Maximus, Inc. Q1 FY2025 Earnings Call

Greetings, and welcome to the Maximus Fiscal 2025 First Quarter Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jessica Batt, Vice President of Investor Relations and ESG for Maximus. Thank you, Mrs. Batt, you may begin.

Good morning, and thanks for joining us. With me today is Bruce Caswell, President and CEO; David Mutryn, CFO; and James Francis, Vice President of Investor Relations. I'd like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember that such statements are only predictions. Actual events and results may differ materially as a result of risks we face, including those discussed in item 1A of our most recent Forms 10-Q and 10-Ks. We encourage you to review the information contained in our recent filings with the SEC and our earnings press release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances except as required by law. Today's presentation also contains non-GAAP financial information. Management uses this information internally to analyze results and believes it may be informative to investors in identifying trends, gauging the quality of our financial performance, and providing meaningful period-to-period comparisons. For a reconciliation of the non-GAAP measures presented, please see the company's most recent Forms 10-Q and 10-Ks. And with that, I'll hand the call over to Bruce.

Thanks, Jessica, and good morning. We have strong first-quarter results to share with you today, and I'll offer my perspective on Maximus, Inc.'s favorable position in government services as we navigate the first weeks of the new administration. But first, I'd like to recap the highly positive developments for the business that have occurred since our November 21st year-end call. I'll start with the two large recompetes that we faced and what I believe was the best outcome. The government withdrew the attempted early recompete of our CMS contact center operations, or CCO contract, also known as the 1-800-Medicare and federal marketplace contract. We objected to the basis for the recompete and took our case first to the Government Accountability Office and subsequently to the Court of Federal Claims. Following the election, late November, the government canceled the procurement, thereby clearing the way for our current contract to continue operating, which we expect it to through 2031, using the available option periods. Then, as announced last month, we were successfully reawarded the successor contracts for our VA medical disability examination, or MDE work. These two-year contracts began on January 1st and enabled our support of the VBA and the veteran community to continue. Next, we completed the divestiture of our employment services businesses in Australia and South Korea, that resided in the outside the US segment. We had previously committed to reshaping this area of the business and are pleased to have worked again with a recognized provider who has proven to be an excellent home for our employees. This recent divestiture achieves an important goal of reducing volatility and is expected to improve profitability in the segment through fiscal year 2025 and beyond. Finally, as announced in mid-December, the Board of Directors authorized an increase of $200 million to our share repurchase program. When we go to David for financial results, he will share the latest activity on that front. I'd like to turn now to how Maximus, Inc. is uniquely positioned to continue being a proven value-added partner to government. This speaks to both our current book of business as well as new opportunities that may lie ahead. During the transition period, we've witnessed the durability of our core business, as well as early insights as to the priorities of the new administration, to which we believe we are well equipped to respond. While we predominantly serve the federal civilian side of government and its related state-administered benefit programs, our durable portfolio is tied to well-established entitlement programs and others requiring mandatory spending that have broad bipartisan support. Medicare and veterans disability benefits are prime examples, and we witnessed recent events that demonstrate their criticality to government. One was the recent hiring freeze on federal civilian employees, which exempted positions related to the distribution of benefits under Medicare, veterans benefits, and Social Security. Separately, the Office of Management and Budget instituted a temporary pause of agency grant loan and other financial assistance programs. While the funding freeze was ultimately rescinded, OMB had already clarified that programs providing direct benefits to Americans, including mandatory programs like Medicaid and Medicare, were explicitly excluded. In a fast-moving policy environment that can introduce uncertainty and ambiguity for some companies, we believe our track record has demonstrated that our core business across major federal and state programs has desirable characteristics that contribute to its resilience. Looking beyond the core benefit program areas I've mentioned, our earned reputation as an efficient and accountable service provider, in our view, positions us well to respond to the evolving needs of our customers and priorities of the new administration. One area receiving ongoing attention, of course, is the Department of Government Efficiency or DOGE. As you know, the DOGE now resides in the renamed United States DOGE service, or USDS, previously known as the United States Digital Service. The legacy USDS was established in the Executive Office of the President in 2014 to bring top-tier technical talent to partner with federal agencies to, among other objectives, improve critical government services. The executive order establishing and implementing the DOGE updates the subjective in its stated purpose to include, quote, modernizing federal technology and software to maximize governmental efficiency and productivity, end quote. In our view, recognizing that we are still in the early innings, the importance of technology modernization to the administration and capabilities needed to achieve the USPS software modernization initiative calls are well aligned with the demonstrated experience of Maximus, Inc. in the areas of software development, network infrastructure, and IT systems. Finally, turning to the state level and our US services business, much has been written about potential changes to reduce the level of federal Medicaid spending through levers ranging from FMAP reductions to per person spending caps or block grants. Many states, in turn, are developing contingency plans, that for some include accessing reserves, and for others may include examining eligibility requirements. While it's too early to know which, if any, proposed policy changes will proceed, I'll offer two observations on the dynamics that characterize our Medicaid business. First, changes requiring consumer engagement, such as steps to verify eligibility, generally increase our volumes. Most of our state contracts are based on the volume of activity we perform rather than a flat rate per member per month. And second, in many of our largest states, we also administer state-based exchanges in which consumers may become enrolled when no longer eligible for Medicaid, meaning our engagement with those consumers is sustained. We anticipate states will take varying approaches in addressing potential Medicaid policy changes and see opportunity to work collaboratively with them to apply our deep experience to tailor solutions to their different needs and desired outcomes. Let's turn to awards, and I'll share two recent wins that provide further evidence of our execution on our three to five-year strategy. First, we are pleased to have been selected by the Federal Reserve System to provide technology-enabled contact center services through our recently announced total experience management, or TXM solution. The Federal Reserve Board of Governors were in need of modernized contact center operations, including self-service capabilities, all to be delivered while meeting strict data privacy requirements in a SOC-compliant and FedRAMPED environment. The total contract value of the award is $76 million over nine years with options and is reported in our unsigned award balance at December 31st, 2024. Our TXM solution leverages data insights and cost-effectively enable federal agencies to reach citizens through a multichannel secure cloud-based platform. It is anticipated that other agencies, including the Federal Deposit Insurance Corporation and the National Credit Union Administration, could benefit from TXM in the future. I'm also excited to announce a recent win at the National Energy Technology Laboratory or NETL, part of the Federal Department of Energy. Valued at $123 million total contract value, with a five-year performance period, Maximus, Inc. will provide expanded professional IT services to meet the business and research needs of the NETL in areas including high-performance computing, AI/ML development, and ongoing operations and maintenance. Delivered by our technology consulting services or TCS team, our services reflect strong core capabilities in enterprise IT infrastructure, cyber, data management, and AI/ML. I'm proud of our TCS team who's exceptionally qualified to support the modernization, operation, and maintenance of NETL's complex portfolio of enterprise cyber and research infrastructure. Let's go to awards reporting and the pipeline. In the first quarter of fiscal year 2025, signed awards totaled $2.1 billion of total contract value. Further, at December 31st, there were $410 million worth of contracts that had been awarded but not yet signed. These awards translate into a book-to-bill of approximately 1.5 times when measured in the quarter. This represents a healthy step up from our book to bill at September 30th and tracks to our expectations for an improved metric in this fiscal year. A key driver this quarter was the successful recompete for the MDE contracts demonstrating rebid award activity picking up again after lower rebid volumes in preceding periods. As we approach the midway point of the second quarter, I'm pleased that we're continuing to see awards flow and thus far solicitations tracking to expected schedules. We maintain our slightly cautious approach to forecasting this year while also being optimistic about our deal flow. Our total pipeline of sales opportunities at December 31st was $41.4 billion compared to $54.3 billion reported at September 30th. The prior period pipeline figure had included the early rebate of the CCO and recompete for the MDE contracts, so the reduction is largely driven by the successes discussed at the start of my remarks. The current pipeline is comprised of approximately $2.5 billion in proposals pending, $1.5 billion in proposals in preparation, and $37.5 billion in opportunities tracking. Of our current pipeline, approximately 57% represents new work. Additionally, 63% of the $41.4 billion total pipeline is attributable to our US Federal Services segment. We are continuing to focus on the US Federal sector; we believe technology modernization and cost-effective program administration, using private sector partners will remain a priority while maintaining a balanced mix of federal and state opportunities. This approach aims to ensure a responsibly diversified portfolio and well-managed exposure across the segments. Over the past few years, we've communicated ways in which our company culture has evolved, leading to greater organizational agility and a heightened ability to innovate. As an example, the Maximus Forward initiative has been a positive forum to challenge established structures and processes, promote more efficient operations, and provide for reinvestment in the business. Address priorities from talent acquisition and development to technology and innovation. Reflecting the goals of Maximus Forward, our chief digital and information officer, Derek Pledger, has established an AI and data accelerator group to advance our AI capabilities providing the necessary resources, frameworks, and infrastructure to harness the full potential of AI across our operations. The AI and data accelerator is designed to speed up the development and deployment of AI-driven solutions from pilots to scale while ensuring they adhere to our governance principles. Central to our strategy is our commitment to responsible AI development and use while taking steps to help ensure that our AI solutions are implemented ethically, transparently, with accountability to government guidelines and regulations. In this spirit, I'm excited to announce our inaugural investment via Maximus Ventures, our corporate venture capital function. We will be partnering with a company that is developing human-in-the-loop AI capabilities specific to clinical assessment services. Our objective is to support our clinicians in a manner that allows for fully auditable, timely, effective, and quality health assessments and evaluations. We've structured an investment that is designed to drive increased financial performance on our existing clinical programs while bringing differentiating technology to our government clients. We believe our unique positioning with federal and state governments makes us an attractive partner for innovative health technology companies and startups wishing to access these large markets where contract vehicles, relationships, and the complex nature of government contracting are challenging for outsiders. In addition to driving efficiency in our service delivery, Maximus, Inc. is also focused on helping government gain access to proven safe and ethical new technologies through its venture investments. Before I turn the call over to David, I'd like to congratulate our teams on an excellent start to the fiscal year. With our CCO and VAMDE contracts now secure, and fueled by a strong start to new contract wins, our teams are focused on consistent operational execution while supporting our clients as policy priorities continue to evolve. While we, like many of our peers, continue to face unknowns and the risks they represent, overall, we believe the balance tilts toward opportunity. And with that, I turn the call over to David.

Thanks, Bruce, and good morning. We're pleased to start fiscal 2025 with strong first-quarter results and an improvement to our full-year earnings guidance. We're delivering them from a strengthened position after successfully securing favorable outcomes on the two key rebids. We also completed the divestiture of our employment services businesses in Australia and South Korea, thus reducing volatility in the outside the U.S. segment, providing a lift to the segment's profitability. In addition, we significantly increased our pace of share repurchases in the quarter. From our fiscal year start on October 1st through last week, we have deployed approximately $290 million through share repurchases, enabled by our strong balance sheet and consistent with our capital deployment strategy. Let's turn to quarterly results where Maximus, Inc. reported revenue of $1.40 billion for the first quarter of fiscal year 2025, which represents 5.7% year-over-year growth, with 6.3% on an organic basis. The US Federal Services segment was the primary driver of growth in the quarter, with the outside the U.S. segment also posting strong double-digit organic growth. Adjusted EBITDA margin was 11.2% and adjusted EPS was $1.61 for the quarter, and $1.34, respectively, for the prior year period. The outside the U.S. divestiture was completed in the first quarter, and as a result of the transaction, we incurred divestiture charges of about $38 million, the majority of this, about $21 million, results from foreign exchange losses that had accumulated over decades related to Australia. These have been recorded in other comprehensive income, but the transaction event requires them to move to the income statement. There is no cash impact related to this shift. These divestiture charges also caused a higher effective tax rate to be recognized in the quarter. The divestiture charges and the related tax rate impact, which together make up $0.64 per share, are excluded from our adjusted EPS and adjusted EBITDA metrics, consistent with our methodology. I'll now move to results for each of our segments. For the US Federal Services segment, revenue increased 15.3% to $781 million, which was all organic. Revenue growth stemmed from multiple areas throughout the segment, including clinical assessments, some outsized volumes on other programs, as well as customer service type programs. The operating income margin for the segment in the first quarter of fiscal 2025 was 12.7% as compared to 10.2% in the prior year period. The outsized volumes in certain smaller clinical programs helped bolster this quarter's margin and are not expected to carry through the remainder of the year at these levels. For the US services segment, revenue decreased 7.7% to $452 million. The prior year period, which had outsized growth at the time, benefited from strong performance across the Medicaid-related portfolio, most of which were excess volumes from the now-completed unwinding exercise. The segment's operating income margin this quarter was 9.0%, and compares to 13.5% for the prior year period. A portion of the margin gap stems from the prior year period's enhanced profitability from the excess volumes. The other portion is some seasonality that was contemplated in our full-year outlook for this segment, which is unchanged in our updated guidance. Revenue increased 6.0% year over year, $170 million for the quarter. Organic growth was 10.7% and driven by strength in flagship contracts in the UK, such as the new functional assessment services contract. The segment generated $8.1 million of profit, which is a 4.8% margin compared to an operating loss of $0.1 million in the prior year period. Following the divestitures of predominantly employment services contracts that we have completed in the last two years, we are now seeing a notable reduction of volatility in the segment. We will continue to evaluate this segment's performance, though we believe that the shaping actions requiring prioritization have now been completed. Turning to cash flow items. Cash used in operating activities was $80 million and free cash flow was an outflow of $103 million for the quarter ended December 31, 2024. First-quarter negative cash flows reflected expected seasonality around timing of payments that we tend to have in this quarter, which I noted on our November call. Our days sales outstanding were 62 days. During the quarter, we significantly increased the pace of share repurchases, buying back approximately 3.1 million shares for $237 million. This increase is consistent with our stated capital allocation approach, which features opportunistic share repurchases, enabled by our strong balance sheet. Since quarter end through January 31st, we repurchased an additional 686,000 shares for $53 million, leaving approximately $85 million remaining under the current $200 million Board of Directors authorization. Ended the first quarter with total debt of $1.40 billion; our net debt to EBITDA ratio increased from 1.4 last quarter to 1.8 times this quarter, primarily as a result of the share repurchase activity. As a reminder, this ratio is our debt net of allowed cash to adjusted EBITDA for the last twelve months, as calculated in accordance with our credit agreement. We remain below our stated target net leverage range of two to three times adjusted EBITDA. Our capital deployment priorities have not changed, and we continue to seek acquisitions that can accelerate future organic growth. Meanwhile, we continue to pay a dividend that increases with earnings over time and maintain an opportunistic share repurchase program, which has been consuming a larger portion of our capital deployed over the last few months. I'll finish with 2025 updated guidance, where our implied organic growth rate is increasing and we are raising both earnings and free cash flow projections. The revenue side, our updated guidance is $5.2 billion to $5.35 billion. Crosswalking from formal guidance in November, $100 million was removed for the completed outside the U.S. divestiture, which means other areas of the business, including Q1 results, have increased guidance by $25 million. This translates to a 50 basis point bump to the implied full-year organic growth rate versus last fiscal year. On the earnings side, for fiscal year 2025, our full-year adjusted EBITDA margin guide improved by 20 basis points to 11.2%, and our adjusted EPS guide increases by $0.20 to range between $5.90 and $6.20 per share. Free cash flow guidance increases by $10 million to $355 to $385 million. There are several drivers to the increased guidance. Number one, our Q1 results were strong and ahead of internal expectation. This was evident in the U.S. Federal margin of 12.7% in the quarter. Number two, the divestiture in outside the U.S. At the time of announcement in December, we noted the transaction was estimated to be slightly accretive and is now baked into the full-year forecast. Number three, the higher levels of share repurchase activity, especially in the first quarter of this year, is providing a benefit to our full-year adjusted EPS. Worth noting that our forecast for the remaining three quarters of fiscal 2025 remains largely intact and reflects a continuation of a more cautious approach, which was our objective when we laid out initial guidance for the year. I'll touch on segment margin assumptions. We expect the U.S. federal segment to deliver a full-year margin of around 11.5% for fiscal 2025, reflecting more typical performance after a strong first quarter. The U.S. services segment remains on track to deliver a full-year margin of around 11%, reflecting improvement for the remaining quarters after the lower first-quarter margin, which as I mentioned was largely expected. For the outside the U.S. segment, we expect 3% to 5% for the full year, as we noted on our divestiture announcement. And while the actions we've taken are still fresh, I'm pleased to see us tracking to our committed 3% to 7% margin range for this segment. Other updated assumptions for fiscal 2025 would be an updated interest expense of approximately $75 million resulting from greater borrowings tied to higher repurchase activities. Our full-year tax rate is now expected to range between 28% and 29%. As a reminder, the higher first-quarter rate was tied to the divestiture-related charges and not an indicator of the three remaining quarters, which are expected to be in the 25.5% to 26% range. Finally, on a full-year basis, the weighted average shares are expected to be about 58 million shares. We continue to track favorably to our 10% to 13% adjusted EBITDA near-term margin expectations that I shared on the November call. Today's guidance for fiscal 2025 is approximately 11.2%. Our goal beyond 2025 is ongoing incremental improvement to move into the upper half of that range. I believe there is cause for optimism. We with the business firmly rooted in essential bipartisan programs, a healthy pipeline of opportunities, and a reputation for solving challenges for government customers through the efficient delivery of quality programs often at scale. And with that, we will open the line for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Charlie Strauzer with CJS Securities. Please proceed with your question.

Hi, good morning.

Good morning, Charlie.

Bruce, if you could maybe talk about strength in Q1, very strong quarter. Well ahead of our expectations. You know, was there any, you know, pull forward from, you know, in that outperformance, I should say.

Yes, it's a good question. And David will give you some more details on that.

Yes. Thanks, Charlie. Just to put it in the context of the annual guidance as well, it might be helpful to quantify some of the changes in the full-year guidance. So know, I said the forecast for Q2 to Q4 is largely intact. The share repurchases, if you look at the change in share count, the higher interest, and combine that with a slightly higher tax rate, that gives you about a 10 cent improvement to the full-year earnings. So kind of below the line. And then the other two drivers I mentioned, which were the Q1 overperformance as well as some accretion from the divestiture, actually drive a little bit more than $0.10. So altogether, that'd be a little bit over $0.20. Given we're only one quarter in and still maintaining a disciplined approach, we decided to keep the earnings guidance range at the $0.20 level. And as we said on the last call, we have intentionally kind of derisked the forecast for any potential impact of procurement timing. So now less than 2% of our revenue midpoint is coming from new work. So Q1, it was less of a pull into Q1 but just wanted to put the Q1 overperformance into the context as it relates to the full-year guidance.

Is that helpful? Yeah. Definitely. And, you know, maybe talk a little bit too about, you know, your confidence in the guidance and making some of it into your thought process.

Yes. I think confidence remains high and when we give guidance we’re careful to not lean forward too much, and I think you're used to having that thinking around it. I think the new business assumption I mentioned is probably the clearest and most precise kind of evidence I can show that we're being careful about the environment and making sure we've got good visibility.

Great. Thanks. And Bruce, you know, given the headlines from the new administration, obviously, you probably have some smaller pockets of your portfolio that are not tied to durable programs where you might have opportunities or risk. Can you maybe talk about that a little more color?

Yeah. Charlie, it's a good question. Thank you. And I think you hit an important point that these are would be small pockets. We've really as you can imagine, looked very closely at the portfolio kind of across all of our federal customer areas on a contract by contract basis. And as we have done that, we've, you know, the product and if, for example, there were to be a structural change at a department level, where would that core function have to go to continue? Because in our view, the programs themselves are not going to go away, and the basic functions of providing service and managing portfolios, for example, on behalf of the government, have to continue to be performed. And so, we've looked at, you know, where that might go in the future if necessary, and would be ready to adjust if we needed to. But fundamentally, we really haven't seen many pockets that would be, if in fact, any pockets that would be directly impacted by any of the executive orders. It's worth also saying that we've been pleased to see continued deal flow in the pipeline. Happy to go into more detail on that. But, you know, compared to other presidential transitions or the last presidential transition, it's really, you know, normal course presently, you know, from a deal flow standpoint.

Yeah. I was gonna ask you too about you know, last time when Trump was printed into office. It took, you know, quite a while to, you know, find the right appointees, etcetera. It seems like he know, kind of hit the ground running here and you know, is that helping you with your pipeline in terms of going after our, you know, RFPs and RFPs being let out that that is gonna slow down in that sales cycle, if you will?

Yeah. Let me give you a little more context on that. So we're not seeing any real direct impacts presently on deals that we're in the pipeline, particularly in the health and defense and the homeland security areas. Some individual agencies within that group, as you might expect, are temporarily pausing new acquisitions to ensure that they're aligned with administrative priorities, and that's a very common thing for them to do during a period of transition, kind of as expected, and we bake that into our expectations in terms of new work for the year and so forth. On the civilian side of the business, it's a slightly different dynamic. We're seeing some customers turn to extensions and bridges on existing contracts to get work through and accommodate delays in other procurement vehicles. So that is a great position to be in when you're an incumbent because you're picking up work with really very low or no cost of sales on existing vehicles. It's less of a great position to be in when you're waiting for procurements to come out. And I'm pleased that from a civilian perspective, I feel like we've been more on the benefit. Another point I would make is that, many of the GovCon companies, as you well know, are dependent on government-wide acquisition vehicles or GWACs. And we really haven't seen any material delay in the acquisition schedules for those. So that gives you a sense of the lay of the land. I want to note, however, that there are some other variables that everybody's watching. One is the FY 2025 appropriations process that could impact the timing of new contracts across the GovCon community if they represent actually new spending. And would obviously go above the funding that would be available through a continuing resolution. So already we've seen talk about what will happen on March 14th when the current CR expires. Will we see another CR, will that carry us through the remainder of the fiscal year? In some instances, if we're maintaining the current funding level, that could keep new contracts from being funded with new money. We're also cautiously watching the OPM deferred resignation and voluntary early retirement authority or VERA process for the potential impacts on government procurement staff. The government procurement teams and contract shops have been stretched for a number of years in some agencies. And we want to obviously consider and as an industry, how resignations and retirements could exacerbate that issue. So that's why I think David put it well when he said, you know, we're maintaining a disciplined view of the remainder of FY 2025. And that we've got less than 2% of our FY 2025 revenue coming from anticipated pipeline conversions.

Hope that helps. Yeah. Definitely. Thank you very much, Bruce. And, David Sure. David, if you maybe if we could talk a little bit more about segment margins. What are kind of the assumptions you're baking into your kind of stated goals there and, you know, are there any kind of, you know, drivers or impediments to achieving those goals?

I'll start with U.S. Services. So U.S. Services margin in Q1 was a bit lower than what we expect for the year. As a backdrop, as you recall, last year in 2024, U.S. Services had higher than normal margins as a result of the extra volumes from the Medicaid unwind. So we have tough year-over-year comps for the first three quarters there. And then recall in Q4 of last year, U.S. Services delivered a more typical margin of 11%, which again is what we're guiding to for the full year. Despite the first quarter being at 9%. The dip in Q1 was largely anticipated. A component of that was really the impact to open enrollment on that segment. Especially this year, we were prudent in how we staffed our contracts there that are typically paid on either a volume base or more of a price basis. Especially given there's been a lot of change in that population. So we largely anticipated that when we gave the guidance back in November. And we still expect that segment to come in around 11% for the full year.

U.S. federal margin is a little bit higher in Q1 than our guidance of 11.5%. And then, again, as I said, there were some smaller clinical programs that really overdelivered in the quarter. Just given higher volume coming through that we've we are not currently anticipating that level of volume continuing at such a high level. So that explains what we see there. Then outside the U.S., you know, I'm pleased that it's at 3% to 5% and should be more stable as a result of the shaping we've done.

And should be more stable as a result of the shaping we've done. Great. And one housekeeping question for you, David. The tax rate was a little higher in the quarter and your implied tax rate guidance is a little bit higher as well. What's driving that?

Yes. So the first thing is the impact of the divestiture. So those are nontax deductible. Therefore, the Q1 rate is very high, which we've adjusted out of our adjusted EPS numbers. Even apart from the divestiture-related impact, I said in my commentary that the tax rate in Q3 and Q4 should be in the 25.5% to 26% range, which is just a tad higher than the 25% range we said last quarter. So there's just a small upward impact there with no single driver once you normalize for the divestiture impact.

Great. Thank you very much for taking my questions.

Thank you.

Thank you. And this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.