess of estimates are charged to cost of goods sold as incurred. In the third quarter of 2018, cost exceeding the original estimates were minimal. Additionally, the gross margin on residential projects has declined year-over-year. Lower than historical margins on residential projects were driven by competitive pricing pressures and our inability to absorb a fixed cost as a result of lower job volume. While we maintain a variable cost model, certain costs do not increase at the same rate as revenue. We are expecting slightly higher revenue from our residential business in the fourth quarter, and anticipate improved gross margins accordingly. Total operating expenses excluding stock-based compensation for the third quarter of 2018 were $3.4 million, compared to $4.5 million in the third quarter of 2017. This represents a 25% decrease from the same quarter in the prior year, and a 9% decrease from the second quarter of 2018. In addition, our total operating expenses excluding stock-based compensation for the first nine months of 2018 declined 26% versus the comparable prior year period. Operating expenses excluding stock-based compensation decreased for the eights consecutive quarter and are at the lowest level in three years. We anticipate some minor cost reductions in the remainder of 2018 that will offset by strategic cost investments to enable future growth. Stock-based compensation was $151,000 during the quarter, compared to $299,000 in the prior year quarter. Interest expense for the third quarter of 2018 was $191,000, up from $142,000 in the second quarter. Third quarter interest expense includes three months of interest related to the CrowdOut [ph] finalized in April, compared to only two months in the prior quarter. We expect interest expense to be relatively constant, at about $190,000 per quarter going forward. Net loss for the third quarter of 2018 was $400,000 or $0.01 per basic and diluted share, compared to a net loss of $2 million or $0.09 per basic and diluted share in the year-ago quarter. Turning to our balance sheet, our unrestricted cash and equivalents were $3.6 million at the end of September 2018, compared to $6.4 million at December 31, 2017. Our accounts receivable balance at the end of the quarter was $9.4 million. This receivable balance reflects a $1.8 million payment that we received on October 1st. Had the payment been received just one day earlier our cash balance would've been higher and our receivables balance lower. As we discussed on last quarter's call, we have a high level of inventory on hand as a result of the strategy of purchasing or committing to purchase solar modules prior to the enactment of the tariff on imported modules. Inventory balances have declined to $3.9 million, a $2.7 million decline from the record high balances at March 31, and a $500,000 decline from the December 31st balance. We expect inventory balances to continue to decline and cash and working capital to improve as we convert inventory on hand to cash. Our total debt at September 30, 2018, was $5.1 million, and including the $3.75 million promissory note finalized in April, $1.3 million from acquisition or equipment financing, and $100,000 convertible note that bears no interest. $1.1 million of the debt is considered current, and the remaining $4 million is long-term. I will now turn the call back to Chuck.

[Charles Cargile:]

Thanks, Phil. We're focused on closing out 2018 on a positive note, and position ourselves for a strong 2019. Although it's difficult to predict the quarterly timing of installation revenue due to customer pushouts, delays from utility companies, and potential rainy wet weather, we believe our fourth quarter revenue will be in the range of $18 million to $20 million, which will be similar to the fourth quarter of the prior year, but we anticipate gross margins to be much higher than the prior year level. And we anticipate reporting positive adjusted EBITDA in the fourth quarter of this year versus a $2.8 million negative adjusted EBITDA last year. With improving gross margins and a fulsome pipeline of new projects and reduced operating expenses, we're positioning the business for consistent and predictable profitability and cash flow. I'd now like to turn the call over for questions. Operator?

[Operator:]

Thank you. [Operator Instructions] Our first question has come from the line of Philip Shen with ROTH Capital.

[Philip Shen:]

Hi, Chuck, Phil. Thanks for the questions. Good work on getting to positive adjusted EBITDA. Wanted to kind of walk through how you expect margins to trend. I know you have guidance officially out for Q4, but wanted to see if you could speak to the cadence of margin by quarter as we go through '19, how quickly do the older projects kind of go out. So if Q3 was $18.4 million and what you're bidding on is $23 million and what you're winning is at $22 million, do we just have a natural kind of step function to -- like when do we get to that $22 million level, do we get there in Q3 of next year, Q2 of next year? Any kind of color on that would be very helpful for modeling. Thanks.

[Philip Radmilovic:]

Yes, sure. So as we talked, we're still being impacted from these older jobs that are kind of at that lower price point, as Chuck went into. We've made a lot of progress over the last year in capturing the appropriate cost and correcting our estimates going forward. But we are still recording a significant amount of revenue on these old jobs. So specifically in Q3, jobs originally booked, prior to '18, made up $6 million of revenue. And on that $6 million, we generated gross margin of approximately 16%. This compares to Q2, where jobs booked prior to '18 amounted $8 million, and that $8 million generated gross margin of approximately 10%. So, in Q4 and subsequent quarters the older projects in our backlog should continue to be a smaller percentage of total revenue. But there will continue to be a drag until we flush out all these lower margin projects.

[Philip Shen:]

Phil, can you give us a sense for when the older projects could be flushed out completely? I mean, do you think it's a back-half of '19 situation?

[Philip Radmilovic:]

Yes, I do. So are working through right now -- the number keeps getting smaller. We anticipate it to continue to decline. And we think we should be through majority of it through the first-half of 2019.

[Philip Shen:]

Okay. And then from a quarterly standpoint, because this really helps for modeling, do you expect the $8 million from Q2 to be the high watermark? So for example, Q3 was a little bit lower, $2 million lower. Does Q4 -- how much do you expect, roughly, ballpark numbers, in Q4, Q1, and Q2? Thanks.

[Philip Radmilovic:]

Yes, so it is a little difficult to predict because some of these are very large projects that tend to be very lumpy. But that $8 million is anticipated to be the high watermark. Q4 is anticipated to be lower than Q3 as far as percentage of old jobs. And the remainder after that is going to be spread kind of between Q1 and Q2 at roughly the same levels.

[Philip Shen:]

As Q4?

[Philip Radmilovic:]

Yes.

[Philip Shen:]

Okay, good. Yes, that's really helpful. Thanks. So in terms of our national grocer, I think it saw 10 to 15 new stores in '19. I know your business can be very lumpy, but how does that break down in terms of quarters, or maybe half, is it back-half weighted and front-half weighted? How do you expect the cadence there to be?

[Charles Cargile:]

Yes, so we're happy about the new business that we announced this morning with the national grocery chain. It's one that we've talked about before. We've probably done half-a-dozen or more projects with this company already. So it's a recurring customer and it's one of our cornerstone national accounts that we've talked about a lot over the last year or so. And I want to make sure I explain a piece of it. The announcement this morning was for 10 to 15 new stores in 2019. But I have every expectation that we'll do more than that because the national grocery chain is divided into different regions. And this particular region -- and each region will bid out their project slightly differently. So they have approved EPC, but each one goes through -- each region has a different point person on the supply chain that we coordinate with. So this is one particular region that got approval to do 10 to 15 stores over the course of 2019. And the important part for us is they got approval to avoid the RFP process. So as they roll out those stores we're the chosen one. At the same time, we currently have in our queue a number of other proposals that we are bidding on that we would expect to win, but we still have to go through the RFP process. So long answer to your question. And then the specific answer is that it will be pretty much spread over the course of the year. My guess is not a lot of it in Q1, because we have the plans now. And I think by the time we get them all approved and rolled out it's probably not a big impact in Q1, but then it'll be pretty ratable over Qs two through four.

[Philip Shen:]

Okay, good. And want to confirm, when you say new stores, you mean new builds for the grocer, right. So is there -- or are these opportunities for you on existing stores, I'm guessing it's actually the latter.

[Charles Cargile:]

Yes, it is.

[Philip Shen:]

Okay, it could be a combination of both. But it's probably more existing stores, right, because otherwise you wouldn't be able to do it so quickly because those stores would have to be built.

[Charles Cargile:]

Yes…

[Philip Shen:]

Okay, fair enough. Thanks. And then kind of looking beyond this particular national grocer, what is the pipeline looking like in terms of other accounts or targets that could be similar in terms of recurring business and large number of addressable buildings or opportunities within that entity. Do you have others lined up there near-term or is this kind of the one we should be focusing on?

[Charles Cargile:]

We do. We do have others lined up. I appreciate the question because I think you're very in tune to what our strategy is. And we do have a strategy that we're executing on, which is to acquire more business with national accounts, which to us is the closest that we can equate to recurring revenue, and so we are looking at others. And we also look to solidify and enhance our relationship with other partners, people like ForeFront that we've talked about before who we've partnered with when they financed a number of public works projects. Over the second-half of this year, we've developed a very, very strong relationship with a customer who does projects for multiunit housing for low-income renters, where there's a real nice subsidy and a great payback for the owners of those rental facilities, the multiunit housing. We've won over 20 different projects with that partner, and expect that that number will be even larger next year. We've talked in the past about our relationship with a large beverage company. And just this quarter, we're hoping to win at least one more project with them and maybe more. We continue to get more opportunities with them, which is good. And then just this week, we won two projects in Northern California with Harley-Davidson, which is a new account with us. And we hope that that's going to lead to other stores with them as well. So it's a strategy that we have and we're executing on, and we think that it's going to continue to be a bigger part of our revenue base, and a more predictable recurring part of the base.

[Philip Shen:]

Great. That's great color, Chuck. Harley-Davidson sounds interesting and fun. Is it their dealership or is it a manufacturing facility in those cases?

[Charles Cargile:]

Yes, these were dealerships.

[Philip Shen:]

Okay. And how competitive, in particular for them, was it for you guys to win that bid?

[Charles Cargile:]

As you know, there's competition almost always. There's very seldom does an EPC like ourselves get one without some degree of competition. In this particular case, I believe it was won on a relationship that one of our people had with the local decision maker. So we still have to prove our wares and still have to win the competition. But we were in the driver seat and eventually won, I think, primarily because of the relationship.

[Philip Shen:]

Okay. Does that relationship give you the opportunity to go national at some point with Harley or is it more of a, "Hey, let's do it here," and then maybe with the [indiscernible] you guys can expand to other Harley-Davidson?

[Charles Cargile:]

I would say in the near-term or even near to midterm, if you think about 2019, there's enough opportunity regionally, I would say, so staying in California. And then eventually, ideally, that would become more national. But I think it would grow organically from this region and then expand, that would be the way I would visualize it, I think.

[Philip Shen:]

Okay. One last question, I'll pass it on. In terms of the acceleration of resi sales, I think you mentioned in your prepared remarks. What is the driver there? I mean, is it just the overall growth of the market or are you doing something different?

[Charles Cargile:]

Yes, that's a good question, and I could spend a long time talking about it because we've gone through a number of changes in the residential group over the last time I've been here year and half and even beginning before that and the first step was to make the business more efficient. In 2017, the residential business lost a lot of money, so there was some nice growing revenue but it was not profitable. So throughout 2017 and for the most part of 2018, we wanted to make sure that we could be profitable in residential and we have been successful in it being a positive contribution to the profit doesn't cover all the corporate overhead but it's been positive at a contributed profit level. So we've even as the environment in California became more competitive, we've been focused on now trying to take that efficient profitable base and grow the revenue. We went to a third-party model as I think you know so primarily our revenue there is through third-party and that took a little bit to get it up and running, I think we're starting to see some success there and then I think probably a large factor that shouldn't be underestimated is we have as we were driving for that profitability, we held our price point at a pretty high level. And now over excuse me over the last three months or so, we relaxed that a little bit and allowed ourselves to be a little bit more competitive on pricing. That might squeeze the margin a little bit but I think what we're going to see is the increased volume will make that forth and it's I think we've been patient and methodical in how we evaluated that and so over this quarter and the first part of 2019, I think we'll be able to prove that out. So long answer, but it's something that we've been very focused on and I think putting that leverage is going to help us a little bit on the growth side.

[Philip Shen:]

So as you think about the potential growth here right because I think you guys were at $5 million of revenue in Q3 for resi, are we looking at a situation where that residential growth could accelerate kind of faster than the growth of let's say the growth of the market is 10% next year, year-over-year in terms of volume megawatt volume for resi. And maybe even California let's just make that assumption, then do you see the potential because you've kind of fixed and focused on the internal operations to get ready for this volume and now that you're ready to face the world again to be a little bit more aggressive on maybe a little bit pricing to get that volume, could you get that could you grow faster than the overall market out if the assuming it's a 10% growth rate?

[Charles Cargile:]

I do think that and that's something that will be driving to achieve and the way I think of that sale particularly from this $5 million level that we've been bouncing around the last several quarters. Getting back to a $6 million level which is where we were not that long ago. I think we have line of sight to that and, so if you just look at the last small numbers in the percentage that would be much better than the 10% and then the other way I think about is in talks with our operations team, we believe with the footprint we have today and not contemplating. We don't have installation labor to satisfy it but with the footprint that we have, we think we could get as high as $7 million or $8 million a quarter in revenue from this $5 million level without a significant change in the cost structure, direct costs, yes but the overall cost structure we think we could accommodate it, so we got the point where we didn't want to reduce the costs anymore. We want to leverage those costs on growing revenue, so that's going to be the focus. I don't think we get to $8 million in a matter of quarters but I give you that just, so you have an idea for how we think we could grow it without there being a meaningful difference in the fixed cost structure.

[Philip Shen:]

Great. Thanks for all the color. It's very helpful and I'll pass it on.

[Charles Cargile:]

All right, thank you, Phil.

[Operator:]

Thank you. Your next question is from line of Jim McIlree with Chardan and Capital.

[Jim McIlree:]

Yes, thanks, and good morning. Just following on that last comment that you are making Chuck about the ability of the company scale. Revenues without OpEx increases, can you make a similar, can you have a similar discussion on scaling in the ACI in the public works side would you need to increase a lot of OpEx or OpEx cost in order to have a revenue increase at that similar kind of rates that you are talking about in residential?

[Philip Radmilovic:]

Yes, sure I'll take this. So similar to the residential side, we do have the scalability along the rest of the business. We focused not just on the residential side but across all of them worked extensively on our spending particularly as it relates to OpEx over the last year. So and kind as I mentioned that led eight straight quarters of declines in operating expenses and our OpEx excluding stock comp it's 25% lower than it was a year ago and 9% lower than it was a quarter ago. So we continue to be very mindful of our spending on expenses but we may see a slight increase in Q4 depending on some year-end accruals. The impact of new hires that we are considering, but all that factored in, we believe we can support increasing revenue levels entity wide, not just within residential. With our operating expenses staying in that consolidated $3.5 million to $4 million range.

[Jim McIlree:]

Okay. Thank you. And so, then the challenge becomes increasing the top line on these lower expense levels in this different distribution model. And I guess, I'm just trying to understand how reasonable -- I guess reasonable is a wrong word, how quickly you can start ramping up sales? If the sales cycle long such that we should be really expecting these kinds of quarterly sales levels for the next couple of quarters and we start to see an increase in the second half or is that too soon, or am I being way too pessimistic or if you can just offer some commentary on that would be appreciated.

[Charles Cargile:]

Sure. I think it's an intuitive question and a good question and it reflects the way we've approached the business over the last year which is. First, solidifying the base, cost structure and profitability of the business, and clearly, the challenge on the gross margins has mitigated some of the benefit that we would have hoped to get from the lower operating expenses. But now as we've talked a lot, we'll start to see that trend move in our favor. As the mix of projects become more of the new better margin projects versus the old ones. So now I do feel more comfortable than I have over the last year and pushing harder to win more business and I feel more confident in our estimating process. And when we say that a project is going to earn, let's just use the 22% than the average of what projects have been won at in 2018. I have greater confidence that, that will deliver 22%. And so, I think it gives us the ability to be more aggressive with projects and be more credible when we meet with customers and propose on projects. Timing, that's always the million-dollar question and I think we've proven and I think it's true to the industry not just Sunworks that there's a lot of factors that make it hard to predict. So particularly as a public company when you best be ring the bell at the end of a quarter and everything has to tally up based on that day. It's hard to predict quarter-to-quarter but I am confident that we can start to drive the needle to something higher than the $18 million to $20 million dollars that we've been recording over the last several quarters and start to see that increase. And I think the first Telltale sign of that is going to be some of the new projects that we book in Q4 that start to fill out that pipeline for the second half of the year. Because as we mentioned we've got more than $50 million dollars of backlog today, that's scheduled for installation. So that carries us for the next couple of quarters. And that doesn't even account for two and three quarters out for residential. So that would be added on top of that. So I think you can't -- we can't start to see increasing revenue levels and that's kind of the second half of the year, we'll be buoyed by what we do in the next quarter or two in terms of new sales.

[Jim McIlree:]

Okay. And earlier you guys were talking about residential business. And I was a little bit confused as to whether or not you're seeing margin pressure there or not. And so, might ask in a different way which is, what are your current residential margins versus what they were, let's say 12 months ago?

[Charles Cargile:]

Yes, so 12 months ago.

[Jim McIlree:]

But I'm talking gross margins.

[Charles Cargile:]

Sure, I get it. So 12 months ago, or so when we were at higher revenue levels and most of that revenue was coming from direct sales. Our gross margins were in the mid-to-high 20s but the operating margin was a little bit lower because we were carrying within our selling and marketing expense, and all the costs that are now carried by the third-party dealer. So today, we generally estimate a forecast residential gross margin to be in the 20% to 22% range. And what I think is going to happen if we do it right Jim, is that the -- even if we drop the price a little bit. And we benefit from the extra volume. There won't be a drop in that margin and the spread of the coverage of the fixed costs will allow it in fact even if the pricing is a little bit lower to maintain or improve that gross margin. If we start to see revenue levels tracked to what I talked to Phil about earlier something above the 5 gig or 6 and ideally all the way up to the 8 million. So I think that there if we said definitely if we do 5 million again in Q4 after taking a price reduction then clearly the margin would be lower. But that's not the intent. I think, we can we can absorb a slightly lower price by having the higher volume.

[Jim McIlree:]

Okay. That's helpful. And then finally, first of all, I'm not trying to get you to pin you down on a quarter-by-quarter prediction for 2019. I'm just trying to understand kind of the trajectory of the where the kind of how the year looks conceptually and so it sounds like the first half is kind of sort of like the second-half of this year. We've got some margin pressure from the old projects and maybe a new kind of similar revenue levels maybe you get a bump from residential. Second-half, we get better margins because we've flushed out the old projects and we've got the new projects coming in and maybe we get a little bump in the ACI in public works as well as, as residential.

[Jim McIlree:]

Is that a reasonable way to look at next year?

[Charles Cargile:]

It is.

[Jim McIlree:]

Okay. Perfect. Thanks a lot guys. Good luck with everything.

[Charles Cargile:]

Thank you.

[Operator:]

Thank you. This concludes our question-and-answer session. I'd like to turn off our back to Chuck Cargile for closing comments.

[Charles Cargile:]

All right. Thank you all for joining us today and for your interest in Sunworks and always I'd like to encourage you if you have any follow-on questions, don't hesitate to reach out to Phil or myself or to Rob Fink at Hayden Investor Relations. Thank you again.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time and thank you for your participation.