Hello, and thank you for standing by, and welcome to Bassett Furniture Industries Q2 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to turn the call over to Mike Daniel, CFO of Bassett Furniture. Sir, you may begin.

Thank you, Twanda, and welcome to Bassett Furniture's earnings call for the second quarter ended June 1, 2024. Joining me today is our Chairman and Chief Executive Officer, Rob Spilman, Jr. We issued our news release yesterday after the market closed, and it's available on our website. We have updated our reporting format with a fresh look that we believe provides an efficient and easy comparison of important metrics compared to the prior year's second quarter. We're offering today's conference call to provide additional information about our business, including the restructuring plan we announced in the release. We will open the call for a Q&A session after our remarks. In addition, we will post the transcript of the call on our investor site within 48 hours of this call. We believe this process will help enhance how we share our quarterly results with you, and we welcome your feedback. During today's call, certain statements we make may be considered forward-looking and inherently involve risks and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. The company cannot guarantee the accuracy of any forecast or estimate, nor does it undertake any obligation to update such forward-looking statements. For more information, including important cautionary notes, please see the company's annual report on Form 10-K for the fiscal year ended November 25, 2023. Other filings with the SEC describing risks related to our business are available on our corporate website. Now, I'll turn it over to Rob for comments about our second quarter.

Thank you, Mike. Good morning, everyone, and thank you for joining us today. The macroeconomic pressure currently exerted on the furniture industry continued in the second quarter. Elevated home prices, relatively high mortgage rates, and general inflationary tension remain persistent. We also know from our customer data that many are spending more on experiences than they are in their homes, a reversal from what we saw during COVID. Revenue in both our wholesale and retail segments were down, with greater pressure on our retail business due to the higher levels of associated fixed costs. Geographically, sales were stronger in areas where housing is hotter, specifically the Southeast and across Texas. Excluding the $2.7 million in additional inventory valuation charges that we levied, we were pleased with the strong consolidated gross margin that we recorded in the second quarter, coming in at 55.7% compared to last year's 53.6%. Although inventories have dropped by $28.6 million, or 33%, since the end of fiscal 2022, we believe that we can run an even leaner business in the future because certain elements of our assortment are not productively generating our expected sales velocity. Accordingly, this quarter, we elected to record higher reserves on items in anticipation of the sell-off of more discontinued product over the course of the next couple of quarters. Our average retail ticket was $3,960, up 9% from last year. Design makeover projects comprised 43% of total retail sales, down slightly from last year. In the current economic environment that I discussed earlier, the big holiday sales events carry even more weight. We're pleased that our three-week Memorial Day promotion slightly exceeded last year's written business total. Additions to our online product catalog, ongoing website optimizations, and stronger promotional messaging proved to successfully drive consumer engagement during the key holiday period. Particularly notable over the Memorial Day selling event was the success of the addition of leather to our True Custom Upholstery program. Also, the recently introduced Origins Dining program drove new sales as we re-entered the everyday dining category with product designed for kitchen or breakfast areas of the home. On the wholesale side, we were excited about our showing at the High Point Furniture Show in April for two reasons. First, the showroom debut of our Bassett Design Studio concept, spotlighting our True Custom Upholstery program. And second, the strategic outreach to the interior design community through our selling space located in the InterHall area of the International Market Center. We were pleased that we made contact with over 400 interior designers and design firms, and we expect this will yield results well into next year. In our news release yesterday, we reported that we are executing a restructuring strategy effective immediately. While we are going through a down period for the industry, we are setting the table for the inevitable rebound in consumer purchases for the home. This plan is designed to grow our business and to get the most out of our revenue and our working capital to drive profitability. There are five key points to the plan. Number one, drive organic growth through Bassett branded retail locations, omnichannel capabilities, and enhanced customization positioning to expand our dedicated distribution footprint. Number two, rationalize US wood manufacturing from two locations into one primary location supported by a small satellite operation. Number three, optimize inventory and drop unproductive lines. Number four, improve our overall cost structure and invest capital in refurbishment of current corporate retail locations. And number five, close the Noa Home e-commerce business. We believe that the depths of our custom furniture manufacturing capabilities and our quick response made-in-America model make us unique in the industry. With our network of company-owned and licensed stores and our organization of highly-trained design consultants, we are leveraging people and technology for customer acquisition. Although, we are exploring three new markets for store locations, we do not plan any further openings this year. Capital investments are targeted for refurbishment of existing corporate locations. Our approach is well suited to offer personalized solutions to the interior design community to better serve their clients. And we are excited about showcasing our long-proven True Custom Upholstery offering and the new Bassett Design Studio format introduced earlier this year. Many in the industry now refer to offering more than one fabric on a frame as custom upholstery. Our True Custom program truly represents what custom upholstery really is, a choice of frame length, arm, back and base styles, cushion options, multiple fabric and leather options, etc. Designed for better independent furniture retailers, a 1,000-square-foot concept is off to a great start. Recall in April, in our first quarter report, we had signed 17 new locations and through May, we are up to 30. For a modest investment in fixtures and displays, our customers received a quick response setup that Bassett is recognized for, and they are giving us very positive feedback. They're happy with the margins and the fact that they can carry lower inventory. We are targeting to have 50 dealers in the fold by year-end toward our ultimate goal of at least 100 locations. Because we believe we can manufacture the same amount of US-made wood furniture that we are currently providing more efficiently and cost-effectively, we are reconfiguring our domestic wood manufacturing footprint. This action is underway and resulted in a charge of $1.4 million for the second quarter. Our goal is to lower our cost structure. We have completed the initial phase of our retail warehouse consolidation that resulted in the closing of three warehouses during the quarter. We also plan to move out of a major wholesale distribution center at the end of the third quarter that will result in significant savings and could result in an additional charge of up to $1 million to be taken in the third quarter. We made the decision to close Noa Home, the mid-price e-commerce furniture retailer headquartered in Canada with operations in Canada, Singapore, the US, and the UK. Despite providing Noa consistently with the working capital that was needed starting in 2022, they were not able to generate sales growth. As a result, we did not feel that additional funding of the operation was in Bassett's best interest and have made the decision to wind down their operation by the end of the fiscal year. Our capital allocation strategy remains to focus on investments in our business, like those I've outlined, and to deliver returns to shareholders through dividends and share repurchases. We also announced on Tuesday that the Bassett Board of Directors approved an 11% increase in our quarterly dividend. We're proud to increase our dividend, and this is a sign of confidence in our growth potential and cash flow. Our company has a long history, 122 years and counting, of weathering economic cycles from housing to inflation. We believe that our restructuring plan, backed by our strong financial position and consistent cash dividend, will grow revenue, reduce costs, and strengthen operating margins. As we implement this plan, we expect the back half of 2024 will be a reset for our business. We are optimistic that consumer demand will improve and that our unique competitive advantages will allow us to increase market share and deliver long-term shareholder returns. Now, I'll turn things over to Mike for more details on our financials.

Thanks, Rob. In my commentary, the comparisons I will discuss will be the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023, unless otherwise noted. Total revenues decreased $17.1 million, or 17%. Consolidated gross margins were comparable to the prior year at 52.5% versus 52.6%. Adjusted for the additional and unusual inventory reserves that I'll discuss shortly, consolidated gross margins were 55.7% versus 53.6%. We had a consolidated operating loss of $8.5 million as compared to operating profit of $2.5 million for the second quarter of 2023. Included in the current quarter were several significant and unusual expenses due to the restructuring plan Rob previously enumerated, including $2.9 million of asset impairment charges associated with retail store tenant improvements and the lease right-of-use assets for underperforming stores and warehouse consolidation; $1.8 million of asset impairment charges and $500,000 of inventory valuation charges associated with the wind down of Noa Home Inc.; $700,000 of asset impairment charges and $700,000 of inventory valuation charges associated with the consolidation of our domestic wood manufacturing operations; and finally, $1.5 million of additional inventory valuation charges in both our wholesale and retail operations in anticipation of the sell-off of more discontinued product over the course of the next couple of quarters. As a result of the restructuring plan and the charges taken, we expect to realize annual cost savings of between $5.5 million and $6.5 million starting with fiscal 2025. Now, I'll provide information regarding our wholesale operations. Net sales decreased $9.2 million, or 15%, from the prior-year period due primarily to a 19% decrease in shipments to the open market, a 16% decrease in shipments to our retail store network, partially offset by a 2% increase in Lane Venture shipments. Gross margins increased 110 basis points over the prior year, primarily due to the expected improvement in the Club Level leather business. As this product line is internationally sourced with extended lead times, we received significant amounts of inventory during the second and third quarters of 2022 just as product demand was weakening due to the market downturn in home furnishings. Also, the ocean freight costs associated with the majority of the product received were at significantly higher costs than we are currently realizing on current product receipts. In addition, we realized a favorable adjustment in our warranty and returns reserve due to improved diligence and efficiency in handling claims. These increases were partially offset by $1.7 million of additional inventory valuation charges previously discussed and decreases in the gross margins for our domestic upholstery and wood operations due to deleverage of fixed costs and labor inefficiencies due to the lower sales volumes. SG&A as a percentage of sales increased 170 basis points, primarily due to reduced leverage of fixed costs from decreased sales. Now, moving on to our retail store operations, net sales decreased $10.3 million, or 17%, from the prior-year period. Written sales, the value of sales orders taken but not delivered, declined 2.5% from the second quarter of 2023. Gross margin was flat with the prior period because higher margins on in-line goods were offset by lower margins on clearance goods. In addition, we had $500,000 of increased inventory valuation charges previously discussed due to the strategy to be more aggressive in selling clearance goods to better control inventory levels. SG&A expenses as a percentage of sales increased 570 basis points, again, primarily due to decreased leverage of fixed costs from lower sales volumes. As Rob discussed, we have announced that we will be winding down the operations of Noa Home Inc. As part of that, we recorded a $1.8 million charge to write off the previously recorded intangible asset for the trade name and $500,000 of inventory valuation reserves to prepare for an orderly sell-through of the inventory. Finally, let's turn to our balance sheet and capital allocation. We ended the quarter with $60.5 million in cash and short-term investments. We generated $5.8 million of operating cash, funding all of our capital expenditures, dividends, and share repurchases for the quarter. Given the current state of business, we have cut back our prior plans for capital expenditures. Now we plan to spend an additional $4 million to $5 million over the back half of the year, with the majority of that spending on limited retail store remodels. We will also continue to buy back shares opportunistically as the share price warrants. Our financial condition remains solid and provides us with the platform to weather the current economic storm while executing our plans for generating sales growth. Now, we will open up the line for questions.

Thank you. Our first question comes from the line of Anthony Lebiedzinski with Sidoti. Your line is open.

Good morning, gentlemen, and thank you for taking the questions. Can you hear me?

Yeah, we got you.

All right. Thanks for hosting the call and thanks for taking the questions. And first, just a quick comment. Nice job maintaining a strong balance sheet, certainly given the state of business nowadays. So, I guess, first, when we look at the components of the restructuring plan, how should we think about the timing and the impact? If you could just kind of parse out the different components of the restructuring plan, what's kind of the low-hanging fruit first and then kind of like maybe walk us through the timeline as to the expected benefits?

Why don't I take a crack at it, Mike, and you fill in the blanks?

Yeah, okay.

Well, as we mentioned, we'll start from the bottom and go up. Number five was the Noa Home business, and we had the intangible goodwill on the balance sheet. We've accounted for that hit, as well as some reserves for the remaining inventory that will be phased out over the course of the year. We believe all of this is included in the reported numbers. There will be some severance occurring primarily in the third quarter, but we don't see that as a significant amount since we had a small number of employees there. Those employees are located in Canada, so we've complied with the local laws regarding the operation's closure. Most of that process is mostly complete. Moving up to number four, we are looking at our overall cost structure, invested capital, and refurbishment. Some refurbishment is already in progress; for instance, our Greensboro, North Carolina store is currently being renovated. We plan to begin work on our Concord, North Carolina and Wilmington, Delaware stores as soon as we finalize the architectural plans. As for our overall cost structure, this provides a macro view of our efforts. There could be some severance costs associated with this, but we don’t anticipate it being significant. The inventory will hopefully be addressed in the latter half of the year, and we've accounted for that upfront as well. Additionally, the consolidation of the wood operation is included in the plan we've announced. There is also a warehousing operation in California that we are attempting to sublease. If we're successful, it could result in a charge of up to $1 million in the third quarter. We aim to vacate that space by the end of the third quarter regardless. That's probably the most significant outstanding item in the restructuring for the remainder of the year. We aim to finalize all these matters by year-end. Mike, you can correct me, but that covers the severance I mentioned, which isn't really substantial, along with the warehouse charge. Did I miss anything?

No, Anthony. The goal for 2025 is to have all the savings fully integrated. We will still incur some costs and face inefficiencies related to the consolidation of the wood furniture plants during the third quarter, but we hope to be fully operational by the fourth quarter. We expect to achieve savings of $5.5 million to $6.5 million in 2025.

Sounds good. Okay. And then, if we could just go back to the second quarter, so I guess, if we were to exclude the inventory write-down charge, gross margin came in at a very strong, I believe, 55.7%. So, what do you attribute that to? And how sustainable do you think that that type of gross margin is?

On the retail side, we're performing very well. A significant factor is the pricing strategy we've implemented over time, leading to a more disciplined approach. Additionally, Mike mentioned the warranty reserve. Much of our domestic furniture is solid wood, but we've faced some perception issues with consumers. They would see an attractive table in the store, but the one they received didn't always match their expectations. We explained that we can't control how the tree is made, and there’s nothing wrong with the table. A lot of it was perception-related, and we've worked hard to address that. Although it may seem trivial, it has been a significant issue for us. As a result, our returns and claims have significantly declined in the past six months, thanks to a company-wide effort involving both retail and manufacturing teams. Retail plays a crucial role in this success. We also addressed the Club Level inventory challenges from the latter half of 2022, which has improved as we moved through that inventory and has positively impacted our gross margin. We believe this improvement is sustainable, but we are uncertain about how much higher we can push it while remaining competitive in the marketplace.

That's great to hear. And then, so obviously, the vast majority of your products are made domestically, but you do import some products like the Club Level, you also import some components. Now, we have heard from some companies talking about higher ocean freight costs. Some have put in freight charges. Can you comment on that? How should we think about that?

We have contracted container rates like many others. So far, it's been a week-to-week situation for us. Some weeks, we manage to obtain the containers we need at the contracted rate, resulting in no adverse effects. Other weeks, we don't. The spot rates have definitely increased, and it seems the shipping companies are not being straightforward again. There are significant factors at play, like the situation with the Suez Canal. We are carefully considering surcharges, although we haven't implemented any yet and are currently discussing that. If we can't secure the contracted rate, which isn't always possible, we've seen instances where rates have tripled. It's a daily challenge, influenced by many factors, and I believe most people on this call are already aware of these issues. However, it's still a concern.

Hey, Anthony, let me jump in real quick on what Rob was talking about on the reserves because I know you're asking about modeling questions. I would say for the back half of the year, we might have slightly lower margins because of the mix of what we're trying to sell through. The things we took the reserves on, remember that only brings it up to a zero gross margin, if you will. So, there could be the back half of the year a little bit less or lower margins. And then, on a go-forward basis, in 2025, again, we should be back to the margins that Rob is referring to.

Thank you for that. And then, my last question before I pass it on to others. So, given your focus on True Custom Upholstery, do you plan to change your advertising messaging to better highlight this?

We showcase this on our website and discuss it frequently. However, the term True Custom is new for us. We chose it because we grew frustrated with others claiming to offer custom upholstery when, in our opinion, they do not provide true custom options. They might use different colored fabrics on sofas and label it as custom upholstery. To us, true custom involves making adjustments by the inch and varying cushions, bases, and backs, which people genuinely respond to. Sales for this have been strong, so we intend to enhance our messaging to clearly define what True Custom Upholstery is, in contrast to the overused term custom upholstery that is prevalent in the industry today.

Got you. Well, thank you, gentlemen, and best of luck going forward.

Thanks, Anthony.

Thank you, Anthony.

Thank you. Please stand by for our next question. Our next question comes from the line of Budd Bugatch with Water Tower Research. Your line is open.

Good morning, Rob. Good morning, Mike. And let me add my thanks for the call and the information and also for the filing of the Q this morning, which answered a lot of my questions in terms of some of the detail. And I want to also just comment, I've been doing this for a long time, and I don't remember seeing a time and it's not a pleasant time in the industry where you've seen a company address forthrightly its charges that it needed to take and its business and come up with a stronger balance sheet and at the same time raise a dividend. That's really remarkable and shows you tremendous confidence and commitment to your shareholders. So, thank you for that. And...

Thank you, Budd.

Let me ask some questions, starting with True Custom. I agree that your custom upholstery program has unique features that set it apart significantly from others. You mentioned having gained 30 new dealers since the market, with 17 at market and 13 more, aiming for a total of 50. How does the pipeline appear?

We have one more week left in California, and our team is excited about it. When I refer to our team, I'm talking about our sales management and field representatives. The number mentioned in the release indicates that we expect to reach 50 by year-end, and we feel optimistic about that, though we want to remain grounded. This program offers a cost-effective solution for retailers to leverage our extensive options and advanced technology, along with our top-tier delivery speed. We're refining the process, which may sound minor, but it's significant. In the past, we've faced delays with point-of-purchase materials and fixtures coming in separately from the furniture. We can actually produce the furniture faster than the fixtures are made, but now we are organizing everything efficiently by inventorying and palletizing support materials, ensuring everything arrives on the same truck. Our representatives then handle the setup and train the sales team, leading to a strong launch. Despite the challenges, this has been an exciting opportunity for our entire team to use as motivation to promote our best program and share the message.

And of the 30, are all of them or some of them installed already? And if not, then when will it be done?

I should know this, but I would say the majority of those guys are up and running, yes.

Any early results in terms of delta sales?

We receive a report on that every Monday, and the results are positive. This initiative is effective, which is encouraging, as it has been in our design centers and stores for years. Additionally, our larger gallery program is central to this effort. Overall, we are seeing good results.

That's great. When I was in retail, this would have been an obvious choice for a retailer. Using your capital to drive my sales was always beneficial. Over the past few quarters, I've observed that the changes in retail orders are significantly better than the changes in deliveries. The backlog has also increased sequentially in the last quarter. Are we beginning to see positive retail orders, and how did that trend during the second quarter? I know Memorial Day was a crucial period, so it likely had an impact. What were the month-to-month observations?

Let’s both try to address this. The backlog initially reached $100 million, which was substantial, but it has now decreased to $20 million. I don’t think J.D. Bassett in 1902 anticipated this, but the way he structured the fiscal year coincides with the end of quarters falling on major holiday weekends. The first quarter closes at Presidents' Day, the second at Memorial Day, and the third at Labor Day, giving us an advantage during these key selling times. I want to highlight that overall retail sales declined by about 2% to 2.5% for the quarter, while our top line decreased by 17%. We seem to have reached a bottom, and we aim to bounce back from this figure. Notably, during the three-week window around Memorial Day, we showed an increase compared to last year. Additionally, I can say that our performance around July 4th was better than last year, marking it as a strong event. These significant moments have a larger impact on our situation now than they did previously, at least for us. Mike, please continue.

Yeah. And to tag along here, since you're comparing that 17% down compared to Q2 of last year, we were still selling through backlog. And you can see that, if you go back to Q1 of 2023, our retail backlog was $42 million. At Q2 of '23, the next quarter, it was down to $33 million, and it's been pretty consistent since then. So, I think that's a way of saying it feels like we've hit the bottom. As we said, we were down 2.5% written for the quarter, but down 17% because we were selling really through the backlog.

It seems like the calculations align with what was disclosed in the quarterly report. It appears that you have stabilized at this low point since you've narrowed that delta over the past few quarters. My next question pertains to the income statement, specifically regarding the tax shield, which stands at 11%. While I recognize that you report in accordance with GAAP and do not make adjustments, there are two significant items in this period that might be subject to different tax treatments: the additional inventory valuation charge and the asset write-downs. Could you clarify the tax implications of those items?

Yeah. And I'll take this one, Rob.

Good.

So, two things. Let me first say the two charges associated with Noa, the $1.8 million and the $500,000, I take no tax benefit on that. So that's the first thing to consider. Then, in terms of the other, there's really no difference in the tax treatment on the other restructuring charges and the inventory charges. It's just baked into the year-end rate. Now given where we are with our permanent differences and being in a loss, things you'd normally expect 25%, 26% blended rate, it just doesn't all work out in that fashion. So, I don't know if that answers your question, but...

Oh, it certainly brings the math into better alignment. And the 25%, 26% is assuming a 21% federal and then the balance between state and other kinds of discrete items?

Correct.

Given the losses, is the rate still in the low-20% or mid-20% range? Is that where it stands?

You have to back out the losses associated with Noa, which we don't give you...

$2.3 million, yeah.

We don't give you the actual loss generated by Noa. It's buried in the corporate and other...

I got you.

But then you'd also have to back out the losses from Noa outside of the charges taken.

Got it. Okay, we'll take a shot at it and see what comments we can provide at that time. Regarding the anticipated benefit next year in fiscal '25 of 5.5% to 6.5%, will that be distributed evenly throughout the year? Will it occur at the same level each quarter, or do you expect it to increase over time?

The plan is to start on December 1st, which marks the beginning of our fiscal year 2025, and therefore, it will align with the first quarter.

Okay. All right. And a couple of other just quickies. I know that Noa didn't live up to expectations, but hopefully there were some learnings in there that, Rob, you might want to chat about. And is there any residual that you can glean from Noa in terms of sales domestically or even in Canada somehow with e-comm?

Good question. One thing we learned is that pure-play e-commerce in furniture is definitely a challenging business. We launched a new website at Bassett last year and have talked about it extensively. We're beginning to see some positive signs from that initiative. We believe we have a much improved platform and navigation, and we’re starting to witness some encouraging results. We're not yet where we want to be with e-commerce, but it's a step in the right direction. A few individuals from Noa have assisted us in this effort, and one is likely to remain involved for a significant period due to his considerable e-commerce experience prior to Noa. Thus, from that standpoint, we anticipate some continued advantages. Additionally, we have explored the idea, although we haven't made a decision, of potentially using the Noa site to offer Bassett products in Canada, where they had a brand that sold more furniture than we do. It's a possibility, but our focus is currently more on the balance sheet, as they needed cash contributions from us, which we did not see as valuable to continue at that level. We're still discussing what the future may hold in that area.

Okay. As I said, just a few more details. There's a difference between the $2.7 million valuation charge to inventory that you showed, I think that affected the income statement in the gross margin and the $3.8 million showing on the cash flow is additional inventory valuation. What accounts for that difference?

We take a regular charge every month to add to our reserve. The difference you're mentioning, $2.7 million compared to $3.8 million, represents a quarterly run rate of about $500,000. Last year, we recorded $2.5 million, or specifically $2.475 million, which included an additional charge of $1 million. We mentioned it last year but didn't disclose the exact number or provide an adjusted gross margin. However, the press release included a table that explains how we accounted for the $1 million charge. Typically, the charge is around $500,000 each quarter, which has been consistent for both years.

Yeah. I don't think we normally see that reserve additional charge. At least I have to go back and look...

You wouldn't have noticed it because of the extent of the changes we made to the inventory. We highlighted it, and besides that, we applied our usual quarterly charge against inventory.

I believe we outlined it in the 10-K last year at the end of the year, but yes, you're correct. We typically do not break that out.

Within the quarters, yes. That's why I remember it. Lastly, Rob, you mentioned you are exploring other sites, which would be exciting to see in different markets for retail. When do you anticipate making a decision? I understand nothing is planned for this year, but could you share a bit about the process and the timing for that decision?

We've got some travel set in July to look at these sites. It takes a long time to once you make the decision to make these things happen, in some cases, depending on what the actual situation is. But I think that these would be decisions that we would be making in the next 90 days, I would surmise and something that would happen in 2025 as far as the timetable goes.

Okay. Well, again, thank you for taking my questions. Thank you for the call, and best of luck in the second half of '24 and beyond.

All righty. Well, I'd just like to wrap it up by saying, we appreciate the interest in Bassett and your questions. The third quarter is underway and the environment for home furnishings remains challenging, but as we said earlier, we've got a long history of weathering economic cycles, making the right decisions to remain an industry leader. We're confident that through our restructuring plan, we can continue to provide exceptional customer service with a leaner, more efficient operation. And that was the basis for the restructuring charges. And the 11% increase in our quarterly dividend that our Board of Directors approved on Tuesday is a further indication of our focus on delivering additional shareholder value. Thank you for your time, and thank you, operator.

You're welcome. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.