TESSCO Technologies Incorporated
Q3 2019 Earnings Call Transcript

Published: 26 Jan 2019

[Operator:]

Good day, ladies and gentlemen and welcome to the Third Quarter 2019 TESSCO Technologies Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms. Jamie Bernard. Ma’am, you may begin.

[Jamie Bernard:]

Good morning, everyone and thank you for joining TESSCO’s Q3 2019 conference call. Joining me today are Murray Wright, TESSCO’s President and Chief Executive Officer and Aric Spitulnik, the company’s CFO. Please note that management’s discussions today will contain forward-looking statements about anticipated results and future prospects. Forward-looking statements involve a number of risks and uncertainties and TESSCO’s results may differ materially from those discussed today. Information concerning factors that may cause such a difference can be found in TESSCO’s public disclosures, including the company’s most recent Form 10-K and other periodic reports filed with the Securities and Exchange Commission. With that introduction, I would like to turn the call over to Murray Wright, TESSCO’s President and CEO. Murray?

[Murray Wright:]

Thank you, Jamie and good morning everyone. Thanks for joining us on the call today. Our third quarter performance reinforces our enthusiasm for TESSCO’s future. As we enter the final quarter of the year, we look forward to fiscal 2020 with optimism. Let me provide a brief summary of the quarter with three key points. First, revenue and gross profit growth, together with our focus on rigorous execution and operational effectiveness, helped drive TESSCO’s highest quarterly earnings per share in the past 3 years. Second, sales to the public carrier ecosystem grew significantly again this quarter and we are poised to continue the strong performance. And finally, improvements in inventory and accounts receivable resulted in $6.5 million in cash from operations. Now, let me jump into the details of the quarter. We achieved overall revenue growth of 4% in the third quarter, representing the eighth quarter of the year-over-year sales increase in the past nine. Our third quarter growth was primarily driven by a 48% increase in sales to the public carrier ecosystem as we capitalize on opportunities in that market. Our 48% increase compares to the overall carrier CapEx spend of only 9%. Our value proposition to the public carrier market is resonating with our customers and we are being rewarded in market share and sales growth. In addition to driving sales, we are focused on enhancing the profitability of this market through better operational execution. We have been working closely with our customers and suppliers to refine the forecasting of our customers’ product needs. We are also implementing a number of technology tools to improve our cost structure in servicing this business. This includes upgrading our website to improve the ordering process as well as implementing proprietary tools such as our [indiscernible], which enhances workflow management for project-related opportunities. We previously laid out a plan to drive growth in the public carrier market and we are pleased to see those plans coming to fruition. We will continue to focus in the carrier ecosystem while working to replicate this success in the VAR and Integrator market. The strength in public carrier sales was partially offset by lower year-over-year sales to our VAR and Integrator as well as retail markets. We completed the restructuring of our VAR and Integrator business in the second quarter to a regional sales model. This was a disruptive process, but one we believe necessary to set us up for future growth. Overall, this has gone well, but it has taken longer than expected to work through. We have full confidence that we are going to gain traction with our VARs and Integrators in the coming quarters. The team is working through significant changes that came with the new sales model, including people, processes and tools. We are looking forward to leveraging this new model to capitalize on growth opportunities. During the second quarter, we continued our investment in this market by adding new business development expertise and we have also added more sales coverage to support our VARs. Our focus on product mix and sales of higher margin Ventev products contributed heavily to improve margins in this market during the quarter. Overall, Ventev infrastructure sales were up 9% marking the second consecutive quarter of the year-over-year improvement. This growth is being driven by a multitude of different projects across many industries and customers, while reinforcing our value proposition and our ability to capture market share. Operationally, we executed well in the retail market. However, softer-than-expected major phone release and general consumer electronics industry weakness resulted in a sales decline of 2%. According to the latest Consumer Electronics Confidence Index, this market had a broad-based decline following a poor Black Friday performance and that continued into January. Our lower sales appear to be in line with this industry trend. At the same time, TESSCO is gaining traction in the retail market on a few fronts. For example, we are increasing product placements at big box retailers and expect to continue to develop opportunities in the coming quarters. We are also excited that our Ventev mobile device accessories division launched 9 new products at CES. Additionally, we will continue to invest in e-commerce and technology initiatives, which are starting to make an impact on the business. Let me do a quick review of our markets. Our public carrier business is demonstrating strong growth and momentum. We expect that to continue. The VAR and Integrator market has undergone significant go-to-market changes and we are confident that we will see strong performance in the coming quarters. Our retail market is leveraging tools and business development initiatives to open new relationships and create a more robust product mix. And we are focused across all markets on improving gross margin. I also want to make one more point before turning the call over to Aric. The important component of TESSCO’s mission is to be a thought leader across each of our markets in the wireless industry. To that end, another avenue we are pursuing is to provide additional value to our customers through our recently launched Tessco Concierge Series. These are invitation-only events aimed at bringing together leading industry and technology providers, industry experts, technology integrators and contractors in the wireless industry. These events enable companies that are building and improving the nation’s infrastructure to hear from the leading technology manufacturers, government agencies and other prominent industry spokespeople. Feedback from both our customers and our manufacturing partners has been extremely positive and has led to several new actionable opportunities. This is another example of TESSCO differentiating itself as a value-added distributor providing industry expertise, the latest technology solutions and valuable industry insight. Now, I will turn the call over to Aric for a discussion of the financial results and I will be back to provide some final thoughts. Aric?

[Aric Spitulnik:]

Thank you, Murray and good morning everyone. The key to our success this quarter was our ability to improve revenue and margins, while managing SG&A and ultimately delivering the best EPS quarter in 3 years, all this while improving our balance sheet. Our intentional focus on our public carrier ecosystem is delivering results and we anticipate the actions we have in place in the other markets will deliver growth in future quarters. For the third quarter, revenues totaled $152 million, up 4% from the prior year quarter. Public carrier revenue was up 48%; VAR and Integrator sales declined 5%; and retail sales declined 2%. Gross profit for the quarter increased by 5% from a year ago as a result of higher total sales and improved gross margins. Gross margin for the quarter increased to 20.4% from 20.2% in the third quarter of fiscal 2018. While the lower margin public carrier market constituted a larger percentage of the revenue this quarter, our profit improvement initiatives enabled us to increase overall gross margins. As a result of our ongoing cost management efforts, SG&A expenses were essentially flat year-over-year despite the higher sales volume. As a percentage of revenue, SG&A was 18.1% compared with 18.7% of revenue last year. Accordingly, our third quarter operating margin increased 80 basis points from 1.5% last year to 2.3%. Net income for the third quarter was $2.7 million compared with $1.6 million a year ago. Earnings per share were $0.32 compared with $0.19 in the third quarter of fiscal 2018. The cost management improvements made during the quarter were a significant contributor to the year-over-year increase in earnings per share. In addition, our third quarter of fiscal 2019 EPS benefited from a lower year-over-year effective tax rate driven in part by the new tax laws and by a nonrecurring tax benefit. Going forward, we expect our tax rate to settle in, in the mid to upper 20s. Turning to the balance sheet, while growth in the carrier business inherently puts pressure on inventory and receivables, our focus on improving these measures is working. We saw a significant decline in inventory and accounts receivable this quarter, which contributed to our ability to generate $6.5 million in cash from operations. As a result, we reduced the balance on our line of credit by $3 million. While the project-based business will naturally lead to fluctuations in balance sheet performance, we remain focused on continuing long-term improvements in working capital and cash flow. We have set our dividend at $0.20 per share with a record date of February 13 and a payment date of February 27. We currently anticipate being profitable in the fourth quarter and achieving annual growth in revenue and earnings. Before turning the call back to Murray for closing remarks, I wanted to briefly touch on a couple of additional items. The recent partial government shutdown had a minor impact on TESSCO in Q3, with the larger impact expected in Q4. The most direct impact is in our sales to federal government agencies and the VARs doing work on their behalf. It is also causing a slowdown in sales to non-government customers working on new builds as new FCC licenses are being impacted by the shutdown. Regarding tariffs, the vast majority of our distributed products are unaffected by the current tariffs and they have no material impact on Q3 results. The area most impacted by tariffs is Ventev mobility products, which are mostly subject to a 10% tariff that began in September. Unless a new agreement is reached, the rates will increase to 25% on March 1. If the tariffs remain at 10%, we expect there to be minimal impact to profitability going forward. Conversely, if they increase to 25%, there could be a more definitive impact. Our team is working to determine the optimal product sourcing roadmap going forward. In addition, we are negotiating with our current manufacturers to reduce product costs. Finally, I wanted to convey my excitement about the results this quarter. While the rate of our revenue growth wasn’t as high as in previous quarters, the gains we made in profitability were significant. We are optimistic about ongoing revenue growth as we enter the new calendar year. I am also very pleased with our balance sheet improvement this quarter and I am proud of the intense focus our entire organization has on driving smart profitable growth. With that, let me turn it back to Murray.

[Murray Wright:]

Well, thank you Aric. As we entered the final quarter of 2019, our team is executing well and we expect to end the year with growth on both the top and bottom lines. Looking out to our next fiscal year, we continue to expect the first net build-out to positively affect our results. We also expect 5G to begin to have a favorable impact late in the calendar year. These, along with the incorporation of new vendors into the business and our organizational and go-to-market changes, should begin to have an increasingly positive effect on TESSCO as we move through fiscal 2020. While we still have work to do as we prepare to capitalize on exciting growth opportunities, we are confident in our team and our future. We are enthusiastic about the prospects ahead and we look forward to discussing further progress with you on our next quarterly update. And with that, Lauren, we will open the call for questions.

[Operator:]

Thank you. [Operator Instructions] And our first question comes from Maggie Nolan with William Blair. Your line is now open.

[Maggie Nolan:]

Good morning, Murray and Aric and congrats on the good profitability there. I wanted to ask a little bit about the Integrators and VARs segment. Obviously, there has been a lot of investment in that area, maybe taking a little bit longer than you anticipated. I am wondering, what are the steps going forward or is this really a matter of the investments have been made and the growth will come and it’s more of a timing game or are there more steps that you all are going to take on your end to help invigorate growth in that segment?

[Murray Wright:]

I think – hi, Maggie, it’s Murray, and I think the way that you stated is, the steps have been taken, and in fact, a lot of the steps we can – completed early in Q3. And this I think we’ve described in earlier calls as an ongoing process and quite disruptive to the business, where we’ve essentially gone to a regional sales model that effectively changed virtually every sellers’ territory and relationship in the business. So we feel like that heavy lifting has been done now and it’s really a question of focusing the team and driving the results that we know are out there and assuring that we’ve got the right coverage. We’re still doing some tweaking, but feel as though that all of the heavy lifting has been done and now it’s just focusing on accelerating the growth there.

[Maggie Nolan:]

Okay, great. And then building up on that in terms of a lot of the investments you’ve made in the past and how that impacts SG&A. Obviously, SG&A was a little bit lower as a percentage of revenue this quarter, drove some good profitability. Do you think we’re kind of narrowing in on what you would consider to be a normalized SG&A level going forward?

[Aric Spitulnik:]

Hey, Maggie, it’s Aric. I would say yes and no. I think this quarter was more representative than last quarter. There’s still going to be some ups and downs to it, as we’ve got more activity with some of the bigger carriers that will still lead to a little bit more freight cost and operations costs. And then we also have things like payroll taxes that jump up in our Q4 when the FICO amounts reset, that’s a few $100,000. So I don’t want to be – I want you to make sure you’re well-aware of those things that as we do have some kind of a seasonality in the expenses. But I think from a people standpoint, we’ve got a few more specific investments to make mostly in the sales organization, but for the most part, I think we’re in good shape there. We do have some more technology investments to make and you’ll see some of those coming up and we’ve been continually doing them and that’ll continue as well.

[Maggie Nolan:]

Okay, understood. And then you mentioned some seasonality to the expenses, but I want to make sure we’re thinking about the upcoming quarter and upcoming quarters after that properly. So you mentioned the potential tariff increases, you’ve mentioned some impacts from the government shutdown, I know the fourth quarter can tend to be at least sequentially a little bit softer. So how should we be thinking about this March quarter coming up here? And then how should we be thinking about kind of the growth expectations going into the next fiscal year?

[Murray Wright:]

Well, I think that Maggie that the fourth quarter as we just mentioned in the – in our comments here is, we expect the year to be ahead of last year. So you can take a look at what the math looks like from last fiscal year. And our pipeline is robust from a sales perspective going into this quarter, and I think what we’re just trying to identify is there are some variables that I would say are uncontrollables for us that would potentially impact our quarter. So we feel very confident in our team and we feel confident in the pipeline and the moves that we’ve made in the business, so there’s a lot of good signs for the fourth quarter. On balance, this is one of those scenarios that we’ve communicated several times is that a big piece of our business is project-based. And so I’m confident when I look out over the longer-term horizon that the growth of the business is going to steadily improve. But from a project perspective, we could have a project land in the final 2 weeks of a quarter or a project rollover to the first week of the following quarter that can potentially impact year-over-year compares. So I just want to be a little – I want to be clear that that’s the nature of our business and it will – I think that, that complexity of that has the potential to increase as 5G projects start to roll out in the balance like late in, what we’re anticipating late in 2019 calendar year.

[Aric Spitulnik:]

And the other thing I’d add to that Maggie, when you’re looking at Q4 last year, just recall that that’s had an extra week in it. So you – from a – when you’re looking at projections, there was some more – some extra revenue and there was also extra expenses. So just to make sure you’re factoring that in as you look at quarter-to-quarter.

[Maggie Nolan:]

Okay, right. Makes sense. Okay. Thanks. One last quick one if I can, just the diluted share count for this third quarter, and thanks, guys.

[Aric Spitulnik:]

I think it was just over 8 million, 8.5 million – 8.4 million. So it came down a little bit from last quarter.

[Maggie Nolan:]

Understood. Thank you.

[Operator:]

Thank you. [Operator Instructions] And the next question comes from Bill Dezellem with Tieton Capital. Your line is now open.

[Bill Dezellem:]

Thank you, and good morning, and congratulations on a really nice improvement in the quarter. So I would like to start with the freight challenges that you had last quarter. It appears by your margins that you corrected those if not entirely, almost entirely and that happened very quickly. Would you discuss that process of correcting those higher expenses that you had last quarter and how you view that whole freight category going forward?

[Murray Wright:]

Hi, Bill, it’s Murray. Just I’d be happy to give you some perspective on that. Here’s the way I look at it, Bill, there’s kind of two factors here. One is, what’s controllable by the management team and I feel very confident that the processes that we put in place shines a spotlight on the things that we need to do from a process perspective to understand the costs and manage them accordingly based on wherever we happen to be in the quarter. But I also – similar to the comments that we just had a discussion with Maggie is, I also want to reinforce that the freight costs are also impacted depending on the timing of projects from the delivery of timing. And ultimately in the second quarter, I mentioned that we made some conscious decisions to trade off cost to make sure we delivered on customer SLAs on those service level agreements and expectations. And confronted with a similar kind of scenario, which is variable, we would make that same decision to protect the customer. So I feel confident that we’ve made good improvements around process and visibility. I also want you to be aware that based on the nature of the business and the timing of it that we will default to trying to make sure that we execute on behalf of the customers because that’s a long-term view of how we want to be perceived and engaged with our customers and supporting our vendor partners.

[Bill Dezellem:]

Great. Thank you. Let’s shift if we could to the VAR and Integrator restructuring. Would you talk to the timing that you expect the success of that or reorganization to become apparent to us on the outside from a sales perspective?

[Murray Wright:]

Yes, I mean, I think that – it’s a good question, one that we’re asking ourselves as well. I think that this quarter we’ll start to see traction and then I think it’s going to get continuously better as we get into the first and second quarter of our next fiscal year. I mean, ultimately, that was the purpose of going through pretty dramatic changes so that we could align ourselves with better coverage in the United States and also align ourselves with our partners to attack the marketplace in a more thoughtful and strategic manner. So the disruption that it’s created with our sales organization is one that I think that we’ll get a better traction this quarter, and I’m pretty confident based on looking at pipelines that we’re off to a good start on that on a year-over-year compare basis.

[Bill Dezellem:]

Great. Thank you. And then relative to the extra services to the retailers that you announced around CES, how long have you actually been doing those services? What revenues does that drive for you all and what revenue level has it been driving, and are you anticipating something meaningfully more, and, I guess, when I say meaningfully, something that’s noticeable again to those of us on the outside?

[Murray Wright:]

Yes, it’s a great question, Bill. And I think the way to look at this is that TESSCO is differentiating their selves across our businesses by making sure that we can provide value-added capabilities. And we’re investing in technology as an example to try and drive some of that. In retail, we’ve been performing extremely well and adding value by providing services. What we are doing right now is essentially incubating a services business and we’ve made – we put a business plan together around services only, so that it increases the flexibility for our customers and to an extent, our vendors on how they want to engage with TESSCO. They can engage with a full-service package. We provide a whole host of services and we can ship product. We can just ship product. We can just do services. And so I’d say it’s going to take us some time to incubate this business and we wanted to make the announcement because we believe that it’s a differentiator in the market and there’s capabilities that we’ve put into our services offering that are quite a bit different than anybody else in the marketplace.

[Bill Dezellem:]

So when you say quite a bit different, I can very easily allow my mind to jump quickly and say, gosh, if you’re really different, the retailers are going to jump on it and we’ll see an immediate revenue increase. But it sounds like that’s really impractical in terms of the way reality works?

[Murray Wright:]

Yes. I agree with that. Yes.

[Bill Dezellem:]

Yes, right.

[Murray Wright:]

I mean, to me, you have – we have to sell it, Bill, right? I mean, that oftentimes our customers are doing – could be supply chain services, could be merchandising services, could be mystery shopping services, could be merchandising services, they could be conducting some of those themselves. So is it a benefit for having TESSCO to provide some of those capabilities? We think that there’s a business case for them to consider. And we have validated that because we’re performing some of them in the marketplace, which gave us the leverage to want to go and build a business around services only. And there are companies in the market that provide services only to the retail business. So this is our business incubation strategy.

[Bill Dezellem:]

That’s helpful. And then I would like to follow up on questions that Maggie was asking relative to earnings. And so I was thinking about the comments that you made in your release and if the March quarter has revenue growth versus the $149 million last year, that implies that revenues will be similar or better than the $152 million that you did here in this quarter. And so if revenues are equal to or better what we just reported then it seems that the March quarter earnings should be similar or better than the $0.32 just reported. But maybe the question that I should be asking is, what happens in the March quarter from a margin perspective that would lead to earnings not being as good as this quarter using the logic that I – that’s rattling in my head?

[Aric Spitulnik:]

One clarification, Bill. We said that the fourth quarter would be profitable and we expected annual increases in top and bottom. When we said annual, that’s the fiscal year, not the quarter. So we’re not necessarily saying that revenues are going to be higher than the $149 million from last year.

[Bill Dezellem:]

Okay. So let’s then use that as a point – a starting point, do you believe that revenues will be higher than last year since you – what is it, 8 out of 9 in the last quarters have grown revenues versus the prior year?

[Aric Spitulnik:]

Well, we purposely weren’t commenting on that because of a few things. One, the extra week that we saw in the quarter last year does have an impact and the government shutdown is still a concern for us. So those two items give us enough pause to not want to go out and say exactly where we think the revenues are going to be for the fourth quarter. We do think it’ll be a nice quarter, but we’re not prepared to say it will be higher or lower than last year.

[Bill Dezellem:]

Great. That’s understandable. I would probably do the same if I were in your shoes. So let me – let’s circle back to just the broad question of what are the impacts to margins either favorable or unfavorable in the March quarter relative to the December quarter that you would naturally experience irrespective of volume? Clearly, if volume is down or up, that would influence margins directionally.

[Aric Spitulnik:]

Are you talking about gross margins or operating margins?

[Bill Dezellem:]

I’m talking about the full business model.

[Aric Spitulnik:]

Okay, so let me just start with gross margins. We do expect the carrier business to continue to be strong and probably a bigger piece of the overall business that will have a could have a negative impact on gross margins from an operating margin, again, volume is a key there from a leverage standpoint as I mentioned earlier, we’ve got some seasonal impacts that hit our expenses in Q4 that are incremental to Q3, mostly around benefits and payroll taxes with some of the things that we said at the beginning of calendar year so that has a negative impact to us otherwise, I think freight costs I think we should be relatively in line with Q3 no major changes in comp and benefits other than the one just discussed so you pull those few things out and it should be relatively close, but you have to impact it for those few things we just talked about, including the lower potential volume.

[Bill Dezellem:]

Great. And if you will allow, I’d like to just throw out some more questions here relative to earnings last year, you had a solid December quarter and then also, I was a little surprised that the follow-on March, June and September quarters did not match the results of December and yet I feel like there were some extraneous factors that impacted that so, would you discuss what’s different coming into 2019 calendar year that’s different than a year ago, which I think you expressed some optimism for this coming fiscal year?

[Murray Wright:]

Well, I think there’s a couple of factors maybe, Aric and I can just share some of that, Bill so, first of all, last year, we if I recall correctly, I think we were at 6% EPS which is the first time in three years that the fourth quarter was profitable so, I think coming out of that quarter, the TESSCO team felt pretty good about being able to go from minus 10% in EPS to a minus 13% to a positive...

[Aric Spitulnik:]

Positive 13%.

[Murray Wright:]

Positive 13%, excuse me yes so, pretty good transformation so, I think we had to convince our team, for instance, that the characteristics of the fourth quarter, and to your point, the third quarter, we need to carry those forward into the fourth quarter so, our pipelines are strong, but we have some cyclical impacts, like Retail for instance, still 30-plus percent of our business it is not a good quarter typically for our Retail business and that’s why we’re trying to complement the traditional Retail business with initiatives like services and we are expecting the Carrier business to be continue to be robust and we’re expecting to gain some traction in the VAR and Integrator market and so, as you look at all that, you go, okay, well the news there could be pretty good we have got some expenses that just from a calendarization perspective hit us at the same time, we are dealing with an unusual environment in the United States with the government shutdown and that potentially is it’s not positive for us, let’s just say that it is definitely not positive the longer this goes, the more it impacts FCC licenses and more it impacts the ability to get vendors’ products certified that are completing projects so, what’s the impact of that? I have no idea and we’ve got this best case, worst case, most likely case but honestly if you when is the shutdown going to end and when are we going to get back to a normal scenario so that some of these considerations we don’t have to worry about? That’s the only thing I would say is, I can give you confidence that our team will execute well in the fourth quarter some of the things that aren’t in our control, I don’t know how that’s going to affect us.

[Bill Dezellem:]

That’s helpful. And then relative to the June and September quarters, should those be ramping relative to where we’re at here in the December quarter since we don’t have that downward seasonality that would normally be associated with the March quarter?

[Murray Wright:]

Well, I think last quarter you asked if there’s an inflection point at some point if there’s an inflection point and I don’t think it’s going to be as dramatic as an inflection point, but if you look at what the past 2 years have been as there has been steady progressive improvement in top line and a year-over-year improvement in operating margin as well that’s what we will expect as we move forward.

[Bill Dezellem:]

That’s quite helpful. So I have additional questions and I am happy to step out of the queue. However, if there is time, I’m happy to continue asking more I’ll let you direct me at where I go.

[Murray Wright:]

Well, we’re happy to have a call with you as well after this, if you’d like, Bill, if you have a long list of other questions.

[Aric Spitulnik:]

We have time for one or two more if you’d like.

[Bill Dezellem:]

I will ask one more, and then I will jump back in and that’s relative to G&A, which was down $2 million sequentially so I was hoping you could highlight your success on bringing that SG&A down as well as you did so fast.

[Aric Spitulnik:]

Yes, so it’s probably three things there one is the freight costs that you already discussed earlier so they’re still up a little bit over last year, but down significantly over Q2 we had talked last quarter about health insurance being a little bit higher than historical this quarter, that flipped and went negative or went positive for us, but it was down significantly from Q2 and we’re self-insured, so that’s one of those things you just can’t control we do as best we can with it, but there’s no way to really project it exactly where it’s going to be from quarter-to-quarter and then some of our marketing costs, we had some investments that we made last quarter that were specific to the quarter that those weren’t recurring so in Q3, some of our marketing costs were down over Q2 so those are probably the three areas that are most impacted again from a compensation purposes, relatively flat, up just a little bit I think from Q2.

[Bill Dezellem:]

Great, thank you. Thank you all and appreciate you taking all the questions and we look forward to seeing you a bit later.

[Murray Wright:]

Yes, okay thanks, Bill.

[Operator:]

Thank you. And this does conclude today’s question-and-answer session. I would now like to turn the call back over to Mr. Murray Wright for any closing remarks.

[Murray Wright:]

Thank you, Lauren and thanks to everyone for joining us. We appreciate your support of TESSCO. And as always, I’d like to thank our team members for their continued hard work and dedication. Have a great day today. Thank you.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program and you may all disconnect. Everyone have a wonderful day.