Acuity Inc. (De) Q2 FY2026 Earnings Call

Good morning, and welcome to the Acuity Fiscal 2026 Second Quarter Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Charlotte McLaughlin, Vice President of Investor Relations. Charlotte, please go ahead.

Thank you, operator. Good morning, and welcome to the Acuity Fiscal 2026 Second Quarter Earnings Call. On the call with me this morning are Neil Ashe, our Chairman, President and Chief Executive Officer; and Karen Holcom, our Senior Vice President and Chief Financial Officer. Today's call will include updates on our strategic progress and our fiscal 2026 second quarter performance. There will be an opportunity for Q&A at the end of the call. As a reminder, some of our comments today may be forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as detailed on Slide 2 of the accompanying presentation. Reconciliations of certain non-GAAP financial metrics with their corresponding GAAP measures are available in our 2026 second quarter earnings release and supplemental presentation, both of which are available on our Investor Relations website at www.investors.acuityinc.com. Thank you for your interest in Acuity. I will now turn the call over to Neil Ashe.

Thank you, Charlotte, and thank you all for joining us today. We demonstrated strong execution in our second quarter of fiscal 2026. We grew net sales, we expanded our adjusted operating profit and adjusted operating profit margin, and we increased our adjusted diluted earnings per share. We generated strong cash flow and allocated capital effectively. In Acuity Brands Lighting, we are managing our business aggressively in a soft lighting environment. We are aligning our cost structure to current market dynamics while continuing to serve customers effectively. Over the last 5 years, we've made meaningful progress accelerating our strategy of increasing product vitality, elevating service levels using technology to improve and differentiate both our products and how we operate the business and driving productivity. These efforts have expanded capacity in our manufacturing network and given us greater flexibility to evaluate our production costs. As a result, this quarter, we took certain actions, including targeted labor cost reductions, which Karen will discuss later in the call. We are managing gross profit margin through a combination of strategic pricing and product and productivity improvements. This enables us to deliver in this market environment and positions us well for the future. Now I want to spend a moment on our growth algorithm, which is designed to ensure that we outgrow the lighting market. We enter new verticals, we take share, and we grow with the market. Last year, we strengthened our floodlight portfolio with the acquisition of M3 Innovation. These solutions are used in education, municipalities, and infrastructure and are designed to reduce total installation costs and enhance the user experience. We have won several notable projects that include retrofit and new construction across verticals, including parks and recreation and education. One of our larger projects was an installation at Baldwinsville High School in New York. This project retrofitted an existing football field and installed our solution at a new athletics field. Combined with our lighting controls, we created dynamic control capabilities for a high-impact game day environment across both facilities, all managed from a single control device. The industry continues to recognize the strength of our products and the value they bring our customers. This quarter, several products in our portfolio were awarded the Architecture MasterPrize by the Farmani Group, including the Eureka Junction, a made-to-order luminaire that can be configured to create custom installations that are compatible with our nLight controls for use in large shared interior spaces such as lobbies, atriums, reception areas, and event venues. Multiple products were also awarded Product Innovation Awards by Architectural Products magazine, including the Juno Trac Linear Ambient family in our Design Select portfolio, that offers architects, lighting designers, and installers versatile options for combining accent and ambient illumination within a single system, simplifying specification and expanding creative possibilities. Now switching to Acuity Intelligence Spaces, which continued to deliver strong sales and margin performance. Atrius and Distech control the management of the space, and QSC manages the experiences in the space. Over time, we will use data from both to enhance productivity outcomes through data interoperability. Taken together, this is how we can make spaces autonomous. Both Distech and QSC performed well this quarter. Within Distech controls, our Eclipse portfolio is a strategic differentiator. It is a comprehensive building automation platform that unifies hardware and software into a cohesive ecosystem for intelligent building management. The portfolio includes hardware devices and software used to manage how a building operates, including HVAC control, lighting, and refrigeration. During the quarter, we released the ECLYPSE retrofit solution, a building controls upgrade designed for use in buildings with legacy wiring and control architectures. This solution allows newer ECLYPSE-based control capabilities to be deployed, providing IP-based performance, embedded edge intelligence, and modern user interfaces without the associated cost or disruption of completely rewiring the space. We are also expanding our addressable market at QSC. Q-SYS is building the industry's most innovative full-stack AV platform that unifies data, devices, and a cloud-first architecture to deliver real-time action, experiences, and insights. Historically, the Q-SYS solutions were developed for use in large rooms and spaces. This quarter, we expanded our Q-SYS solution into smaller and medium-sized collaboration spaces with the introduction of the room suite modular system. This gives customers the option to increase their room capabilities using audio, video, and integrated networking, all supported by Q-SYS Reflect. AIS continues to gain industry recognition. Earlier this quarter, the Q-SYS Room Suite modular system won the Best of Show Award at the ISE 2026 in Europe, the largest AV trade show in the world. While Q-SYS loudspeakers won in both the NAM Best of Show Award and in the NAM TEC awards. Distech Controls received the 2025 Global Company of the Year for excellence and integrated smart building solutions by Frost & Sullivan and won the Smart HVAC Product of the Year category at the U.K. HVR Awards for our move. Now moving to our outlook. Acuity Brands Lighting remains the best-performing lighting company in the world. Given our performance year-to-date and our expectations for the lighting market for the remainder of the year, we now expect our full-year ABL sales performance will be flat to down low single digits year-over-year. We will continue to control what we can control. We are focused on product vitality, elevating service levels, using technology to improve and differentiate both our products and how we operate the business and driving productivity. We are executing on our growth algorithm. We are managing gross profit margin through a combination of strategic pricing and product and productivity improvements. This positions us well for today and for the future. Acuity Intelligence Space is strategically differentiated. We have unique and disruptive technologies that are driving productivity for people experiencing spaces and for the people providing those spaces. Our focus will continue to be on growth, and we have the opportunity to expand margins over time. We are confident in the long-term performance of both the lighting and spaces businesses. We have demonstrated that we have dexterity in how we operate, enabling us to continue to execute in dynamic market conditions. Now I'll turn the call over to Karen, who will update you on our second-quarter performance.

Thank you, Neil, and good morning, everyone. Our strong execution delivered solid performance in the second quarter of fiscal 2026. We grew net sales, improved adjusted operating profit and adjusted operating profit margin, and increased our adjusted diluted earnings per share. For total Acuity, we generated net sales of $1.1 billion, which was $49 million or 5% above the prior year. This was driven by growth in AIS, which included an additional month of QSC sales, partially offset by revenue declines at ABL. During the quarter, our adjusted operating profit was $176 million, an increase of $13 million or 8% from last year. Adjusted operating profit margin during the quarter was 16.7%, an increase of 50 basis points from the prior year, with margin improvement at both ABL and AIS. Our adjusted diluted earnings per share was $4.14, which was an increase of $0.41 or 11% compared to the prior year, primarily reflecting higher profitability and to a lesser extent, lower diluted shares outstanding. ABL sales of $817 million decreased $23 million or 3% versus the prior year driven by declines in the direct sales channel. This was due in part to several large projects in the same period last year that did not repeat. Despite the sales declines, ABL delivered a gross profit margin of 45.7%, an increase of 70 basis points compared to the prior year, driven largely by strategic pricing and product and productivity improvements. Adjusted operating profit increased $1 million to $142 million, and we delivered an adjusted operating profit margin of 17.3%, which was an improvement of 50 basis points compared to the prior year. This is a result of the improvement in gross profit margin. As Neil mentioned earlier, this quarter, as a result of our productivity improvements, we took certain actions, including the reduction of labor. This resulted in a $6 million special charge. Now moving to Acuity Intelligence Spaces. Sales for the second quarter were $248 million, an increase of $77 million driven by strong growth in Distech and QSC and as a result of the inclusion of an additional month of QSC compared to last year. AIS delivered an adjusted gross profit margin of 59.1%, an increase of 60 basis points compared to the prior year. Adjusted operating profit in Intelligent Spaces was $48 million, with an adjusted operating profit margin of 19.3%, which was up 60 basis points compared to the prior year. Now turning to our cash flow performance. In the first half of fiscal 2026, we generated $230 million of cash flow from operations which was $38 million higher than the same period in fiscal 2025, primarily due to higher profitability. During the quarter, we repaid another $100 million of our term loan, bringing the total repaid this year to $200 million. We now have $200 million of the debt remaining from the financing of the QSC acquisition. We increased our quarterly dividend during our January shareholder meeting by 18% to $0.20 per share, and we allocated $106 million to repurchase 318,000 shares. In summary, our execution remains strong. ABL is driving margin improvement in the current market environment and AIS continues to perform. We continue to generate strong cash flow and allocate capital effectively, aggressively taking advantage of market dislocations. Thank you for joining us today. I will now pass you over to the operator to take your questions.

Our first question comes from Joe O'Dea at Wells Fargo.

Can we just start on demand trends? And so when you think about what you've observed in ABL year-to-date and the prior outlook for up low single digits, you're now seeing kind of flat to down low single digits. Just additional color on these demand trends and in particular, what you're seeing in independent sales network, where things have trended softer regionally by end market? And then on the direct sales network side of things, the project business that didn't recur, whether you had line of sight to that or if that was a surprise? And then long-winded question, but just what you're seeing on market share trends with respect to kind of the softer market you see versus peers. I guess some questions out there, whether price has any impact on demand trends for you.

Joe, anything else you want to add before we get started?

I got a follow-up too.

We'll save that for later. First, let's discuss general demand trends, highlighting two key points. First, we've consistently noted that the market is seeking consistency or at least a clear direction regarding policy, tariffs, rates, and similar factors. Second, there's the influence of data centers, which is impacting everything else. They are creating some crowding out from a labor perspective, and we'll touch on memory during the call, but their market impact is noticeable. On the lighting side, we have many projects queued in both our independent sales and direct sales networks, which are being released at a slower pace than usual. Our conversion rates remain stable, but the time to release has increased. We've mentioned this in previous quarters, referring to a kind of stagnation occurring in the marketplace, which reflects our demand situation. Regarding the direct sales network, we anticipated this scenario. Last year saw large projects that did not repeat, as Karen pointed out in her remarks, but we expect major projects in the future, primarily infrastructure projects. While these were modestly affected by the government shutdown—given that decisions, permitting, and funding were delayed—the impact does not alter year-over-year comparisons but does cause some ripple effects. As for market share and pricing, we have no signs suggesting a decline in market share. In terms of strategic pricing, it generally means we price our products according to the value they offer. We do not apply a one-size-fits-all pricing approach; we remain competitive in certain market areas while opting to increase prices in others. Ultimately, we are balancing top-line growth and profitability while retaining our market leadership. Did I cover everything?

No, you got all three parts, so I appreciate the color there. And then just a separate topic on the tariff side of things. Some news last night on potential for a presidential proclamation that finished products made with imported steel and aluminum could be tariffed at 25% instead of 50% on just the steel and aluminum content. I'm sure things that are in process in terms of working through but how you're thinking about that? It seems like something that would not have USMCA compliance protection. There's perhaps a 15% threshold below which you'd be exempt. So just big picture, how you're thinking about this development, any potential impact, are most of your products below that 15% steel and aluminum content?

Yes, we're learning about this at the same time as everyone else, and we don't yet know the specifics of the order. Therefore, any comments will be speculative. However, I'd like to take a moment to discuss tariffs in general, as it's an important topic. We believe we have the most efficient and well-managed supply chain in the industry. Our success in navigating through the tariffs can be credited to our strategy, hard work, and the right locations and direction. So far, we have managed the process by qualifying new suppliers, finding suitable locations, and reengineering products. This represents a significant effort from our team, putting us in a strong position to seize opportunities. We are able to adapt quickly to changes, and we have proven our ability to do so. On a broader scale, most of our steel and aluminum is compliant through the USMCA, so that will continue. Additionally, a large percentage of our products are not affected due to the thresholds mentioned. However, we have not yet seen the order, so there may still be changes if it differs from our expectations.

Our next question comes from Chris Snyder with Morgan Stanley.

I wanted to ask on ABL gross margin. I don't think anyone would have expected ABL gross margins to be up 70 basis points year-on-year despite volume declines and a lot of the very clear tariff pressure in the market. So can you maybe unpack a little bit the drivers there? I would imagine it's a combination of productivity and price cost. Kind of how is the company achieving that in an industry that's known to be so competitive, and then I guess just looking forward, what gives you confidence that ABL gross margin can continue to grow after all the expansion we've seen already in the last 3 years?

Yes, Chris, I'll begin, and Karen can add if I miss anything. Last year around this time, we discussed the impact of tariffs and our need to spend a year improving productivity to get back to where we were. To summarize, we're currently addressing the productivity issues we mentioned to offset the tariff impact on our gross profit margin. Similar to what I've said about tariffs, this involves significant efforts regarding product and productivity enhancements. This means redesigning our products, rethinking our manufacturing processes, and incorporating automation among other strategies. Looking ahead, we're confident in our ability to maintain this focus on product and productivity improvements. It's not simple; it requires significant effort, but many factors contribute to this. We’re also seeing the benefits of our technology investments and the smarter systems we’re implementing, which will help us reengineer our operations. As we move forward, the combination of product changes and productivity improvements within our facilities, along with better material efficiency, will continue to boost our gross profit margin.

I appreciate that. I want to follow up on the ongoing intersection of technology and industrials, which I believe is intensifying with AI and its implications. Neil, considering your background, what does this intersection of AI and specifically building controls mean for Acuity? Do you see it as more of an opportunity than a risk? Ultimately, why do you think Acuity is well-positioned to succeed as AI increasingly penetrates the building industry?

Thank you for the question. I’d like to provide an overall perspective and then discuss the effects on both AIS and ABL. I've navigated these transformations before, and while they may not always be identical, they do follow a similar pattern. The common belief is that short-term impacts are often exaggerated, while long-term impacts are frequently underestimated. I believe this will be especially true with AI. I consider myself an AI maximalist and hold a highly optimistic view on its potential benefits for our business. However, it's important to note that the advantages will be widespread, allowing many to benefit and claim success. Nonetheless, certain companies will experience significant advantages—those with the scale, resources, and, crucially, the capability to leverage technology to evolve their businesses. The challenge lies in transforming the business, and that is where we excel, positioning us favorably. The impact of AI will manifest in two primary ways: in the products we offer to customers and users, and in our business operations. Specifically regarding AIS, this illustrates how AI will enhance the products and services we provide. It will facilitate data integration between our systems, such as Atrius, Distech, and QSC, and among their various components. We are already making progress in this area. As for ABL, it offers us a new method to continue improving our business through reengineering core processes, which is something we are also currently initiating. Combining these elements gives us a significant opportunity to enhance the products and services for our customers and improve our operational efficiency. Overall, we feel extremely positive about this direction. Many of the concerns raised about AI, especially in regard to our niche market, stem from the idea that AI can accomplish anything. While that might be the case, just because it can doesn’t necessarily mean it should or will. When considering where our customers will invest their resources, it's unlikely to be in basic tasks like adjusting lighting or connecting devices in corporate settings or entertainment venues. Therefore, we feel very confident about our position, our ability to leverage AI, and the long-term sustainability of these initiatives.

Our next question comes from Ryan Merkel with William Blair.

Neil or Karen, can you comment on if you're seeing any cost pressures? And are you considering raising prices in the second half of the year?

Yes, Ryan, let me start with what Neil was talking about with the impact of data centers first. So with the impact of data centers, obviously, that's had some impact on labor availability, which is impacting demand, but it's also impacting memory availability. So when we think about that, we think about it as a supply shock, just like others that we've had in the past. And here's what we're focused on, similar to what we've done around tariffs. First, we want to make sure we have the right availability of components for our customers. And then second, we will make sure we cover the dollar impact of any of those increases. And then finally, over time, we'll make sure to address any margin impact just like we've done and Neil described with the tariff situation. So that's really where we're seeing a little bit of the pressure right now, but we will manage through it as we've done before.

All right. Got it. And then my second question is on AIS. Can you just comment on if the outlook has changed and what kind of demand signals you're seeing right now?

Yes, I'll take that one, Ryan. The short answer is no. But the longer answer is we feel really good about how this business is coming together. It's hard to believe that it's only been a year since we integrated QSC into our organization. They are now fully part of AIS, and we are seeing benefits from this integration. Both QSC and Acuity are experiencing advantages from this partnership, and we’re optimistic about the combined capabilities of Atrius, Distech, and QSC. Regarding long-term opportunities, we maintain the same positive outlook as before in both the building space and the integrated AV sector. We feel really good about our current position. For the first half, they are performing as expected from a revenue standpoint, and we feel confident about their future prospects.

Our next question comes from Christopher Glynn with Oppenheimer.

A lot of interest in ground covered here today. I had a question on the ABL outlook for kind of flat to down now. That arguably suggests the second half shows a little more resilience in the year-over-year versus the second quarter or probably no worse. But it might be intuitive that the data center draw on the rest of the market might be intensifying. So just wanted to put some qualitative on that kind of top-line indication you gave for ABL.

Yes, I'll take that one and then Karen, if I leave anything off. So first, I'd say, basically, for the first half of the year, ABL is basically down about 1%, and we have really tough comps from all of the order ahead from this time last year, now that we're starting to anniversary. So that's the synopsis basically of what's going on at ABL. I think going into the year, it's fair to say we had expectations that then became hopes, which now we don't count on anymore that the market would start to normalize and free up a little bit. So you know everything that's happened between when we made that plan and where we are from a global macro perspective at this point. So that's largely what's going on. And then we're executing through that. I'd tell you an anecdote to explain kind of the impact of data center. So I was talking to one contractor who is actually a Distech supplier, a mechanical contractor who does a lot of data center work. And what he said to me was, I think, three things, which I found really interesting. The first is that they could devote 100% of their capacity to data centers, and they have twice the margin on data centers that they have on anything else. The second thing he said was they're not going to do that, though, because he recognizes that data centers won't last forever, and he doesn't want to alienate all his existing customers for the next stage. So people are starting to see or to balance for that. And then finally, he said, basically, all of his controls people, their business at this point is to rip everything else out and replace it with Distech because they think Distech performed so well. And the reference project he gave me was the at Atlanta Hartsfield. So it's the first time in 25 years, anything other than the legacy provider has been in Hartsfield, and now Distech is. So that's a quick synopsis and the color of like the texture of how this is playing out on the ground.

Nice anecdote on Distech there. And then I just wanted to follow up on capital allocation. With the stock going down, it might have guessed you buy back more shares. You see really intent on eliminating the Distech debt, but optically, at least the leverage is negligible. So just curious how you're thinking about that. And then the third component that I didn't mention would be the pipeline.

Yes, that's correct. As Karen mentioned in her prepared remarks, when we identify an opportunity, we aim to take advantage of it with our share repurchase strategy. We have obviously exceeded our initial expectations in this regard and will continue to do so when we find the stock at appealing levels. Regarding debt repayment, it's simply a result of having sufficient cash, so we have no reason to carry debt unnecessarily. We are fully comfortable employing leverage when appropriate, which leads me to the third point about our acquisition pipeline. We still have strong opportunities for acquisitions, and our focus remains on expanding AIS as a significant part of our business. Our priorities are clear: we will invest in growing our current businesses, whether through capital expenditures or operational expenditures to speed up organic product development. Additionally, as you noted, we raised the dividend in January for the year. We have a robust pipeline for acquisitions and when we find ourselves in situations where multiples decrease significantly, we see an opportunity for repurchases, and we take action.

Our next question comes from Brian Lee with Goldman Sachs.

This is Tyler Bisset on for Brian. I guess just first, can you provide any additional commentary on the cross-selling opportunity with QSC? And I guess, what has been the early customer feedback so far? And how are you envisioning the continued rollout of this product?

Let me start by saying that they are the leading full stack AV provider globally. We emphasized the ISE Best & Show Award because it represents a significant acknowledgment within the industry, indicating their superiority. This sets a solid foundation for ongoing growth. The potential for cross-selling is an additional advantage. We shared examples in the last call, such as integrating some Distech products with the recent developments involving Q-SYS to create a unique office solution in India. Furthermore, there is a substantial overlap in our customer base. I used to say that the smartest customers choose our products, and I can confidently say the same about Q-SYS. Our end-user councils often include the same individuals, though it’s interesting that different decision-makers might be involved. We believe the cross-selling opportunity will ultimately be driven by end users, as companies recognize the benefits at a higher level than how these individual products have been assessed in the past. This aligns with our goal of enhancing productivity for the people utilizing these spaces and those providing them. We are seeing positive momentum in this regard. Lastly, we are also noticing some progress with AIS and ABL cross-sells, which we can discuss in more detail later.

Our next question comes from Jeffrey Sprague with Vertical Research Partners.

I wonder if you could just kind of come back to the question of memory, and certainly, the color on data center crowding out contracting is certainly very interesting. I'm kind of more curious just on the kind of core supply side of memory, sort of the nature of memory that you yourself need for your business and whether or not you actually do have a secure source of supply here as things get much tighter.

Thank you for the question, Jeff. As Karen mentioned, we are experiencing a supply shock, and it seems to be a recurring issue. Soon, we might not even refer to them as shocks but rather something else concerning supply. Our approach to managing this situation is to first ensure we have availability, second to address the dollar cost impact through various means, including productivity and price adjustments. Finally, we aim to regain our margin, similar to what you've seen us do with ABL. We have begun by securing availability. The market is dynamic and changes monthly, but we are generally well positioned in terms of availability, which remains our primary focus. Regarding our long-term perspective, we don't have a different view or additional insight compared to the general market. While the situation is very tight now, it remains fluid, and we anticipate some bumps along the way. We've taken steps like extending some purchasing and funding in advance to guarantee availability. We plan to monitor the market over the next six to twelve months to understand how availability and pricing evolve.

Is the reduction in your top line forecast specifically tied to not having as much memory as you would have needed to make that other forecast?

No, there's no impact. Most of the memory would be at AIS, not at ABL.

Okay. Great. And then I was just wondering if you could maybe elaborate a little bit more on the restructuring actions. Is this another one of many that might be coming? Or should we view this as sort of a one-off action here? And what kind of payback do you see on the actions that you took here in the quarter?

I'll start, Karen, you can summarize later. Overall, I want to highlight that we have made significant efforts related to ABL over the past six years to boost our productivity. This enhancement has led to an increase in our capacity, positioning us well to take advantage of short-term market opportunities and to address future prospects. Specifically, we've begun reducing some labor in our manufacturing facilities due to these productivity improvements and current demand levels. That's the main action we've taken. Additionally, we made some adjustments to our go-to-market strategy, which were less significant. These actions are not isolated; we will keep monitoring our manufacturing network and supply chain based on this productivity increase, but it will be a gradual process over years rather than just quarters.

Our next question comes from Robert Schultz with Baird.

I'm on for Tim this morning. Neil, earlier in the call, you referred to the gap between quoting activity and releases. What do you think we really need to see for that gap to close? And just how would you frame current sentiment from agents within your independent sales network today?

I want to provide some context before addressing your specific question. Our conversion rate has remained consistent over the past 15 years, not just over the last two quarters. However, the time between quoting and project releases has lengthened compared to the past. This indicates that while there are still many projects in the pipeline, they are being released at a slower pace. We believe this slowdown may be attributed to factors such as labor issues and market crowding, as well as uncertainties related to policies and tariffs. Regarding the independent sales network, their outlook is generally positive. We conduct regular surveys and maintain frequent communication with them. They are still in hiring mode and increasing their workforce, which is an expense for these independent small- and medium-sized businesses. Overall, their sentiment is that we can expect improvement over time.

Got it. And then just as it relates to the ABL guide and the revision in sales there. Is there any changes to what you guys are thinking about SG&A spend in the back half of the year?

Well, obviously, we've already taken some actions around SG&A. And as we indicated, as Karen indicated in our prepared remarks, we are managing SG&A really aggressively through this period. So Karen, would you add anything to that?

Yes. No, I think that's fair. As Neil mentioned, the charges that we took this quarter at ABL will impact a little bit of the SG&A spend as well, and we just continue to manage aggressively in this market.

We also, though, will continue our investment in technology. So just to finish that point, Rob, we will continue our investment in technology. Obviously, I covered that pretty extensively earlier, but we will continue that investment.

Our next question comes from Joe O'Dea with Wells Fargo.

This one is a quick one. But just on the guide, you talked about ABL. Just in terms of AIS revenue, are you still looking for low to mid-teens growth there for the year? And then any change to the EPS guidance range?

Yes, Joe, thanks for asking. Yes, no change to AIS growth still low to mid-teens and no change in EPS as well.

And I'm showing no further questions in queue at this time. I'd like to turn the call back to Neil Ashe for any closing remarks.

Great. Well, thank you all for joining us this morning. I would say that I am pleased and proud of the execution that our company is showing through this dynamic market environment. At ABL, we are clearly the market leader. We are managing gross profit margin despite lower sales. At AIS, we are differentiated and we continue to grow and change the industry. So I feel really good about where we are going forward, and we look forward to talking to you again in another quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.