1 800 Flowers Com Inc (FLWS) Q2 2023 Earnings Call Transcript

Good morning, and welcome to the 1-800-FLOWERS.COM Inc. Fiscal 2023 Second Quarter Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. And please note that this event is being recorded. I would now like to turn the conference over to Andy Milevoj, Senior Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to our fiscal 2023 second-quarter earnings call. Joining us today are Chris McCann, CEO; Tom Hartnett, President; and Bill Shea, CFO. Before we begin the call, I'd like to remind you that some of the statements we make on today's call are covered by the Safe Harbor disclaimer contained in our press release and public documents. During this call, we will make forward-looking statements with predictions, projections and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, including those contained in our press release and public filings with the Securities and Exchange Commission. The company disclaims any obligation to update any of the forward-looking statements that may be made or discussed during this call. Additionally, we will discuss certain supplemental financial measures that were not prepared in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables of our earnings release. And now, I'll turn the call over to Chris.

Thank you, everyone, and good morning. Our second quarter results reflect a successful holiday season and benefited from the strength of our food brands as well as improving gross margins. We did a good job projecting consumer demand for the quarter, particularly related to trends and sales curves. On a consolidated basis, revenue declined 4.8%. Our Gourmet Foods & Gift Baskets business had a solid quarter, with revenue being relatively flat, while revenue within our Consumer Floral & Gifts segment decreased 12%. This trend aligns with previous patterns in which consumers gravitate towards food gifting options from floral arrangements in challenging macroeconomic environments. Unlike a year ago, when there was an unprecedented pull-forward in holiday demand due to global supply chain challenges, we had anticipated that customers would revert to their historical shopping patterns and shop much closer to the holidays, and that is precisely what we experienced. Beginning in October, we witnessed a very promotional retail environment, and those trends continued throughout the holiday period. Additionally, with some of our brands targeting a lower price point and appealing to a lower-income customer base, we noticed that customers appear to be more price-sensitive, delaying purchases in anticipation of deals. We strategically utilized promotional pricing throughout the holiday period to entice customers, while simultaneously reducing other offers, such as free shipping, that were not as impactful in the current economic environment. Moving forward to November, Black Friday and Cyber Monday were, once again, significant days for us and represented a strong kickoff to the holiday shopping season. In fact, PersonalizationMall had its largest revenue day ever on Cyber Monday. Looking ahead, we continue to see demand build throughout December, with some of our greatest volume days occurring during the two weeks before Christmas. Customers traded up to higher-value, higher-price point assortments within our food business, with the largest gains coming from offerings priced over $100. We also observed that customers gravitated towards our prepared meal offerings, which simplify their cooking and entertaining processes. Our heat and serve meals, appetizers, and side dishes enable customers to spend less time in the kitchen and more time with family and friends. Moreover, our charcuterie and cheese assortments experienced notable growth as more customers began entertaining during the holidays again, compared to the prior couple of years. Overall, Harry & David set new records this holiday season, including: its largest sale day ever in December, surpassing a record set in the pandemic year of 2020; its first $3 million Mobile Day, as more customers shifted from desktop and tablet to mobile; and record sales of our award-winning wines, all contributing to a record sales quarter for the brand, sustaining growth we have experienced over the past few years. Cheryl's delivered strong performance from the holiday assortment, which included the introduction of candy cane, maple syrup, and cinnamon swirl cookies, helping to offset softer everyday sales earlier in the quarter. Wolferman's grew its e-commerce business partly due to a 6% increase in new customers. Turning to our floral business, we continue to leverage our strong assortment of products and brands to meet our customers' needs. We observed strong growth in holiday plants that increased 10% over the prior-year period, alongside various floral and sweets pairings, which included offerings from 1-800-Flowers and Shari's Berries, and saw strong double-digit growth. However, due to the floral business lacking a significant spike during the holidays, these successes could not offset the lower demand for everyday gifting throughout the quarter. Furthermore, while our direct-to-consumer business across the enterprise remained fairly resilient to macroeconomic pressures this quarter, our B2B business was less unaffected. Our corporate gifting business witnessed softened demand as companies began seeking more opportunities to cut expenses. With more employees shifting to hybrid work environments over the past year, companies started hosting holiday parties again as opposed to focusing on corporate gifting. Although corporate gifting continues to face challenges today, we remain committed to it and see growth opportunities and market share gains in the future. Our second quarter performance also benefited from our marketing efforts. We are transitioning our company from being a purely transactional e-commerce firm to developing deeper relationships with customers through content and community engagement. Our focus is on inspiring our customers to give more and build better, more meaningful relationships in their lives. We have constructed a company knowing that individuals are naturally compelled to give. Notably, our best customers tend to be those who genuinely enjoy giving. Our initiatives include our weekly Celebrations Pulse email newsletters, our experiential programs such as floral design classes, and expanded content development across various social channels. Through these initiatives, we focus on nurturing our relationships with existing customers, growing our multi-category customer cohort to enhance their purchase frequency, and defining our company as the preferred destination for all our customers' gifting needs. As could be expected, net sales per customer are highest among our multi-category customers, followed by our 1.4 million Celebrations Passport members. Regarding our margins, during the second quarter, as anticipated, our margins improved due to lower inbound freight costs and strategic pricing initiatives. As Bill will elaborate, we expect this trend to persist in the second half of this year and into next year. As these costs continue to moderate, we anticipate that our margins will return to historical levels over the next few years. Consequently, we expect to see a significant recovery in EBITDA. In summary, we anticipate that specific macro trends would assist us, and indeed they have. While they have not reverted to pre-COVID levels, certain cost inputs remain favorable, which gives us confidence in our capacity to improve margins moving forward. Based on our second quarter performance and particularly our gross margin improvement and reduction in operating expenses, we are increasing our fiscal '23 adjusted EBITDA guidance to be within a range of $80 million to $85 million. As we assess the remainder of the year, we are concentrated on executing effectively for the upcoming holiday period. We expect consumers to remain cautious in this environment and to curtail spending on everyday gifting occasions, while maintaining expenditure on significant holidays. Even in an uncertain environment, we are confident that customers value our unique and one-of-a-kind gifts, making them the perfect solution, regardless of who you’re shopping for. As we look beyond Valentine's Day to the spring, we are focusing on our 'Giving is the Gift' campaign. From friends, family, teachers, and caregivers, this is an ideal time to remind those in your life how much you appreciate all that they do for you and your family or business. Before I turn it over to Bill for the financial review, I wanted to take a moment to highlight the newest addition to our family of brands. We are excited to welcome Things Remembered to our all-star roster. This is a prime example of a tuck-in acquisition that enables us to expand our leadership position and product offerings in the personalization category further. Things Remembered is highly complementary to PersonalizationMall and significantly increases the number and variety of personalized products we can offer to customers for celebrating every occasion with personalized masterpieces. We acquired the Things Remembered brand and related intellectual property, including their customer lists and specific assets, for approximately $5 million shortly after the end of the second quarter. This addition exemplifies how our e-commerce platform was built for rapid growth, as we seamlessly integrate complementary brands onto our platform and grow them profitably. Now, I'll turn the call over to Bill for his financial review.

Thank you, Chris. As Chris highlighted, our second quarter performance was solid, benefiting from the resiliency of our Gourmet Foods & Gift Basket business. We achieved adjusted EBITDA of $131.4 million and offset the 4.8% revenue decline by improving gross margins and managing our cost structure. Gross margin improvement was led by a 170 basis point increase within our Gourmet Foods & Gift Baskets business, which benefited from our strategic pricing initiatives; lower year-over-year ocean freight costs that continue to trend favorably; a more stable labor market, which enabled us to reduce overtime pay; and our logistics optimization efforts that leverage our full distribution network to minimize shipping zones and deliver products closer to recipients. Furthermore, our warehouse automation efforts allowed us to significantly improve efficiencies. Our Hebron, Ohio facility is in its second year since we installed automation, and we processed over 1.8 million packages in December, increasing throughput by 8% over last year while reducing expenses. Additionally, we completed our next phase of automation in our Atlanta, Georgia facility, enabling us to fulfill orders for multiple food brands and increasing throughput by 42% for December compared to the previous year. In the long term, we believe that we will gradually restore our gross margins to historical levels and leverage the substantial top-line growth from recent years to drive bottom-line results. You may recall that the Gourmet Foods & Gift Baskets business was the most impacted by negative macro cost inputs over the past 18 months. Our Consumer Floral & Gifts segment was less impacted, and thus its recovery is subject to certain macro trends that have yet to improve. Now, let's review our key metrics for the second quarter. Total net revenues declined 4.8% to $897.9 million compared to revenues of $943 million in the prior year. Gross profit margin for the quarter improved 90 basis points from 40.1% to 41%, driven by the aforementioned improvements in our Gourmet Foods & Gift Baskets business. Operating expenses were 28.1% of total sales compared to 27.9% in the prior year. On a dollar basis, operating expenses fell by $10.1 million, primarily reflecting lower marketing costs as we shifted our advertising investments to areas of the marketing funnel that offer lower costs and higher returns. As a result, our second-quarter adjusted EBITDA was $131.4 million compared to $133.1 million the previous year. Net income was $82.5 million, or $1.27 per share, and adjusted net income was $82.7 million, or $1.28 per share, compared with net income of $88.5 million, or $1.34 per share, and adjusted net income of $88.6 million, or $1.34 per share in the prior year. Regarding our segment results, our Gourmet Foods & Gift Baskets segment revenues decreased 0.4% to $588.4 million compared to $590.9 million in the prior year. Revenue benefited from the resilience of our consumer food gifting businesses, which helped mitigate some of the softness in our corporate gifting business. This segment's gross profit margin increased 170 basis points to 41% from 39.3%, benefiting from our strategic pricing initiatives, lower inbound transportation costs, improved labor availability, and our automation efforts. This segment's contribution margin was $123.5 million compared with $110.5 million a year ago. In our Consumer Floral & Gifts segment, revenue decreased 12.1% to $277 million compared with $315.1 million in the prior year, reflecting the softness experienced in everyday gifting and a shift by customers from floral gifts to gourmet food gifts during the holiday period. Gross profit margin decreased to 40.5% compared with 41.3% in the prior year, primarily due to higher fulfillment costs and outbound transportation costs. Segment contribution margin was $27.9 million compared with $38.2 million in the prior year. In our BloomNet segment, revenues for the quarter decreased 13.4% to $32.9 million compared to $37.9 million in the prior year. Profit margin of 42.2% was flat with the prior year. Segment contribution margin was $9.3 million compared with $11.9 million in the prior year. Regarding our balance sheet, our cash and investment position was $189.7 million at the end of the second quarter. Inventory was $201.1 million, compared with inventory of $191.1 million at the end of last year's second quarter. In terms of debt, we had $152.8 million in term debt and no borrowings under our revolving credit facility. Now, on guidance for fiscal 2023. This morning, we increased our fiscal 2023 guidance based on our second quarter performance. Before I share our views, it's important to note that the current macro economy is still highly unpredictable, making it challenging to forecast consumer behavior with any certainty in this environment. After growing revenues 77% over the last three fiscal years, we expect revenues to decline in the mid-single-digit range in fiscal 2023 due to cautious consumer behavior. We expect to offset the impact of the revenue decline on our earnings through our strategic pricing programs, moderation of certain cost inputs, and the investments we have made and continue to make in our business platform. As a result, we expect to continue gradually improving gross margins and bottom-line results during the latter half of the current fiscal year. Based on these assumptions and our year-to-date performance, we now expect adjusted EBITDA to be in the range of $80 million to $85 million. We expect to generate more than $75 million in free cash flow in the current year, representing an improvement of more than $135 million compared to a year ago as we continue to sell through our inventory balance. I will now turn the call back to Chris.

Thanks, Bill. To recap our performance this quarter, we had a successful holiday season. However, consumers continue to face challenges from inflationary pressures. We believe that the macro environment will remain challenging throughout the remainder of our fiscal year and we are proactively addressing these trends with compelling high-value bundle assortments that appeal to a wide variety of customers. Nonetheless, we remain very bullish about our long-term prospects. Our foundation consisting of our all-star family of brands is robust and positions us to perform well as the macro environment improves. The diversification of our portfolio helps mitigate risks and provides resiliency against seasonality. Our core customer remains loyal, and we continue to deepen our relationships with them through our innovative marketing and engagement efforts. This is what distinguishes us in the marketplace, as we genuinely care about nurturing our relationships with our customers. As I noted earlier, we built the company on understanding that people are naturally compelled to give, and it's no coincidence that our best customers enjoy giving the most. A common thread runs through all giving; it brings joy to everyone involved, and that's why we say, 'Giving is the Gift.' Now, I'd like to open the call for any questions that you may have. Thank you.

We will now begin the question-and-answer session. And our first question today will come from Dan Kurnos with The Benchmark Company. Please go ahead.

Great. Thanks. Good morning. Nice job on the bottom line, guys, in the quarter. Couple of things for me, maybe just on some of the noise around mix here. You did talk about PMall having the strong Cyber Monday. Can you just talk about how it did overall in the quarter? And I think in the past, we've kind of talked about some pricing activity within PMall. On the gifting side, which we can keep separate for now, you've got some price uplift, but just in general, how are you thinking about pricing and promotion activity given the consumer backdrop right now as we go into Q1 with a lot of excess inventory built up across e-commerce? How are you thinking about that backdrop?

Sure. Thanks, Dan. Good to hear from you. We're very happy with the quarter and the performance that we had, especially regarding how we managed the company's cost structure throughout the quarter. So, thank you for that. As we look forward, from a PMall perspective, we were thrilled to see Cyber Monday being a record day for PMall. And Bill, can you comment on the overall PMall performance?

Yes. PMall was down in that mid-single-digit range from a top-line perspective. Again, it's reflecting the same kind of trends we're seeing throughout the business where every day is soft. It had a strong Cyber Monday, a little softness in the early part of December, and then a very strong finish.

And Tom, what are we looking at regarding the pricing initiatives from a PMall and Consumer Floral perspective as we look forward?

Yes. Good morning, Dan. Certainly, we discussed our strategic pricing initiatives on some of our lower price point products, whether they pertain to PersonalizationMall, Shari's, or Cheryl's Cookies. Those consumers with slightly lower household incomes are particularly challenged in this environment. We have observed the need to be promotional, but as Chris mentioned in his remarks, we've managed to pull away from some of the shipping discounts we've offered historically. Therefore, we’ve been able to maintain margins effectively. And fortunate for us, our largest brands, Harry & David and Flowers, cater to a broader range of consumers, allowing us to elevate customers on value and pricing. Additionally, we're able to take advantage of bundles and create-your-own products that enhance value for our customers.

When looking at this past quarter, it's a good example where strategic pricing initiatives and merchandising mix, along with featuring more bundles and higher price point items, allowed us to lift our average order value by 6%.

So, our average order value was about $90, up around 6%. Approximately half of that was due to the strategic pricing initiatives we implemented, and about half of it is attributed to the mix. We've seen more affluent consumers upgrading their selections on bundles and higher-priced items, which have proven very attractive.

Got it. That's very helpful. Isn't it funny how we’re heading into a recession, and consumers are now willing to pay for shipping and returns, whereas those were the things they wanted free most when economic conditions were better? Alternatively, you discussed record performance for Harry & David, which is crucial. Of course, the vast majority of the upside in order came from GFGB. Bill, could you provide any incremental commentary on Harry & David's outperformance in comparison to the rest of GFGB? Also, you touched on this before, but it would really help to understand how much of the proactive actions you took to avoid a repeat of last year drove the margin upside versus the organic improvements realized from optimization and the external factors with lower input costs outside your control.

Well, first off, the quarter was undeniably driven by the performance of our food brands, which remained relatively flat from a top-line perspective. Harry & David was the top performer, experiencing low single-digit growth year-over-year. We made necessary investments in inventory to mitigate the supply chain challenges we faced last year, which created more operational efficiencies. Having inventory on hand and access to a stable labor force enabled us to operate much more efficiently. This was undoubtedly a contributor to the 170 basis point improvement in gross margins we observed in the food brands.

Okay. I'll follow up with you on that offline. The last one for me, and I'll step aside. I always ask you this, Chris, as we look ahead understanding that there’s consumer uncertainty, but with the arrangements you’ve made regarding pricing initiatives, it’s encouraging to see confidence on the margin side. From a revenue perspective, if conditions were more stable, how would you view the potential for top-line progress? It would help to break it down between Consumer Floral and Food if possible. Thanks.

Sure, Dan. I firmly believe we have strong confidence as we assess our business prospects moving ahead. As previously mentioned in our remarks, the operational leverage we are realizing through improvements in OpEx spending, coupled with gross margin enhancement, supports our positive outlook. We are effectively building upon the strengths established over the past few years. As Bill mentioned, we grew by approximately 77% over the last two to three years and successfully doubled our customer base. Therefore, we are leveraging this capability to expand our product catalog while pursuing our latest acquisition and bolstering our foothold in the personalization category. Even in a challenging environment, we still foresee continued consumer engagement for major holiday occasions such as Valentine's Day next week, followed by the spring holidays encompassing graduations, Mother's Day, etc. We believe we are well-positioned to end the year as anticipated.

Alright, great. Thank you for all the details. I appreciate it and congrats again.

Thank you.

And our next question will come from Michael Kupinski with Noble Capital Markets. Please go ahead.

Yes, thank you, and congratulations on a solid quarter. A couple of questions. Can you talk about the tone of the market for Valentine's Day? Is it more competitive than in the past? Are your competitors being more rational and less promotional, or do the economic conditions warrant a more promotional approach this time? Can you give me a tone of the market?

I'll turn this over to Tom for his insights on the market tone. Remember, Valentine's is traditionally a last-minute holiday, and just as we observed our customers revert back during the Christmas holiday to pre-pandemic shopping trends, we expect to see similar dynamics. The holiday is still in front of us. But, Tom, what observations do you have regarding the marketplace?

Yes, I mean, it is early. I think, in some cases, we are seeing it's always a competitive environment, but the same players are involved. I believe the same rules apply, and we have played this out over the years. Given the uncertainty surrounding consumer behavior, I would say there is increased focus on bottom-of-the-funnel tactics in our marketing strategies.

Got you. Can you provide insights about Things Remembered? It's a relatively small acquisition, but it seems reminiscent of Shari's Berries, which was very successful. Can you discuss the revenue opportunity and anticipated margin profile moving forward?

Certainly, Michael. While it is a relatively small acquisition, it illustrates our capability to leverage the platform we've built to foster growth. Initially, it may have functioned as a standalone business, but we can strategically enhance its growth through integration and effective management within our existing infrastructure, particularly boosting gross margins and operating expenses. Tom, could you provide additional insight regarding the market positioning of Things Remembered compared to PersonalizationMall?

Certainly! Regarding product pricing, Things Remembered operates at a different tier compared to PersonalizationMall. We are carefully examining brand positioning across various crucial life occasions, whether it's weddings, anniversaries, milestones, or graduations. Consequently, it fits seamlessly into our product catalog, which will benefit our personalization market. Furthermore, it integrates well with our overall enterprise assortment and customer base. We are optimistic about leveraging this acquisition as we have gained over 1 million active e-commerce customers through this transaction. Although it's still early in the process, we are enthusiastic about growing this revenue stream. Our strategy includes launching a new e-commerce site utilizing our current platforms shortly.

The key point here, Michael, is akin to prior successful acquisitions like Shari's Berries and our recent entry into food with Vital Choice. This demonstrates our ability to successfully integrate new brands into our platform, enabling growth with strategic investments, thus aligning perfectly with our growth strategy. While organic growth remains a priority, we continue to pursue attractive M&A opportunities, especially in the tuck-in category. Should situations arise for more substantial acquisitions such as PersonalizationMall, we are positioned to act based on our strong business foundation and balance sheet capabilities.

Thank you for the insights. Regarding the automation of distribution facilities, should we consider that initiative fully accomplished, or is it still a work in progress?

Michael, while there will always be automation opportunities for us, the significant capital investments are behind us. As we've discussed previously, our capital expenditures were approximately $55 million two years ago, $65 million last year, and are projected to be around $45 million this year. During the first half of this fiscal year, we were still finalizing the major phase of automation in our Atlanta, Georgia facility. However, initiatives remain ongoing to automate and enhance operations within our distribution and service centers for future improvements.

Understood. Regarding capital allocation, can we expect to see share buybacks or will there be a focus primarily on debt reduction, or perhaps both? Can you share your perspective on what the capital allocation strategy entails?

Certainly, we continuously evaluate how to maximize shareholder value. While we've opted for smaller acquisitions in recent years, strategic M&A remains our top priority. We firmly believe the most effective way to drive shareholder value is to grow the business, allocating capital to M&A, CapEx for operational enhancements, or to reduce debt. Stock buybacks are also considered in our overall capital allocation strategy.

Great. Thank you. That’s all I have. I appreciate it.

Thank you, Michael.

And our next question will come from Alex Berman with Craig-Hallum. Please go ahead.

Great. Thanks for taking my question and congratulations on a successful holiday season. I wanted to inquire about the trajectory of restoring gross margins back to historical levels in the long-term view. How will the components of your gross margin compare in the future to historical levels regarding elements like product margin, freight, and labor? Do you anticipate that achieving these targets will follow a similar mix as you’ve seen historically, or do you foresee any significant shifts to reach those numbers as conditions normalize?

Thank you, Alex. I genuinely believe we have reached an inflection point concerning gross margins. We predicted seeing stabilization in the second quarter, which was achieved with a 90 basis points overall improvement and a 170 basis point improvement in our food brands. This success stems from our strategic pricing initiatives, favorable inbound freight cost reductions, improved labor availability, and operational efficiencies achieved through automation. As we project the second half of this year, we anticipate further gross margin improvements year-over-year, extending into fiscal '24 and beyond. Historically, our margins remained within the 42% range over the preceding decade, and we aspire to return to that range. This anticipated recovery will arise from commodity costs stabilizing at more normalized levels, along with ongoing corrections in inbound freight costs, which we are already witnessing. While outbound freight expenses have remained consistently high, necessitating operational efficiencies to uphold profit margins, we remain optimistic about the return to historical margin levels.

As outlined, we look forward to our gross margins, as Bill emphasized earlier, anticipating improvements over time and the support from OpEx management enhances our strong position moving forward.

Your insights are greatly appreciated. Thank you!

And our next question will come from Linda Bolton Weiser with D.A. Davidson. Please go ahead.

Yes. Hi. Thank you. In relation to the freight discussion, I believe you mentioned that freight costs were lower for the food business but higher for floral and gifts. I assume this distinction pertains to inbound versus outbound freight. Could you clarify? Additionally, with the decline in oil and gasoline prices, why wouldn't that also contribute to lower outbound freight costs?

Bill, can you break that down further?

Certainly. The inbound freight costs have decreased dramatically, as we are currently paying significantly less for containers compared to last year. However, this cost has not fully passed through our profit and loss statement yet; we observed some benefits of this reduction in Q2 and expect more to follow in fiscal '24 as we replenished our inventory. It should be noted that the food segment is more impacted by inbound freight compared to floral, as the latter does not depend on inbound freight in the same capacity. Outbound freight costs impact everyone; they affect the food brands, PersonalizationMall, and the 1-800-Flowers offerings. Despite the decline in fuel prices, we still face elevated fuel surcharges compared to a year ago. This presents ongoing headwinds as we navigate through the second quarter.

Thank you; that explanation helps clarify matters. Often, I’m curious about the competitive landscape and whether any small, up-and-coming competitors you’ve encountered have exited the market due to the softness in everyday gifting. What has been your perception of that competitive environment?

Indeed, Linda. Over time, our experiences in the floral sector show there are always a few entrants that fade away, including some recent startups. I cannot confirm the current status of all businesses in this sector, but any operation that needs to rely on external cash flow may face significant difficulties. If any business in our space requires fundraising right now, it would face substantial costs. Therefore, while we haven’t seen notable changes thus far, the current climate could potentially hinder the competition, especially within the floral segment, food sector, and personalization markets. Notably, Valentine's Day remains a competitive event; however, we’ve primarily noticed familiar players remaining in the market.

Thank you very much. I appreciate the insights.

Thank you, Linda.

This will conclude our question-and-answer session. I'd like to turn the conference back over to Chris McCann for any closing remarks.

Cole, thank you, and thank you all for your time and participation this morning. We enjoyed a very successful holiday season, and we believe we are positioned better, bigger, and stronger than we were pre-pandemic. We remain very optimistic regarding the company's outlook for the future. Thank you for your time. And a reminder, it’s never too early to plan your Valentine's orders; we have many Valentine's to provide assistance with. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.