Earnings Call Transcript - FAST Q2 2024

Operator, Operator

Good morning, and welcome to the Fastenal Second Quarter 2024 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Taylor Ranta of Fastenal Company. Thank you. You may begin.

Taylor Ranta, Corporate Communications

Welcome to the Fastenal Company 2024 second quarter earnings conference call. This call will be hosted by Dan Florness, our President and Chief Executive Officer; and Holden Lewis, our Chief Financial Officer. The call will last for up to one hour and we'll start with a general overview of our quarterly results and operations with the remainder of the time being open for questions-and-answers. Today's conference call is a proprietary Fastenal presentation and is being recorded by Fastenal. No recording, reproduction, transmission, or distribution of today's call is permitted without Fastenal's consent. This call is being audio simulcast on the Internet via the Fastenal Investor Relations homepage investor.fastenal.com. A replay of the webcast will be available on the website until September 1, 2024, at midnight Central Time. As a reminder, today's conference call may include statements regarding the company's future plans and prospects. These statements are based on our current expectations and we undertake no duty to update them. It is important to note that the company's actual results may differ materially from those anticipated. Factors that could cause actual results to differ from anticipated results are contained in the company's latest earnings release and periodic filings with the Securities and Exchange Commission, and we encourage you to review these factors carefully. I would now like to turn the call over to Mr. Dan Florness.

Daniel Florness, CEO

Thank you, and good morning, everyone. Welcome to the second quarter 2024 earnings call. Before discussing the quarter, I want to share a couple of things. First, I’d like to tell a story about one of our sites in Sweeny, Texas. I spoke with Steve Diekman, our Regional Vice President in Houston, where hurricanes frequently occur. When a hurricane approaches, we often check in with our teams, including Steve and Bob Hopper in Florida, to see how they are doing. We remind them that we support them, especially during chaotic moments when quick decisions are needed. My message to Steve and Bob is always to prioritize our customers and protect our employees. Another point I want to make involves a retirement community in Florida that lost power for days during a hurricane. It makes you wonder how such situations happen today. I encourage our branches to look out for facilities like hospitals and retirement homes, checking in to see if they need assistance, whether they are customers or not. We are part of the supply chain, ready to help when needed. At our site in Sweeny, Texas, with Phillips 66, we face demanding customers, especially during critical situations. Wade, one of our employees, came in on a Sunday evening—a time he doesn’t usually work—to ensure we could meet any urgent needs, as a hurricane hit the area early Monday morning. While a significant part of Houston is without power, our customers are still being served by Fastenal. Many of our branches are without power, relying on generators, which presents challenges for our team in the heat. Despite this, our employees reach out to their top customers to see what they need, showing our commitment when others may not be. I also want to congratulate our technology team for their work on our AI-related projects, which we refer to as Fastenal Intelligence, emphasizing our proprietary data. We rolled out a new system on June 28, and I tested it in early June. The results were impressive, as the technology now provides well-considered answers and reveals the source information, offering better insights than before. In the second quarter, our net sales increased by about 2%, although the underlying market remains challenging. Our earnings per share were $0.51, down 2%. We are focused on finding the right balance between defending margins and fostering growth, recognizing areas where we can improve. The Purchasing Managers Index has consistently been below 50 for 19 of the last 20 months, which impacts our revenue since 75% of it is industrial. Despite these challenges, our efforts to acquire customers are showing promise. We have aligned our sales organization, leading to positive outcomes in our recent performance. In the second quarter, we recorded 107 signings, approaching 2,000 active on-site locations, which is a 12% increase from a year ago. Our FMI technology continues to grow, with 7,188 devices signed this quarter, averaging 112 per day, and our installed base increasing by 11% from last year. Many customers appreciate the technology implemented in their facilities, which encourages better management practices. In terms of revenue per device in vending, we've seen fluctuations, but our teams are continually optimizing operations. Despite the economic slowdown that affects customer needs, our strong supply chain positions us as valuable partners who can help our customers reduce expenses. E-business also increased by 25%, driven primarily by our E-procurement sector. Our digital footprint is significant, with 59.4% of our business going through e-commerce or FMI, slightly down from expectations due to reduced customer spending. I will now turn the call over to Holden.

Holden Lewis, CFO

Great. Thanks, Dan, and good morning, everyone. I will begin my comments on Slide 6. I think Dan covered the current business conditions; I won't add a lot there, but I can add some additional color from regional leadership. We continue to experience sluggish business activity that has persisted long enough at this point to be spurring an uptick in layoffs and shift reductions. There were more and longer shutdowns around the July 4th holiday. Some of those, frankly, are continuing, and overall, industrial production continues to exhibit modest declines as we saw in April and May with the key machinery component being weaker than the overall index, and we're feeling that. If I look at our business, total manufacturing grew by 2.7%. Our Fastener product line was down 3%, with contraction in MRO and OEM products. All other end markets declined by 1%, reflecting continued contraction in non-residential construction and reseller end markets. This was partly offset by strong growth in warehousing customers, which combined with good FMI installs went a long way to driving our 7.1% growth in safety products. The profile of the second quarter in terms of performance by end market, product, and customer size was largely unchanged from the preceding quarter. We did have negative pricing in the period of 30 basis points to 60 basis points. Fastener prices remain down, which is not new, but we also experienced some slippage in price from non-Fastener products. I don't want to overstate the impact, I mean, our price cost was very modestly positive in the second quarter of 2024; however, it did ease from where it was in the first quarter of 2024, that's partly from comparisons and the softer market has made things a bit more challenging. Even so, we believe we can improve our own discipline in this area and intend to address the matter in the third quarter of 2024. Setting aside the cycle, we are increasingly encouraged over efforts to accelerate customer acquisition. The first half of 2024 has produced strong onsite and FMI signings and a highly successful customer expo. We are also experiencing accelerating growth now in the double-digits and improved mix in several of our national account contracts. Regional leadership attributes these improvements compared to 2023 to better alignment between our teams, a sharpened focus on selling, and the relative stability of the business environment, which is allowing teams to focus on winning business. Given our traditional lack of forward visibility, it is unclear when business activity will improve. It's also unclear how impactful holiday shutdowns or the hurricane in Texas will be in July. Even if there is no further erosion in macro conditions, the strong signings activity of the first half of 2024 should benefit sales trends in the second half of 2024 and into 2025. Now to Slide 7. Operating margin in the second quarter of 2024 was 20.2%, down 80 basis points year-to-year. Recall in the April earnings call that we discussed a likely impact from the second quarter of 2024 from expenses related to our customer expo and actions taken to support certain warehousing customers in anticipation of additional future business. The combined impact was roughly 30 basis points in the second quarter of 2024 as expected. Some modest impact will carry into July, but the effect on margins in the third quarter of 2024 should be well below what we incurred in the second quarter. Gross margin in the second quarter of 2024 was 45.1%, down 40 basis points from the year-ago period. This was primarily due to product and customer mix. SG&A was 24.9% of sales in the second quarter of 2024, an increase from 24.6% from the year-ago period. Total SG&A was up 3% due to deleveraging of employee-related expenses, customer expo expenses, higher costs for selling-related vehicles as we refresh the fleet, and higher general insurance costs. We continue to believe we are effectively spending where we need to spend to support future growth and scrimping where we can scrimp and that as growth picks up, we will leverage the P&L. Putting everything together, we reported second quarter 2024 EPS of $0.51, down 2% from $0.52 in the second quarter of 2023. Now turning to Slide 8. We generated $258 million in operating cash in the second quarter of 2024, or 88% of net income. While below the prior period when we were deliberately reducing layers of inventory, the current year's conversion rate is above historical second quarter rates. With good cash generation and a soft demand environment, we continue to carry a conservatively capitalized balance sheet with debt being 6.3% of total capital, down from 9.4% of total capital at the end of the second quarter of '23. Working capital dynamics were consistent with recent trends. Accounts receivable were up 2.8%, driven primarily by sales growth and a shift towards larger customers that tend to have longer terms. Inventories were down 3.9%, which continues to reflect primarily the softer marketplace, the reduction of inventory layers built a year ago to manage supply constraints, and modest inventory deflation. While we will continue to focus on continuous improvement as it relates to inventory management, the rate of decline in our inventory balances will likely moderate going forward as the process of rightsizing our stock is now largely complete. Net capital spending in the second quarter of 2024 was $52.6 million, largely flat with $53.9 million in the second quarter of '23. For the full year, we have increased our anticipated net capital spending to a range of $235 million to $255 million, which is up $10 million from the prior range. We anticipate higher spending for vending devices where our mix of signings has been heavily weighted towards higher cost and scaled units. The projected increase in net capital spending for the full year of 2024 is driven by higher outlays for hub automation and capacity, the substantial completion of an upgraded distribution center in Utah, an increase in FMI spend to support increased signings, and higher information technology purchases. Now before turning to Q&A, I want to offer a higher-level perspective on the quarter. The market is tough and the various cyclical forces at play are impacting our growth and profitability; that's not something we control. What we do control is our ability to grow share in the marketplace. A year ago, we weren't as effective as we believe we could be. Today, it's becoming increasingly clear that the changes we made in leadership, approach, and focus are favorably impacting our ability to win new customers. Progress is not always a straight line, of course, but we believe we will build on the successes we've achieved in the first half of 2024 and that it brightens our short and intermediate-term outlook regardless of the cycle. Of course, we're most excited for what it means for our growth when activity levels among our existing customer base stabilizes. Before we turn it over to Q&A, I'm going to pass it back to Dan.

Daniel Florness, CEO

Thanks, Holden. This morning, as you all know, we released our earnings report, and just before the market opened, we issued a second release. Typically, we would have announced this after the market closed, but it's Friday, and I prefer to share news promptly instead of hiding it over the weekend. I aim to lead transparently, sharing both positive and negative updates, and today’s news is positive. Earlier, I mentioned the transition with Jeff Watts taking on the Chief Sales Officer role. Since Jeff started in this role, the sales leaders have really stepped up to support him, and importantly, the rest of the team has embraced him as well. Jeff is not just focused on sales; he is a business leader with strong relationships across finance, HR, technology, and supply chain. Over the past year and a half, he has made a concerted effort to learn more and connect with others, and his willingness to listen and adapt has made us a stronger organization. For example, Tony Broersma and his team will manage our supply chain and distribution. A while back, we made significant changes to what we stock in distribution. When Tony took on this role, we collectively challenged him, and Jeff continued to encourage him to think about supply chain from a customer perspective rather than just focusing on distribution center stock. As a result, we are currently reclassifying and will add around 18,000 SKUs to distribution over the next six months. By year-end, we anticipate adding about $17 million in inventory to our balance sheet, which we believe will decrease by about a third by March as we adjust our inventory levels. Ultimately, we expect this adjustment will balance out over the next 18 months, and the increase in cost of goods sold will be more than offset by the investment in inventory, which we estimate will yield about $20 million in benefits. Our branches will not only have these additional SKUs but will also reduce their workload by cutting approximately 10% of our purchase orders at the branch and onsite level, enhancing our margins and service simultaneously. I see this as a win. A couple of years ago, I shared with the Board my intention to get to know our team better as I approach my 60th birthday this November, and I encouraged field trips to connect with our leaders. We’ve conducted several such trips and I have emphasized the importance of getting to know Jeff Watts more. Today, we announced that Jeff has been promoted to President of Fastenal, which excites me not just for Jeff but for our company, as I believe it will facilitate faster growth. I also had discussions with John Soderberg about innovations at Fastenal. I acknowledged to John that Jeff and I could potentially overwhelm him, but we believe we can accelerate our progress together. Congratulations to Jeff, and John, we’ll do our best not to add too much to your plate. Thank you to everyone supporting Jeff and the organization. Now, we’ll open the floor to questions.

Operator, Operator

Thank you. We will now be conducting a question-and-answer session. Our first questions come from the line of Tommy Moll with Stephens. Please proceed with your questions.

Tommy Moll, Analyst

Good morning, and thank you for taking my questions.

Daniel Florness, CEO

Good morning.

Tommy Moll, Analyst

I wanted to start with a follow-up on the pricing commentary you provided. The deflation in Fasteners has been ongoing for some time and is well-known, but the news today I believe, is in the safety category. So I was just curious if you could give us any context for what you've seen there. When you referenced taking steps to be a little more disciplined in the coming quarter, if you could give any insight on that? Thank you.

Holden Lewis, CFO

I don't believe the second quarter had a significant negative impact, but we are monitoring trends. Our price cost was relatively neutral compared to being slightly positive last quarter, and marketplace pricing contributed to that. I'm not overly worried about the Fastener segment. Prices are down, but so are costs, and the team has managed those factors well. We have a strong value proposition in that area, which helps. However, we also have a strong value proposition in safety. Despite that, I think we haven't been as disciplined in our pricing strategy in the challenging safety market, and this lack of discipline has also been present in some other product categories. To address this, the first step is to raise awareness of the issue. Dan, Jeff, and I, along with other sales leaders, have been emphasizing the importance of being mindful of the solutions we offer in a soft market and ensuring we are appropriately compensated for those solutions. We have been actively discussing this to increase awareness. The second step is to utilize tools that give insights into the field, including tangible financial tools. Over the past few years, we have built and refined these tools to better understand market costs, pricing, and costing. We will use these tools to encourage our Blue team members, especially in the third quarter of 2024. Ultimately, we need more discipline from our contract sellers and field personnel, and they need to trust these tools as they are highly effective. We will leverage these tools to foster greater awareness of the challenges in the marketplace and respond accordingly.

Tommy Moll, Analyst

Thank you, Holden. As a follow-up, I wanted to ask about the nexus between some of the warehousing customers where you've been ramping and the gross margin trends. It sounds like the impact from the warehousing ramps was as planned in Q2 and should ease into Q3, but any other context or any way you can quantify that would be helpful. If you set that against your typical gross margin trends, Q2 to Q3, and maybe even into Q4, how does that net out in terms of what you might forecast for this year versus the typical just given some of these new dynamics?

Holden Lewis, CFO

Now recall that I indicated that some of the gross margin trends that were impacting Q2 were going to be largely contained to Q2 and some of those may have bled into July a bit, but for the most part, I think that statement remains true. If we remove that dynamic, then I think the gross margin on that product is unremarkable for safety products. Do I think the investments that we've been making and the actions we've been taking put us on pace to get additional revenue from that customer set in the back half of the year? I do, but it shouldn't have an appreciable mix impact on the safety margin as a category. Does that answer the question?

Tommy Moll, Analyst

Yeah. To summarize, when looking at consolidated results, how would you describe the usual trend for gross margins from Q2 to Q3? Is there anything notable this year that stands out as particularly positive or negative?

Holden Lewis, CFO

The traditional gross margin pattern from Q2 to Q3 for the company is typically Q2 and Q3 looks fairly typical or looks fairly similar to one another. Relating it back to the question you originally asked on the warehousing side of the business, like I said, I think a lot of that impact we discussed last quarter will remain minimal in the gross margin; I think you can think about seasonality and maybe a touch better than that based on the absence of some of those expenses.

Tommy Moll, Analyst

Got it. Thank you, Holden. I'll turn it back.

Operator, Operator

Thank you. Our next question is coming from the line of Stephen Volkmann with Jefferies. Please proceed with your questions.

Stephen Volkman, Analyst

Hi. Good morning, everyone. Since we're discussing the P&L, I'll continue with that and move to the next point. Holden, you mentioned multiple times that there is a strong emphasis on SG&A control, and I understand that some of the unusual SG&A expenses from the second quarter are likely to decrease. I'm interested in your thoughts on maintaining leverage on SG&A for the second half.

Holden Lewis, CFO

What I've observed is you have to tell me what you're going to build in for our revenue growth. If I look at Q2 and Q3 SG&A historically, I find that when Q3 revenue growth accelerates versus Q2, our SG&A dollar growth accelerates as well, and vice-versa, right? It's hard for me to answer that question without knowing what you’re building in for your revenue growth. I would encourage you to consider that, and the reality is, I know everyone wants to say, well, let's just look at the dollars in a vacuum and what has historically happened, but when 70% to 75% of your SG&A is labor and there's a significant component of your labor that is variable cost, I can't separate the analysis from the revenue analysis. Build in your revenue forecast, take a look at what historically Q2 and Q3 has played out, make your assumptions. I do anticipate that we'll be tighter in Q3 than we were in Q2 with costs; that might mitigate that impact to some degree.

Stephen Volkman, Analyst

Okay. Fair enough. Since you sort of teed me up on this, in terms of thinking about the revenue trend going forward, should we read anything into kind of the better cadence of the quarter, i.e., May better than April, June better than May? Do you think there's any kind of inflection happening or is it just that your ability to outgrow is starting to gain some traction, or is it just the numbers are still small and we shouldn't read too much into it?

Holden Lewis, CFO

I believe our ability to gain traction has improved. I think some of the underlying statistics I cited are evidence of that. I also said in April that we popped about 50 in ISM in March, and that felt kind of good, and in like three weeks later, I was kind of like, well, that good faded really fast, but it's a noisy fall. Last I heard, there's a U.S. Presidential election and like most years, it's kind of a boring event. There’s a lot of noise in the market and some of the stuff the Fed is looking to do is positive. I don't know that that changes things in the next three to six months, but the fact that they're talking about it is positive.

Daniel Florness, CEO

If you're looking for green shoots, I don't have a lot of green shoots for you on the macro side. Where I do think we're accelerating is on the self-help side, right, with the contract signings and the onsite signings and the FMI signings. The reality is, you sign an onsite today, it's not generating revenue tomorrow. There’s a period of time it takes for those things to start to hit our results. In the first half of 2024, we felt the impact of relatively low signings in 2023. I think in the back half of '24, you're going to begin to feel the benefits of the stronger signings in the first half of 2024, whether that be FMI, whether that be onsites, whether that be contracts. We're encouraged about our customer acquisition, but I don't have a lot of green shoots at the macro level.

Stephen Volkman, Analyst

All right. Thank you, guys.

Daniel Florness, CEO

Sure.

Operator, Operator

Thank you. Our next question is coming from the line of Nigel Coe with Wolfe Research. Please proceed with your questions.

Nigel Coe, Analyst

Thanks. Good morning, everyone.

Daniel Florness, CEO

Good morning.

Nigel Coe, Analyst

I just want to go back to the price deflation on the safety and other products. I mean, obviously, you addressed the question from Tommy, but is this a function of a more competitive environment? Are you seeing more pressure from competitors because they've got more products or excess inventories, or is this more elective from your RBPs to try and gain share? Obviously, you've been very successful in contract signings, onsite, etc., so I'm just wondering if this is a bit more offensive or defensive.

Daniel Florness, CEO

I don't know that I have a great way to parse that out. We are in the marketplace trying to win business. I don't think that we need to compete on price. We historically haven't competed on price, but the reality is the marketplace is challenging, and that introduces different stresses than would be the case when it's not, right? I can't tell you it's 60-40 one way or the other; that's not known to me. We are hungry to grow, and that influences decisions. Our customers are hungry to save costs; that influences decisions and that isn't necessarily a negative. Sometimes, often times, we are the source of saving costs and that helps us. Some of our traction with national account signings, some of our traction with FMI might be a customer that’s a little bit slower right now and they're looking for ways to save costs, and we're the ticket and we're seeing that in our success.

Holden Lewis, CFO

To the extent that part of the question is whether Fastenal is intentionally accepting lower margins to secure business, I would say no. Decisions are being made individually in the field based on discussions and judgments that are relevant to the person and the situation at that time. We're not gaining business because we suggest disregarding margins. We consider margins and returns on our business to be very important. However, the market is challenging, and different individuals respond to it in various ways. The connection lies between the market and the conversations with customers.

Nigel Coe, Analyst

Yeah. That's a great answer. Thanks for that. My follow-up is on the onsite performance and the mature onsites. It looks like mature onsites sales are down low-single digits in that realm. Obviously, we saw this trend develop last quarter, and you've made some management changes around that. Just wondering if you could provide a bit more detail on what you've seen in these mature onsites and sort of the pathway to improved performance.

Holden Lewis, CFO

That's production. Dan said it in his preamble. When you have one customer, the fate of your business hinges on what the experience of that one customer is, and as a business, we're 75% manufacturing. Within our onsite world, I bet you it's substantially above that level. If there's a manufacturing environment that's challenging, the onsites are going to feel it to a greater degree. The onsites are going to be more heavily oriented towards production. That's why you're seeing our OEM Fasteners grow in the mix along with onsites growing in our sales mix. You have a combination of the impact of macro on that particular customer category, combined with the fact that, again, it does take a little while for the signing success we have today to translate into revenues tomorrow. I think you're bearing a disproportionate burden of the macro in the first half of this year. It doesn't appear the second half of the macro is going to be a lot better, but I do think some of the signings that we've enjoyed in the first half will begin to grow in that environment, and that's how I'd probably characterize it. I'll just throw in one little nugget, and that is, our East and Western United States business units have been separate business units since 2007. A year ago, we pulled them back into one, and Casey Miller oversees that $6 billion business in the U.S. Casey was a Regional Vice President in the Kentucky, Tennessee area. He's originally from Kentucky; he lives in Nashville now. His business, and by extension, Eastern U.S., which he led for the last eight years, is great at customer acquisition. Casey's observation in getting into the Western business unit, which wasn't as good at customer acquisition, is that they were better at maturing and farming those relationships. The one benefit of combining the U.S. into one business unit is that I think the East and West halves of our business can learn a lot from each other, which is a positive win for our customers, our employees, and our shareholders.

Nigel Coe, Analyst

Great. Thanks, Dan.

Daniel Florness, CEO

Thank you.

Operator, Operator

Thank you. Our next question comes from the line of David Manthey with Baird. Please proceed with your questions.

David Manthey, Analyst

Thanks. Good morning, guys.

Daniel Florness, CEO

Good morning.

David Manthey, Analyst

Yeah. And congratulations to Jeff on the new title. Just one question this morning. I'd like to zoom out and maybe ask you about some secular factors here. Could you refresh us on how you think about outgrowth versus industrial production and your contribution margin expectations? Here, I'm thinking not about the next year but long-term over the cycle. Thanks.

Holden Lewis, CFO

Historically, over the last decade, we have typically outgrown industrial production by about 5% to 6%. Recently, however, our growth has been closer to 3% to 4%, which is below our usual performance. The adjustments we made 12 to 18 months ago were intended to address this decline, and we believe they will help us return to the 5% to 6% growth range. Our long-term goal is to exceed that range because we believe the value we provide allows for faster growth. The changes in personnel and strategy are just the initial steps in correcting our past performance. Moving forward, we aim to improve our growth rate beyond the traditional 5% to 6% above industrial production. As for our operating margin, we have stated that we can effectively operate at a 21% to 22% margin while still achieving significant growth and market share gains. In the current low-growth environment, we have sacrificed some margin, but I believe that as the business improves, we can leverage our financials and return to the 21% to 22% margin range.

David Manthey, Analyst

Appreciate it, Holden. Thanks for the update.

Holden Lewis, CFO

Thanks, Dave.

Operator, Operator

Thank you. Our next question is coming from the line of Ryan Merkel with William Blair. Please proceed with your questions.

Ryan Merkel, Analyst

Hey, guys. Thanks for taking the questions. I just have one as well, and it's on the macro. So can you just level set us on the macro? Is it fair that the industrial economy has just slowed slightly versus Q1 or is it more pronounced? That's the first part of the question. I’m hearing that it could stay a little weak until after the election. I know that's crystal ball stuff, but what do you think about that?

Holden Lewis, CFO

In terms of regional feedback, I probably got a few more comments about extended shutdowns, layoffs, things like that. It doesn't feel to me that the overall level of activity has changed much. It does feel to me like our customers have decided to some extent to throw in the towel on the near term and make some adjustments to their cost structures in light of what has been a fairly lengthy downturn. So I don't feel like the floor has fallen any further, but I feel like customers are saying this could last longer than we expect and making cost adjustments to react to it. That's how I'd probably characterize it. In terms of the crystal ball, I don't know. I don't have a good answer for you, I'm afraid. As you know, we don't have a lot of forward visibility. I’ll choose not to express an opinion about the election.

Daniel Florness, CEO

I’m not touching that one with a 10-foot pole.

Ryan Merkel, Analyst

Yeah. I get that. I was just sort of hearing that from some of the feedback and was just curious. RVPs were hearing that it usually happens in front of the election, I think it’s history.

Holden Lewis, CFO

Well, I can tell you that people say it does. There’s a lot of feedback that we’re receiving from the regionals that people are holding their powder until something gets resolved on the election. I’ll leave it to the listeners to determine how much they think that is true, not true, valid, or not valid and if it will impact.

Daniel Florness, CEO

I can’t even predict that somebody is going to win the election.

Ryan Merkel, Analyst

Well, thanks, guys. I appreciate the color.

Holden Lewis, CFO

You bet, Ryan. Thanks.

Daniel Florness, CEO

Thank you. It is four minutes on the hour. Again, thank you for joining us on the call today. I want to extend to Jeff, his wife, Tuson, and their two children, congratulations on the new role and new opportunity. And thanks, everybody, have a good day.

Operator, Operator

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.