Earnings Call Transcript - AYI Q2 2024

Operator, Operator

Good morning, and welcome to the Acuity Brands Fiscal 2024 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, the company will conduct a question-and-answer session. 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.

Charlotte McLaughlin, Vice President of Investor Relations

Good morning, and welcome to the Acuity Brands fiscal 2024 second quarter earnings call. On the call this morning is 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 on our fiscal 2024 second quarter performance. There will be an opportunity for Q&A at the end of this 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 2024 second quarter earnings release and supplemental presentation, both of which are available on our Investor Relations website. Thank you for your interest in Acuity Brands. I will now turn the call over to Neil Ashe.

Neil Ashe, Chairman, President and CEO

Thank you, Charlotte, and thank you all for joining us this morning. Our fiscal 2024 second quarter was another quarter of solid execution. We increased our adjusted operating profit, adjusted operating profit margin, and adjusted diluted earnings per share. We generated strong free cash flow, and we allocated capital effectively to drive value. Both our lighting and our intelligent spaces businesses delivered strong financial performance. In ABL, we increased adjusted operating profit by $3 million on $47 million less sales and increased the adjusted operating profit margin by 120 basis points to 16.2%. This performance is the cumulative result of the changes that we have made to the business over the last four years. We have made the business more predictable, repeatable, and scalable by executing on our strategy to increase product vitality, elevate service levels, use technology to improve and differentiate both our products and how we operate the business, and by driving productivity. During the second quarter, we continued to make progress on our strategy. By focusing on the needs of our customers, we are elevating our service through our differentiated portfolios. Contractor Select is about 300 of our most popular products that are used in common everyday lighting applications. These products are designed to be resold and are in stock at retailers and electrical distributors. Through high levels of product vitality, we have been able to create a portfolio that offers quality products that our customers want at competitive prices, while at the same time allowing our distributor partners to carry less inventory. Design Select is comprised of products that are configurable and allow customers to easily select the products needed for their projects. We are less than a year into launching the first wave of Design Select, and we are continuing to expand the product families and configurations available. The reception so far has been positive. A recent project in California is a great example, where a customer needed indoor fixtures, outdoor fixtures, and lighting controls. Using options from the Design Select portfolio, we were able to meet the unique product combination of the project, ensure it was there when the customer needed it, and then it was easy for the contractor to install. The remainder of our product portfolio is made to order, which includes specialty products or solutions made for specific applications. At the same time, we continue to make investments for future growth. In the second quarter, we expanded our horticulture product solutions with the Arize family of products to our existing Verjure line in order to take advantage of a growing market. Arize is a collection of professional-grade LED horticulture luminaires that are compatible with our in-line air wireless controls and are used in commercial greenhouses, indoor cultivation, and vertical farming. This small investment accelerates our product portfolio efforts in this attractive vertical. This approach is the right one, as evidenced by the value being realized in our OPTOTRONIC driver and component business. We acquired OPTOTRONIC in 2021 to control more of the technology in our luminaires to expand our OEM channel and to take greater control of our electronic supply chain. Today, we are one of the top driver suppliers to the lighting industry and manufacture the majority of our drivers for our own products. This control not only offers us a financial benefit but also offers us greater engineering flexibility during the design and development process, which is core to our product vitality efforts. This quarter, we introduced the IVO family of shallow recessed downlights from Gotham, which is a new platform that has a compact design for use in confined spaces to replace traditional canned recess lighting fixtures. IVO can be used in most non-residential settings in both new construction and renovation. The compact design and high efficiency options deliver real value for our customers while the use of less steel, less aluminum, and less plastic drives margin for us. Finally, several of our brands were recognized by the industry. Our Aculux, Eureka, Hydrel, Luminis, and Peerless brands were awarded 9 good design awards from the Chicago Athenaeum Museum of Architecture and Design. We were awarded 11, 2023 product innovation awards by Architectural Products Magazine for impressive innovation in terms of form, functionality, and sustainability. And 14 of our luminaires were selected across multiple product categories by the Lift Design Awards for exemplifying outstanding creativity and innovation. Now moving to our Intelligence Spaces Group. Our mission in our Intelligence Spaces business is to make spaces smarter, safer, and greener through our strategy of connecting the edge to the cloud. Distech has the best edge control devices on the market, while Atrius has the best cloud applications. At Distech, we are focused on expanding our addressable market in two ways: geographic and by increasing what we can control in a build space. As part of our geographic expansion, this quarter we added additional systems integrator capacity in Australia and released Atrius Sustainability and Atrius Energy in France. Our independent systems integrators are key to the organic expansion of our spaces business. We partner with the best systems integrators in specific geographies to sell our full suite of Distech and Atrius product portfolios. Our Atrius applications are making a difference for our customers. Atrius Sustainability is an automation tool that captures, categorizes, and reports on carbon emissions, while Atrius Energy facilitates the reduction of energy and carbon usage by allowing facilities teams to benchmark their usage and prepare for upcoming reporting obligations. Our Atrius Energy and sustainability applications are gaining recognition. Commercial Property Executive magazine named Atrius an innovative technology winner in its annual influence awards, and CRE Tech selected Atrius as a finalist in its real estate tech awards for advancing solutions for commercial buildings. Now turning to the outlook for the remainder of the year. We are performing well. We are satisfying customers, expanding margins, and generating strong free cash flow. The order rates in both our Lighting and Spaces businesses are growing year-over-year. In our lighting business, we are back to typical lead times, and absent the impact of sales from excess backlog last year, we would be experiencing sales growth. Our strategy drives strong execution, and we are focused on returning the business to growth in a normalized environment while leveraging our fixed costs and generating strong cash flow. In our Spaces business, we will continue to grow geographically and by adding to what we can control in a build space. Karen will outline what that means for our second half outlook after giving you an update on our second quarter performance.

Karen Holcom, Senior Vice President and CFO

Thank you, Neil, and good morning to everyone on the call. As Neil said, we continue to execute well. In our fiscal second quarter, we increased our adjusted operating profit, improved our adjusted operating profit margin, and increased our adjusted diluted earnings per share while generating strong cash flow. We continue to allocate capital effectively while making progress on our strategic priorities. For total AYI, we generated net sales in the second quarter of $906 million, which was $38 million or 4% lower than the prior year as a result of the lower net sales in our ABL business. This was partially offset by continued growth in the ISG business of 17% in the quarter. We continue to deliver year-over-year margin improvement. During the quarter, our adjusted operating profit increased by $8 million on lower net sales, and we expanded adjusted operating profit margin to 15.5%, an increase of approximately 150 basis points from the prior year. This increase was driven largely by the significant year-over-year improvement in our gross profit margin as we continue to execute our strategy and drive margins through product vitality, management of price and cost, and productivity improvements. During the quarter, our adjusted diluted earnings per share of $3.38 increased $0.32 or 11% over the prior year, primarily as a result of higher net income and, to a lesser extent, lower shares outstanding due to share repurchases. In ABL, net sales were $844 million in the quarter, a decrease of around 5% compared with the prior year, driven by declines across all of our channels. As Neil mentioned previously, our order rate in ABL continues to grow year-over-year, meaning absent the sales last year from the excess backlog, ABL would have experienced sales growth. ABL's adjusted operating profit increased by 2% to $136 million on lower net sales while we delivered an adjusted operating profit margin of 16.2%, a 120 basis point improvement over the prior year. ISG's net sales for the second quarter were $68 million, an increase of 17% as Distech continued to grow and KE2 Therm performed as we expected. ISG's adjusted operating profit was $14 million with the adjusted operating profit margin at 21%, a 240 basis point improvement over the prior year. Now turning to our year-to-date cash flow performance. We generated $293 million of cash flow from operating activities in the first half of the year, down slightly from the same period last year. We continue to allocate capital consistent with our priorities. Year-to-date, we invested $29 million in capital expenditures. We acquired the assets of Arize Horticulture Lighting, we increased our dividend per share by 15%, and allocated approximately $68 million to repurchase over 370,000 shares. In January, our Board of Directors authorized the additional repurchase of up to 3 million shares of common stock, bringing the outstanding authorization to approximately 4 million shares. Since the beginning of the fourth quarter of fiscal 2020, we have repurchased approximately 9.5 million shares at an average price of about $145 per share, which was funded by organic cash flow. This amounts to about 24% of the then shares outstanding. We had a strong first half performance. We delivered improved margins and increased adjusted diluted earnings per share. We generated strong cash flow from operations and continue to allocate capital effectively. While it is not our practice to address our outlook during the year, our performance in the first half was very strong, and we are raising our full-year expectations for EPS. We now expect our 2024 adjusted diluted earnings per share to be between $14.75 and $15.50. Thank you for joining us today. I will now pass you over to the operator to take your questions.

Operator, Operator

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

Joe O'Dea, Analyst

So first question, I'll group kind of 2 in 1, but I wanted to ask about infrastructure and SD&A. And really, the angle is, are you seeing evidence that some of the changes in the commissions that you implemented last year are translating to better wins at this point? You can talk about the infrastructure pipeline a little bit, as well as just when you see where SD&A is as a percent of sales, opportunities that you see there, either volume leverage or cost down.

Neil Ashe, Chairman, President and CEO

Okay. Great. Joe, thank you. So first of all, on infrastructure, we're feeling good about our positioning for the larger projects that are coming down the pipe. I think everyone is recognizing that they are coming down on a longer-term basis than anyone would like. We'd like them to be here today, but orders are strong, but shipments and sales will be spread out over the next year or two. So there will be a continued impact from infrastructure, and we're confident we'll get at least our fair share, and we're working to get a disproportionate share. We also feel, to your question, we positioned ourselves well from an execution perspective. So first, around products for projects that are necessary to win those projects. And then the combination and the interrelationship between our direct sales network and our independent sales network as we approach those. So we feel good about those. As it relates to specific SD&A spending, obviously, we're in a position this year where our performance appears different than it would normally. The reason for that is the excess sales from backlog in last year. So we're confident that, number 1, we'll return the lighting business to growth, and that number 2, when we do that, the combination of the increased margin performance we've demonstrated at the gross margin level, as well as our ability to leverage SD&A costs going forward will continue to expand margins in that business. So it's not insignificant achievement to expand margins on lower sales, obviously. And so we're looking forward to that business returning to normalized growth.

Joe O'Dea, Analyst

I appreciate it. And then also just wanted to touch on cash and deployment. The cash balance at this point is approaching $600 million. How you're thinking about sort of repurchase activity, any revisions to that within the guidance framework as well as with the higher cash balance, just what we should interpret within that and perhaps strength of the M&A kind of pipeline if you're seeing more opportunities out there?

Karen Holcom, Senior Vice President and CFO

Yes, Joe, thanks for that. Overall, we are really pleased with our cash flow performance this quarter or this year-to-date period; we've generated $263 million of free cash flow. So really strong cash flow performance. It's driven a lot by our margin performance, which is contributing to the higher net income despite the lower sales. So overall, really pleased with that. When we look at our capital allocation priorities, we've been really clear over time that it's first to invest in the business for growth, second to invest in M&A, which we've done over the past few years, we've made some small but strategic acquisitions with OPTOTRONIC, KE2 Therm, and now the Arize horticulture assets. So really pleased with the progress we've made there. Maybe you noticed we did increase our dividend by 15% this quarter. So excited to see that increase. And then finally, share repurchases. We've demonstrated that when the share price is high, we buy less, and when the share price is low, we buy a lot more. So this quarter, we've repurchased a cumulative 24% of our shares outstanding. And this year-to-date period, it's been at about $180 a share. So feel really good about where we are from our capital allocation priorities.

Neil Ashe, Chairman, President and CEO

Karen, I'll build on that just for a second. So we feel really good about our ability to generate value through capital allocation. First, on the M&A pipeline, our focus continues to be on expanding the Intelligence Spaces group. We have a good pipeline of both small, medium, and large-sized acquisitions. As Karen mentioned, we've done really well with the acquisitions that we've made to date, and we're patient. So we don't feel an obligation to move until we find the right opportunity that is going to have the right impact at the right valuation. Second, as Karen mentioned, we increased the dividend. We did that because we can. We can continue to afford to pay the dividend at a higher rate and achieve the strategic opportunities that we perceive. And finally, we've demonstrated on our repurchase of almost a quarter of the company at very attractive prices. As Karen mentioned, when the stock price is lower, we'll buy more, and when the stock price is higher, we'll buy less. So when you put it all back together, we view capital allocation as a strategic lever for us to generate value, and we feel really good about our progress on that so far.

Operator, Operator

Our next question comes from the line of Ryan Merkel with William Blair.

Ryan Merkel, Analyst

First on the new EPS guide. What does it assume for sales for the full year? Neil, you mentioned orders are growing and you expect to return the lighting business to growth in the second half; could you talk about that a little bit more?

Neil Ashe, Chairman, President and CEO

Sure. First of all, we're really pleased with our performance so far this year. As you know, it's not our practice to address guidance other than at the beginning of the year. It's our preference to define an outlook at the beginning of the year and then to execute against it. Our first quarter performance was strong, largely driven by margin performance. As we look forward for the remainder of the year, we planned conservatively, given all of the uncertainties going on in the world, so we were appropriately conservative in our plan, and we're adjusting our performance as we perform for the rest of the year. The lighting business will perform as we expect going forward; I would extend that line to be more than just the back half of the year. We feel really good about how we're going to do that as we continue to work through the inflated sales from last year. When you look at the performance over a longer period of time, on a multiyear stack or where we are in the lighting business, we feel really good about that. So we did not change the revenue guidance. We feel confident we're in that range, and we're really pleased with our performance from a profitability perspective.

Ryan Merkel, Analyst

Got it. All right. And then I wanted to ask on ISG, really nice growth. Just high level, are you seeing a lot more interest in controls? And are there any drivers of that that may be new?

Neil Ashe, Chairman, President and CEO

Yes. Thanks for that question, and I'm going to use it as an opportunity to explain two things, if you'll allow me, Ryan. First is that we have a very strong control business in the lighting business. Acuity is one of the largest, if not the largest control players for lighting control specifically, and Distech is an OEM provider to Acuity brand lighting for those controls. As it relates to our performance on ISG, we feel really good about our strategy there of growth. We're expanding the addressable market for Distech and we're seeing disproportionate demand for two reasons. One is our controls and sensors at Distech are perceived to be the highest quality in the marketplace, which is very attractive to building owners and facilities managers because it gives them more flexibility than many other solutions. They have the opportunity to be confident that investment will carry them forward in an attractive way. We also feel good about our ability to add more things that we can control. KE2 Therm is a great example where we acquired products that fit into the Distech portfolio, work within the broader Distech ecosystem, and open up additional verticals. Distech has been taking share in each of the markets, and we now have the opportunity to expand the market and add more controls. Finally, when you connect the edge to the cloud, which is the Atrius data layer that we've been building, it allows us to take the data that all of those sensors and controls generate and present it to the cloud in a manner in which applications can be built that make a difference in those build spaces. So we feel good about the business we're building.

Operator, Operator

Our next question comes from the line of Christopher Glynn with Oppenheimer & Company.

Christopher Glynn, Analyst

I wanted to dive into some of the implications for Contractor Select and Design Select. That manner of product management or categorization internally. Would you consider that the backbone of your productivity momentum?

Neil Ashe, Chairman, President and CEO

I think it's a big part of it, Chris. To spend just another minute on Contractor Select, our strategy with Contractor Select is to make it the brand of choice for retail and electrical distribution with high product vitality at appropriate prices and high service levels for distributors. It’s built to be stocked and resold. It's a very constrained number of SKUs, which has allowed us to build a consistent relationship with the distribution and retail community. At the same margins, they're making significantly more money as a result. So yes, it's been an important part of that product portfolio. The second thing is we've raised the margin of that portfolio to much more consistent levels with where we are now, which has driven some of our margin performance. With Design Select, we're just getting started. This will be a multiyear process, but it will change how specifiers think about our portfolio and how we execute that portfolio. The majority of our business remains made-to-order. We ask about infrastructure earlier; we won the relight of the city of Philadelphia, which is a good example of a made-to-order project. We can satisfy specific needs and roll those out. When you take those all together, everything is operating at a higher margin profile and is doing a better job of satisfying very specific end user needs in the marketplace.

Christopher Glynn, Analyst

The extension of that question; you've talked a lot about the ability to choose and select projects considering all the productivity you're generating that you just elaborated on. Do you see a consistent widening of the aperture moving ahead in terms of what's attractive to you to select within the overall lighting market?

Neil Ashe, Chairman, President and CEO

Well, we feel very good about how we're positioned competitively. We're obviously paying close attention to our competitors and generally think of this from a windshield perspective. As you indicated, we're competitive on the Contractor Select side. We’ve been competitive on the project side. There are examples where we've passed on projects because we don't like the margin profile and prefer to have our competitors execute on those at a lower margin. So, our performance is objectively strong, and it makes us a strong competitor. We continue to press our advantage. We will continue to grow both on our current business and add new verticals. Horticulture is a great example; we originally identified it as an attractive vertical, but did not think it was worth the level of investment. Instead, we started organically, built a product portfolio from the ground up, and now with the Arize portfolio, we have a green light opportunity to grow with a measured level of investment.

Operator, Operator

Our next question comes from the line of Jeffrey Sprague with Vertical Research.

Jeffrey Sprague, Analyst

Maybe just address a little bit more kind of the geographic expansion. How you're choosing to target the bandwidth of the company to execute on that? Is this something where we could see a higher level of activity from this point forward?

Neil Ashe, Chairman, President and CEO

Yes. Our geographic expansion is focused on the Intelligence Spaces Group. The standards are mostly global for the Distech product portfolio, which gives us the opportunity to expand without having to create new product portfolios, with some exceptions like Germany. As a result, we are building on our strength to roll that out. We have strength in North America; that's our home market and we are probably half penetrated where we think we can be in the U.S., so we'll invest there. We're also successful in France and now expanding into more of Europe and other markets. We're focused on markets that look like that, such as Australia where we added SI capacity. We aspire for ISG to be a global unit, and you can expect us to focus on expanding that business globally. Currently, we are in North America and France, so there is a big opportunity ahead.

Jeffrey Sprague, Analyst

Great. And then perhaps for Karen, Neil, you can take it too, just we've gotten this far in the Q&A without any real discussion of price. I know you're not going to talk about price specifically, but maybe just give us a little bit of an update on the tone of the market, and transportation costs were a big topic to the good last quarter. Are you seeing any significant changes there with kind of the chaos in global shipping?

Neil Ashe, Chairman, President and CEO

Chaos is a good word. Karen, why don't you address pricing?

Karen Holcom, Senior Vice President and CFO

I'll address some of the pricing. So Jeff, overall, we continue to be really pleased with our gross profit performance. That really results from what we've talked about on the call already: the strategic management of price and getting the value for our products that they deserve in the marketplace. While at the same time, we are working on input costs with our suppliers. We've seen some benefits this quarter in steel and electronics, so that's helping us. Freight is also continuing to benefit year-over-year. Overall, we feel the focus on our portfolio segmentation that we talked about with Contractor Select, Design Select, and made to order helps us strategically price the products and get the value.

Operator, Operator

Our next question comes from the line of Bobby Schultz with Baird.

Bobby Schultz, Analyst

I've been three quarters now where you've posted 45% plus gross margins. How should we think about the sustainability of those margins into the second half year and then looking into 2025?

Neil Ashe, Chairman, President and CEO

Yes. Thanks, Bobby. As I mentioned when discussing our EPS guidance, we feel good about our performance. I'll build on Karen's answer about price and margin, where we are managing our pricing such that we're realizing value for our products in the marketplace. Our product vitality efforts are changing the amount of content in our products and optimizing shipping. For example, the IVO is roughly half the size or less of what it is replacing, which means less content, and we can fit more on a pallet. This product delivers significant value to the entire value chain. We feel good about our margin performance, and while it may fluctuate a little, we are on a journey to improve our margins and are pleased with our results.

Bobby Schultz, Analyst

Got it. And then I wanted to ask on data centers; what is your exposure there today? And what are you seeing in that market right now?

Neil Ashe, Chairman, President and CEO

We have two exposures to data centers. So, the good news is that data centers have lighting; they cannot operate in the dark. That continues to be an attractive opportunity for the lighting business. Distech is also flat spec to some of the largest data scalers as their control of choice. We focus on digital controls, meaning not the entire market is addressable for us, but the market we can address is growing. We converted a large Asian data center operator to our control system, which will be a multi-year opportunity for us going forward. So we’re exposed to the data center opportunity in both segments – lighting and Space.

Operator, Operator

Our next question comes from the line of Chris Snyder with UBS.

Chris Snyder, Analyst

I wanted to ask about the back half guidance; it seems to me it calls for gross margin to be kind of similar, maybe slightly lower than what we just saw in fiscal Q2, that 45.5%. So is that the right interpretation? And what are some of the puts and takes on that? Because it does seem like there is some volume leverage here from the second quarter to the back half?

Neil Ashe, Chairman, President and CEO

Yes. Thanks, Chris. Kerry can help you in the after-call on building your model, but I'll talk qualitatively about how we're thinking about the back half of the year. Our lighting business is strong; we are competing effectively in the marketplace. The market is valuing the products we sell and we are demonstrating our ability to innovate. We feel good about our continued margin performance. So as you look to the back half of the year, we feel good about the guidance for the remainder of the year and even better about future years.

Chris Snyder, Analyst

I appreciate that. Maybe just following up on the market competition points. Do you feel like the lighting industry is less competitive from a price standpoint than it was five years ago? Or is it that Acuity is being more selective and shying away from the most competitive aspects of the market? Just kind of any thoughts on that.

Neil Ashe, Chairman, President and CEO

I wasn't here five years ago, so I can't address that, but I will address how we've performed over the last four years, which is that we are the largest in the industry with the highest margins and product vitality. We have raised the floor on margins with Contractor Select and are innovating with Design Select. Our performance is objectively strong and makes us a formidable competitor. This positions us to have significantly more control over our destiny. So we control what we can control and we are demonstrating that control in our performance.

Chris Snyder, Analyst

If I could just squeeze in one last question; I'd be interested in where you think we are in the non-residential construction cycle. Activity is still pretty healthy, but a lot of leading indicators are slightly negative. Do you feel like that cycle pressure is on the horizon, or maybe you've already felt that with a lot of the destocking? Just any thoughts on it.

Neil Ashe, Chairman, President and CEO

Sure, Chris. The cycle question has been hard because we've lived through multiple years in a single period. It's hard to call it a normal historical cycle. First, we had the shutdown, then a bull whip of delays in projects, resulting in a backlog that is now affecting sales this year. We look at the market on a multiyear basis; it starts to normalize without a boom or bust cycle. As we look forward, we strive for normalcy and our performance shows we can execute even in a cooler environment.

Operator, Operator

Our next question comes from the line of Jeff Osborne with TD Cowen.

Jeff Osborne, Analyst

Neil, maybe just a follow-up on the prior question. In terms of large projects, what is the CRM system showing for the larger projects? Would you expect a potential rebound of those larger projects to flow through with a disproportionate increase in profitability?

Neil Ashe, Chairman, President and CEO

If we focus on the large projects as a big bucket, we see significant capital running through mega projects. We're confident we'll get our fair share and hopefully a disproportionate share. That's an attractive piece of business; we price fairly and deliver value to the citizens who fund them. The mix is tighter from a margin perspective, and we've raised the floor on Contractor Select margins. We'll continue to price fairly as we execute.

Karen Holcom, Senior Vice President and CFO

On the Contractor Select and Design Select portfolios, given the high turnover with Contractor Select, it allows our distributors to carry less inventory and for us to carry less inventory, so that doesn't have a higher requirement. On Design Select, we manage those inventory levels effectively and improve our turns. So we feel really good about where we are on our inventory.

Operator, Operator

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

Neil Ashe, Chairman, President and CEO

Thank you. Thank you all for joining us this morning. We are pleased with our performance. Our team is executing really well. We feel confident in where the lighting business is for this year and beyond, our growth opportunity on the space side is clear, and we're executing against it. We've demonstrated that we can create real value with capital allocation. We look forward to seeing you next quarter.

Operator, Operator

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