Earnings Call Transcript - IBEX Q2 2023

Operator, Operator

Welcome to the IBEX Second Quarter Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. To note, there is an accompanying earnings deck presentation available on the IBEX Investor Relations website at investorsibex.co. I will now turn this conference over to Mr. Michael Darwal, Investor Relations of IBEX. You may begin.

Michael Darwal, Investor Relations

Good afternoon, and thank you for joining us today. Before we begin, I want to remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinions as of the date of this call, and we undertake no obligation to revise this information as a result of new developments, which may occur. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our annual report on Form 20-F filed with the U.S. Securities and Exchange Commission on October 4, 2022. With that, I'll turn it over to Bob Dechant, CEO.

Robert Dechant, CEO

Thank you, Mike. Good afternoon, everyone, and thank you all for joining us today as we share our second quarter fiscal 2023 results. Once again, I'm extremely proud of how well our business is performing. We posted tremendous results where profitability soared, while revenue continued to grow, and our new logo engine performed well. Driven by the strategic decisions we have made in our business, we were able to set a new standard in the second quarter, with adjusted EBITDA margin at an impressive 18% or $25.1 million, up 450 basis points from a year ago quarter. Revenue grew to $139.4 million, up 12.6% when normalizing for the Q4 FY '22 exit of our lowest margin, highly seasonal client. Equally impressive, on a trailing 12 month basis, revenue increased 13% to $520.1 million, well above our historical 10% growth rate, while adjusted EBITDA was $80.8 million or 15.5%, up from $61.8 million and 13.5%. We have built a strong business that has proven resilient to turbulent market conditions. Fueled by an enviable client list, our vertical mix of both elite blue chip and leading new economy clients and our powerful new logo sales engine, top line continued to perform well. More importantly, the strategic decisions we have made over the last several years, the plan to aggressively expand capacity in our highly profitable regions during COVID-19 social distancing, enabling us to scale for many of our clients and the exit of a large but low margin client relationship are proving to be very impactful to our overall profitability. We have previously indicated that profits will rise as we grow into this capacity and that's exactly what we have seen. Capacity utilization in our high margin offshore and near shore locations grew from approximately 50% to the mid-60s in the last two quarters, resulting in sizable margin gains and we see opportunities for further expansion as we look out on the horizon. Turning to our clients. In the second quarter, we won four new clients each across key verticals and we recently closed a high growth opportunity with a top-tier blue-chip financial services company that we are preparing to launch this month. Looking ahead, we expect another excellent year of revenue build by new logos. I am also excited about our progress on our sales pipeline. Our pipeline is now over $400 million, up 40% from a year ago as a result of the investments we made in our sales and marketing organizations this last year. More importantly, our win rates are at an extremely high rate and well above the industry averages. Our ability to win high profile deals is a direct result of our differentiated BPO 2.0 capabilities, our growing reputation as a provider who outperforms the competition, the culture of our company and a really strong sales team. Another key vector for our revenue growth is within our embedded base clients. As clients face uncertainties in today's environment, the need to keep their customer satisfied grows. As a result, strong operational execution is paramount. We see this as an opportunity playing directly into our strengths. The combination of Wave X technologies, business analytics and insights, our agent first culture and a strong and disciplined leadership team continue to be key differentiators in our ability to outperform competitors of any size. And as we outperform, we become our clients' partner of choice, leading to significant market share gains with many of our clients. As I have previously discussed, our business has become a model for client and industry diversification. The result is, our successful mitigation of the impact of the current macroeconomic environment as we are not overly exposed to any one client, vertical or service delivery type. As such, we continue to drive strong growth in our business. To that point, the retail and e-commerce vertical has grown 29% year-over-year, representing now 27% of our business, up from approximately 22% in Q2 FY '22. A prime example of our market share gains is with one of the world's largest retailers where we were able to successfully expand delivery during the holiday season, increasing headcount by approximately 1,600 across a mix of chat, voice and e-mail in a key strategic high margin offshore market. We maintained the number one CSAT position for the quarter across all the mediums. And recently, the client named one of our delivery geographies as their top chat team for 2022. Additionally, we continue to do a remarkable job in our strategic verticals of HealthTech and FinTech with growth of 32% year-over-year. These two key verticals represent 28% of our business, up from approximately 22% in Q2 FY '22. And we'll continue to grow with our recent wins and late stage pipeline deals. Our operational performance is excellent in this client base. For example, our Q2 launch of 300 agents for our top-tier health care client has been exceptional. We have achieved performance metrics in the first 60 days, which took their other partners six plus months to attain. This led to the client referring to IBEX as the best performing new partner for meeting initial commitments. And this enabled us to drive market share gains with awards of new business in the form of doubling the number of states we are now supporting. Similar performance and gains are occurring throughout this client base. Moving on to profitability. Adjusted EBITDA margin improved 450 basis points over the same prior year period to a new high of 18%. This margin improvement resulted in a 40.5% adjusted EBITDA growth over prior year quarter to $25.1 million. As discussed in prior calls, during COVID, we added over 6,500 seats in our high margin nearshore and offshore markets to enable us to grow with our clients. Because of social distancing requirements, our centers were often running at a maximum of 50% capacity for the last year, adversely impacting margins on a short term basis, where we had front loaded costs burdening fewer utilized seats. Now that we have resumed to a pre-COVID operating model, we are realizing meaningful margin expansion as we grow into the available capacity and cost structure, but we are not done on margin. We have several important vectors to continue this trend. First, we have approximately 4,500 seats of available capacity in our high margin regions to sell into. As we grow, we expect to see further margin expansion from improved utilization. Second, another key driver of margin improvement has been our ability to secure COLA price increases with our clients. This is a proof point of our operational excellence as great performance best positions us to be successful in price discussions. As a data point, we have received COLA increases across approximately 40% of our revenue base between June and today. This well positions us for continued margin expansion as these increases have gradually layered in from Q4 '22 through current. Lastly, we see additional margin opportunity as we continue to right-size our lower margin onshore footprint. Today, our on-site capacity utilization is extremely low as the majority of our onshore operations has migrated to work-from-home. We expect to take significant on-site capacity offline over the next several quarters, which will help move margins up significantly in our U.S. region. All-in, we very much like the margin trajectory we expect for IBEX going forward. Switching to the important things we are doing from ESG. We continue to be recognized as a leader for diversity and inclusion. If you recall, last quarter, we won the award for top company in Pakistan for diversity inclusion by Pasha. I'm very excited to announce that Newsweek named IBEX, one of America's greatest workplaces for diversity in 2023, which NASDAQ recognized us for and showcased on their tower on February 1. As you can imagine, we are very proud of these awards, but even more so the impact of the efforts leading to them as we continue to make ESG an important priority for the company. Over the last two and half years, we have transformed our balance sheet. We see a strong balance sheet as extremely important under challenging market conditions. Today, we have approximately $110 million of cash and borrowing availability on our revolving credit facilities, with less than $5 million in borrowings. Importantly, the business is poised to accelerate cash generation as profits climb and CapEx is reduced, putting IBEX in an even stronger position. And we are confident we can put this to good use for IBEX and our shareholders. Now moving on to the outlook for the remainder of the fiscal year. Our business continues to progress well on top line while significantly improving on operational profitability. We expect this to continue. As a result of our very strong first half and last 12 month results and our visibility going forward, we are raising guidance for adjusted EBITDA for the full year to $82 million to $84 million from $77 million to $79 million. To recap, we have revenue on a great trajectory despite the pressures of the macroeconomic environment. We made bold decisions to aggressively expand our footprint during the pandemic, while many of our competitors stood still. As a result, our margins have soared with further potential upside. Our new logo engine continues to deliver strategic wins in key verticals with major clients and is truly the envy of the entire industry. Our operational team continues to deliver outstanding performance day-in and day-out, leading to market share gains with our client base, and we have a great balance sheet. I have tremendous confidence in what we have built here. I have always believed great leadership teams shine when markets are most difficult. And that is exactly what my team has done and will continue to do, and it's my proof that the IBEX leadership team is the best in the industry. And I would like to thank my great team for their continued dedication to our mission. With that, I will now turn the call over to Karl to go through our financial results.

Karl Gabel, CFO

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our second quarter fiscal year 2023 financial results, references to revenue, net income and net cash generated from operations are on an IFRS basis, while adjusted net income, adjusted earnings per share, adjusted EBITDA and free cash flow are on a non-GAAP basis. Reconciliations of our IFRS to non-GAAP measures are included in the tables attached to our earnings press release. Second quarter revenue increased 5.5% to $139.4 million compared to $132.2 million in the prior year quarter and grew 9% sequentially. Excluding the legacy client that we exited in the fourth quarter of fiscal year 2022, our revenue increased 12.6% over the prior year quarter. We continue to experience high growth in our BPO 2.0 clients as this cohort grew by 16.9% over the prior year quarter and now represents 77.3% of our total revenue versus 59.7% in the prior year quarter. Net income was $1.9 million versus $8.5 million in the prior year quarter. The decrease in net income was primarily the result of the reevaluation of the share warrants, which was driven by an improvement in the stock price. We expect our fiscal year 2023 annual effective tax rate to be in the range of 15% to 17% on a normalized basis, excluding the effect of the warrant fair value adjustment. On a non-GAAP basis, adjusted EBITDA increased to $25.1 million or 18% of revenue compared to $17.8 million, or 13.5% of revenue for the same period last year. The increase in adjusted EBITDA margin was primarily driven by the growth in profitability in our BPO 2.0 clients in higher margin offshore regions. Adjusted net income increased to $11.7 million compared to $5.2 million in the prior year quarter. Non-GAAP fully diluted adjusted earnings per share increased to $0.52 compared to $0.27 in the prior year quarter. The increase in adjusted net income and adjusted fully diluted earnings per share was primarily driven by stronger operating performance. For the second quarter of fiscal year 2023, our top five client concentration decreased to 40.8% from 41.3% of overall revenue compared to the same quarter last year. Our top 10 clients now account for 58.8% of total revenue, down from 61% in the prior year quarter. We continue to work hard to diversify our client base and are proud of the progress we have made. Switching to verticals. Retail and e-commerce increased to 26.9% of second quarter revenue versus 22% in the prior year quarter. FinTech and HealthTech increased to 27.9% of second quarter revenue versus 22.3% in the prior year quarter. Our exposure to the telecommunications vertical decreased to 16.7% of quarterly revenue versus 17.3% in the prior year quarter. Technology decreased to 8.7% from 15% of quarterly revenue primarily due to the previously mentioned exit of a legacy technology client in the fourth quarter of fiscal year 2022. Travel and transportation decreased to 11.4% from 15.2% of quarterly revenue due to macroeconomic pressures experienced by one of our larger clients. Net cash generated from operations was $8.3 million for the quarter compared to $3.4 million in the prior year quarter. The increase was driven by expanded adjusted EBITDA, partially offset by an increased use of working capital. Net cash generated from operations, excluding working capital was $20.8 million for the quarter compared to $13.8 million in the prior year quarter. Our DSOs were 61 days, down one day year-over-year and up two days sequentially. We continue to trend below industry average. Capital expenditures were $7.9 million or 5.7% of revenue in the second quarter of fiscal year 2023 versus $11.8 million, or 8.9% of revenue for the same period last year. As previously stated, we continue to utilize capacity built out over the last two years that is now available as a result of the removal of social distancing requirements. Non-GAAP free cash flow increased to $0.3 million in the current quarter compared to negative $8.4 million in the prior year quarter. We ended the second quarter with $38.1 million in cash, down from $48.8 million as of June 2022 primarily driven by paying down debt, including a net paydown of our revolving line of credit during the fiscal year-to-date. Total debt was $90.5 million, including total borrowings of $4.5 million and lease liabilities of $86 million, down from total debt of $104.7 million, including total borrowings of $15 million and lease liabilities of $89.7 million as of June 2022. Borrowing availability under our revolving credit facilities increased to $71.1 million as of December 2022 compared to $50.5 million as of June 2020. As of December 31, 2022, the company determined it will no longer qualify as a foreign private issuer. Effective July 1, 2023, we will be subject to the requirements of a domestic filer, and we'll be transitioning to U.S. GAAP financial reporting. In closing, our business achieved record revenue and adjusted EBITDA margin as we continue to expand our current base of business across multiple verticals and into our high margin geographies and higher margin services. We are effectively managing the challenging macroeconomic environment and remain optimistic about IBEX's outlook. We have demonstrated great resilience through the pandemic and continue to do so through the current market turbulence. We have a high degree of confidence about the growth of our business and are raising our fiscal year 2023 adjusted EBITDA guidance to $82 million to $84 million, with a midpoint margin of 15.1%, up from $77 million to $79 million, with a midpoint margin of 14.2%. In addition, we are reaffirming our revenue and CapEx guidance. We expect organic revenue between $545 million and $555 million, with a midpoint growth of 11.4% versus fiscal year 2022 and fiscal year 2023 CapEx of $18 million to $22 million.

Operator, Operator

With that, Bob and I will now take questions. Operator, please open the line.

Ryan Potter, Analyst

Hey. Thanks for taking my question. I guess just starting on the revenue outlook, the implied second half guide seems to imply revenue to be at least flattish on a sequential quarter-over-quarter basis when historically, these have been seasonally weak quarters and often down quarter-on-quarter. So can you walk through kind of the various items at play here? What's giving you confidence in the better than historical seasonality, potentially the legacy client, I think you mentioned, it was a seasonal, so is client mix at play here?

Robert Dechant, CEO

Thanks for the question, Ryan. We've successfully restructured our client base. In the past, we had a significant retail component that caused a notable spike in Q2 revenue. We have since exited one of those high seasonal clients. More importantly, we're seeing success in the health care and financial services sectors. We've built a more balanced business, improving our performance on a quarter-over-quarter basis. This consistency helps us manage our operations more effectively. We're optimistic about this trend, especially with our recent achievements in financial services and health care, which should strengthen our performance in the latter half of the year and alter our historical quarterly trends.

Ryan Potter, Analyst

Thanks for that information. Regarding margins, they're quite impressive this quarter. Could you explain what drove this strength besides the increases in capacity and BPO 2.0? I'm concerned that the implied outlook for the second half indicates a significant decline in margins. Was there anything one-time that affected the numbers in the second quarter?

Robert Dechant, CEO

Sure. There are no one-time factors impacting that, just to clarify. We believe we have significantly improved our business structurally. Given the current market turbulence, we are cautious about being overly optimistic as we look at the second half of the year. We have raised our guidance and are confident in those numbers and our capacity to achieve them. Our goal is to surpass those expectations. I want to emphasize that we are succeeding with our BPO 2.0 solution, which is driving strong growth in our high-margin regions and helping us utilize our capacity more effectively. This leads to a significant margin flow-through as we adjust for numerous front-loaded costs. Additionally, the cost-of-living adjustments have been gradually implemented and will contribute to our margins as we see continued success. We believe there is further potential for margin expansion, and our Q2 results did not fully capture all of this. We are very optimistic about the direction of our business. However, we acknowledge the current market conditions and remain confident in our guidance and the path ahead.

Ryan Potter, Analyst

Got it. Thanks again.

Operator, Operator

Thank you. And our next question comes from Tobey Sommer from Truist. Your line is now open.

Jasper Bibb, Analyst

Hey. Good afternoon. This is Jasper Bibb on for Tobey. Thanks for taking my questions. So I was hoping you could comment on how your new economy customers are managing their outsourcing spend in this environment. Obviously, we've all seen headlines about some large customers at least scaling back their full time workforce. So I'm curious if that's having any impact on the outsourcing spend as well.

Robert Dechant, CEO

Thank you for that question, Jasper. It’s a great question. There's a mix of situations across our client base. We certainly have clients whose businesses have faced significant disruptions, leading to a decrease in their outsourcing expenditures. For example, in the crypto sector, we have captured a considerable market share as their spending has reduced significantly. Our impact in this area has been notably less severe compared to our competitors, as we excel at meeting their needs with competitive pricing and effective service delivery. Generally, those companies affected by disruptions are indeed reducing their spending. On the flip side, we are also aware of major announcements regarding substantial layoffs in the tech sector and beyond, which I believe will present considerable opportunities for us. I think these customers will turn to outsourcing, offshoring, and AI solutions, as they need to manage the workload despite the reduction in headcount. Therefore, I foresee a significant increase in their outsourcing expenditures. In the short term, though, the reality is that during large layoffs, there can be a pause as companies assess their new landscape and determine their core teams. This may slow decision-making momentarily, but once the new structure is established, I expect to see a swift resumption of decision-making, focusing on strategies that include outsourcing, offshoring, and AI solutions.

Jasper Bibb, Analyst

Thanks for that. And then on the EBITDA margin expansion, do you think this level of EBITDA margin is sustainable as you continue to scale into the prebuild capacity? And then do you have a target for what normalized utilization would look like in that scenario versus the 62% you cited this quarter?

Robert Dechant, CEO

Our view is that the margins we achieved this quarter were not just a result of favorable circumstances and one-time events. We believe our business can maintain this new standard moving forward. The three areas of margin improvement I mentioned are clearly defined, and you can see how increasing utilization from 50% to the mid-60s has contributed to this progress. Before COVID, our sites operated at 75% to 80% utilization, indicating there is still substantial room for growth. We are excited about this potential, especially as this capacity is primarily in our high-margin regions, which are experiencing rapid growth. Additionally, we are willing to make tough decisions, as evidenced by our choice to end a relationship with a large, long-standing client. We have a significant amount of idle capacity in the U.S., and we will be actively working to utilize it, which should further enhance our performance. I am genuinely enthusiastic about both our immediate and mid-term growth trajectory.

Jasper Bibb, Analyst

I appreciate the detail. One last question for me. It seems that the legacy revenues saw a slight increase sequentially this quarter. Do you believe that the declines in the legacy business have effectively stabilized at this point?

Robert Dechant, CEO

Thank you for the positive feedback. I believe in our last call we mentioned that the situation could either stabilize or decline. The encouraging news is that it has stabilized and even risen slightly, which is certainly better than previous trends. The main drivers behind this improvement are vendor consolidation and gaining market share. One of our clients had around 12 vendors and, as their spending significantly reduced, they've cut down their providers by about 50%. This allowed us to ascend to the second largest market share within that enterprise as they eliminated many low-performing multibillion-dollar providers. IBEX has maintained its position, and now that the client has adjusted, we've been able to grow a bit, which we are very excited about, as we no longer face that headwind.

Jasper Bibb, Analyst

That make sense. Thanks for taking the questions, guys.

Operator, Operator

Thank you. And our next question comes from David Koning from Baird. Your line is now open.

David Koning, Analyst

Yeah. Hey, guys. Great job.

Robert Dechant, CEO

Thanks, David.

David Koning, Analyst

Yeah. And I guess, a little bit like Tobey's question, well, this year, it looks like you're setting up to have the best growth in five years and just a call out is a choppy environment, yet you're growing faster than in several years, and those years were good, too. I guess I'm wondering like some of the verticals this year are still down because of some intentional like shedding of low margin business. So there's some headwinds even in this year. Does that mean that as we go forward, there is room for growth to accelerate even from here, given kind of the sales pipeline and just momentum?

Robert Dechant, CEO

Thank you for the question, Dave. I appreciate your perspective. You're spot on with your analysis. Our business has incredible diversification, with our largest client representing only about 12% to 13% of our revenue, followed by several others at around 5% to 6%. This diversification has helped us navigate any disruptions since gains in other areas can compensate for setbacks. For instance, in the transportation and logistics sector, we've encountered challenges with one client due to the overall economic environment, leading to a decline during a period that is typically strong for logistics, especially around the holidays. Currently, we see this as a low point, and we're exploring new types of work that they haven’t outsourced previously. We're positioned with solutions in several cost-effective labor markets, and they are ready to launch these initiatives with us. This represents growth and is highly profitable in those areas. If we continue to execute our strategy effectively, our win rates are impressive, and as we navigate through current challenges like recent layoffs, I believe we are well-positioned for future success.

David Koning, Analyst

Yeah. No, it sounds good. And maybe just as my follow-up, what would be the callouts, like when you change the U.S. GAAP, what are the callouts there and will EBITDA or EBIT or anything change in ways that we should kind of think about?

Robert Dechant, CEO

Yeah, Karl, why don’t you take that one?

Karl Gabel, CFO

Sure. Thanks for the question. We're in the process, David, of like evaluating the changes. So we'll not comment on that right now. But there are items like, for instance, lease accounting and things like that, that are different between IFRS and U.S. GAAP.

David Koning, Analyst

Maybe another way to ask it is whether the bottom line will reflect changes in some components. I'm assuming that EBITDA might be slightly lower and depreciation and amortization could also be lower, so I'm curious if the net EPS will ultimately remain fairly close.

Karl Gabel, CFO

Sure. It should end up being pretty close. Again, we're in the process of changing the line items like you're saying, could change. And it could change the net number a non-material amount. But we're in the process of evaluating that.

Robert Dechant, CEO

And Dave, to wrap up on that, when we arrived, I discussed the vision we established. The vision was to become a growth-oriented company with strong brands. We aimed to be in the top quartile in terms of EBITDA and profitability. This goal has been somewhat distant, as we've mentioned, due to our significant exposure to the U.S. market and our efforts to reposition and optimize our footprint according to our vision. We've continuously added to these areas. Currently, I believe we are very close to achieving that vision. We now view our business not only as a growth engine with excellent clients and service offerings, but I also feel confident that we have moved firmly into the top quartile of profitability. The entire team shares this positive sentiment.

David Koning, Analyst

Yeah. That's great, guys. Thank you.

Operator, Operator

Thank you. Our next question comes from Arvind Ramnani from Piper Sandler. Your line is now open.

Arvind Ramnani, Analyst

Hi. Thank you for taking my question. I have a couple of inquiries regarding the part of your business that relies on transactions or volumes, which seem to be more variable in nature. You have contracts in place, but your earnings are dependent on the volume your clients are generating. Can you quantify how much of your business that represents, maybe around 10% or 20%? Have you noticed any changes or pressure on volumes in that segment of your business?

Robert Dechant, CEO

Thank you, Arvind. Our business is fundamentally driven by volume. Our clients compensate us based on various metrics, such as the number of agents per hour, transactions per call, or per minute on the connection side. In every case, volume is crucial. Clients will state the number of agents they need, and we build accordingly, predicting the necessary headcount based on their volume forecasts. In other instances, clients specify the number of calls or minutes, and we figure out the headcount from there. Ultimately, all of this is volume-driven. Regarding your question, a significant part of our business relies on these volumes. We enjoy a diverse client base, which comes with its ups and downs. Some clients are thriving, while others face challenges in the current landscape. We believe our structure, client relationships, and diversification position us well to continue growing our business at a rate above industry growth. We have built resilience into our client portfolio and excel operationally. Even among our clients, we gain market share from competitors, allowing us to perform better in tougher environments. Overall, I am optimistic about our growth trajectory.

Arvind Ramnani, Analyst

Perfect. And then in terms of like new logos, I mean, clearly, like the work you're doing with existing clients, that's going to drive the bulk of this year's business or even next year's business. But like new logos kind of has some kind of impact on current year, but they're more like two years, three years out when they really kind of scale. Are you seeing kind of increased traction sort of given kind of the work you're doing with some of your clients around the BPO 2.0 or some decisions making sort of slowing just because of the bad environment? Just trying to figure out the velocity of new deals and how it could impact revenue like two years out.

Robert Dechant, CEO

Currently, many large companies that have conducted significant layoffs are experiencing a slowdown in their decision-making processes as they assess their future strategies with a reduced workforce. In the short term, this has put some brakes on activity. However, I fully anticipate that the pace will pick up as they clarify their strategies after these reductions. One of the top leaders in this industry believes that we need to increase outsourcing and offshoring while also exploring AI-based technologies and automation tools to manage workloads. This shift should create a favorable momentum for our industry as the recent trend of downsizing stabilizes.

Arvind Ramnani, Analyst

Perfect. Thank you very much.

Robert Dechant, CEO

Okay.

Operator, Operator

Thank you. And I am showing no further questions. I would now like to turn the call back over to Bob Dechant for closing remarks.

Robert Dechant, CEO

Great. Thanks, Justin, and thank you all for listening today. Obviously, you can see the excitement that we have in our business, the results that we posted, we're very proud of. They don't come easy, and it's a lot of hard work. So with that, thank you all. Thanks for your confidence and interest in IBEX, and we look forward to connecting as our business continues to move well. Thank you all. Have a good night.

Operator, Operator

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