TEGNA INC Q1 FY2024 Earnings Call

Hello, and welcome to TEGNA First Quarter 2024 Earnings Conference Call. After the speaker's presentation, there will be a question-and-answer session. I would now like to turn the call over to Kirk von Seelen, Vice President and Treasurer. You may begin.

Good morning, and welcome to our first quarter 2024 conference call and webcast. My name is Kirk von Seelen, and I am TEGNA's Treasurer. Today, our President and CEO, Dave Lougee, and our CFO, Julie Heskett, will review TEGNA's first quarter performance and results and provide TEGNA's full year and quarter ahead outlook. After that, we'll open the call for questions. Hopefully, you've had the opportunity to review this morning's press release. If you have not yet seen a copy of the release, it's available at tegna.com. Before we get started, I'd like to remind you that this conference call and webcast includes forward-looking statements, and our actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable GAAP measures in the press release. With that, let me turn the call over to Dave.

Thank you, Kirk, and good morning, everyone. I'll begin with a summary of recent highlights and then turn the call over to Julie to walk you through our financial results in more detail. TEGNA achieved our key guidance metrics in the first quarter. We closed the acquisition of Octillion and began integrating it into Premion, made significant early progress toward our $350 million capital return commitment for 2024, and completed multiple local rights deals for local pro sports teams, including with the Indiana Fever Rookie Phenom Caitlin Clark. Also during the quarter, we returned more than $100 million to shareholders with $82 million in share repurchases and $20 million in dividends. As we announced in this morning's press release, our Board has approved a 10% increase to our regular quarterly dividend. This builds on our track record of dividend increases, including the 20% dividend increase last year, and reflects the confidence we have in the durability of our free cash flow from our business and the strength of our balance sheet. As we shared on our last call, our initiatives to transform our core business operating model are now underway. Today, we're announcing that we expect these initiatives to generate between $90 million to $100 million of the annualized cost savings as we exit 2025, with initial benefits to be realized here in the second quarter with sequential improvements going forward. We'll continue to update investors on our progress as we roll out additional transformational initiatives. Turning to our financial performance, Julie will cover first quarter performance in greater detail, but I'll cover a few highlights. We achieved first quarter key guidance metrics. National advertising has remained challenging as it has across the media landscape, affecting us in both core and Premion. But local advertising continues to improve across our portfolio of products. We're especially seeing that at Premion, our industry-leading OTT sales platform that serves the local marketplace. We further improved Premion's positioning with the acquisition of Octillion. We're now beginning to leverage its technology to improve Premion's local advertiser experience with improved workflow tools and better overall access to the connected TV market. We're already seeing meaningful signs of success. So we're encouraged by first quarter results for Premion, which returned to positive growth following last year's loss of a major national account. We expect continued sequential improvement in Q2 and throughout the year, driven by execution on local. Turning to political advertising, we're feeling very good about the trends as they relate to our footprint. Once again, the presidential race will likely come down to the same 7 states, and that's where the spending will be. Of those 7 states, we cover 6 of them, specifically Pennsylvania, Arizona, Georgia, North Carolina, Michigan, and Wisconsin. In the Senate, there appear to be fewer competitive seats nationwide than in the past. The spending and large spending will be funneled to the seats that are competitive. Here again, our footprint is very strong. Of the 7 seats currently competitive, we have markets covering 5 of them, including the races in Ohio, Georgia, Arizona, Michigan, and Wisconsin. And because we're based here in the Mid-Atlantic, we have a front-row seat to the Maryland Senate race, which we think will be highly competitive for the first time in a very long time, even though it's not classified as that at the moment. With former governor, Larry Hogan, the likely Republican nominee, he's a very popular moderate, and assuming he gets the nomination, Maryland is likely to make a significant and unexpected contribution to our political revenues. Because control of the Senate is up for grabs and only a few seats are competitive, we think these races will likely reach record spending levels for general election Senate races in their respective states. There's fewer governor races in presidential years than during midterms, 11 to be exact, but we do have the only 2 races currently classified as competitive: North Carolina and New Hampshire. So in short, we're in a great position to take a very strong share of linear and CTV OTT political dollars. Lastly, one more important tailwind to highlight for all advertising spending, including political, is the Summer Olympic Games this summer in Paris. With the largest portfolio of NBC stations and in a time zone more conducive to live programming and viewing, we expect enormous levels of engagement. I'd now like to share a little context on some of the recent pro sports deals we've announced. As I shared on our last call, our strong portfolio of stations in big pro sports markets are very well positioned for the shift happening in local sports distribution. Teams are learning and, in so many cases, being reminded of the benefit of being on local broadcast, which brings a huge increase in reach and distribution compared to the Pay TV-only model. We recently announced a deal with the National Hockey League Seattle Kraken, as well as the Seattle Reign of the women's soccer league. We announced an exclusive broadcast distribution deal in the Indianapolis market with the WNBA's Indiana Fever and Rookie Superstar Caitlin Clark. This morning, we announced we've signed additional deals taking Caitlin and the Fever games to 11 additional broadcast markets, including our home state of Iowa in our Cedar Rapids and Quad Cities stations, as well as on stations from Gray, Sinclair, Weigel Broadcasting, and Coastal Television. Notably, the recent NCAA Women's Basketball final featuring Caitlin Clark drew a record-breaking 19 million viewers on ABC stations, including our Des Moines and Quad Cities stations. That audience was larger than the Men's Championship game for the first time ever, and notably, that game aired on cable. Pro sports teams are recognizing the difference. Obviously, the deals we've done to date are with teams who aren't part of the existing Diamond RSN. We're watching closely the bankruptcy court developments with Diamond and are ready to explore additional opportunities that make sense. Before I turn it over to Julie, I'd like to thank and recognize our station colleagues for their tireless dedication to serving our viewers across the country in a very difficult environment for journalists. For example, our stations in Minneapolis, Denver, and Louisville were recently nominated for a prestigious Peabody Award for their work on a nationwide investigation into widespread sexual abuse by private contractors transporting inmates over long distances. Our investigative journalism serves as the watchdog of communities, uncovering corruption, holding power to account, and amplifying the voices of marginalized groups. There are fewer players doing that today, making our role all the more important. I'm so proud of the critical role our stations play. Without them, vital stories would remain untold, injustices unaddressed, and the public trust eroded. With that, let me turn it over to Julie.

Thanks, Dave. Good morning, everyone, and thank you for joining us. To start this morning, I will cover TEGNA's capital allocation execution, then an update on our business transformation initiatives before closing out with a review of our financial results and guidance. As a reminder, in February of this year, TEGNA announced a new comprehensive capital allocation plan, which included our commitment to returning between 40% and 60% of adjusted free cash flow to shareholders over the 2024 and 2025 time frame. I am pleased to report today that we are off to a strong start on that commitment. In the first quarter, we repurchased nearly $82 million of common stock and retired approximately 5.7 million shares. Combined with our regular dividend, our total cash returned to shareholders in the first quarter was $102 million. We are where we want to be to achieve our promise of returning $350 million to shareholders in 2024. During the quarter, TEGNA also took possession of approximately 4 million shares, which occurred upon completion of our previously announced $325 million accelerated share repurchase program that launched in November last year. The settlement of these shares is incremental to the $82 million or 5.7 million shares in the first quarter just mentioned. In addition to our share repurchase activity, our Board just declared a 10% increase in our quarterly dividend to $0.125 per share, building on the 20% increase we announced last year. Our capital return actions through the use of both share repurchases and dividends underscore the durability and sustainability of TEGNA's free cash flow and our commitment to shareholder value creation. While capital return remains an important part of our story, we continue to take actions that position TEGNA for growth as well. To that end, in the first quarter, we closed on Octillion Media and expect to further bolster the growth outlook for our Premion business. The acquisition of Octillion gives us greater control of key technologies Premion uses and better positions us with new go-to-market product development. We continue to execute against our capital allocation framework by returning capital to shareholders, investing in the business, both organically and inorganically, pursuing bolt-on adjacent acquisitions, and preparing for future debt maturities. Our industry-leading balance sheet and strong free cash flow generation is a differentiator that gives us the ability to reward shareholders, grow the business, and maintain our leverage below 3x. Now turning to business transformation initiatives. As Dave mentioned, our previously announced business transformation initiatives are underway and starting to generate savings. These initiatives are expected to be completed over the next 2 years and generate $90 million to $100 million in annualized expense reductions as we exit 2025. This core business transformation will directly target all other operating expenses outside of programming and Premion. We will gain some initial expense benefits from these initiatives in the second quarter of 2024, and expect our run rate growth of all other expenses outside programming and Premion to improve sequentially quarter-to-quarter. These cost reductions are already included in our previously provided 2-year adjusted free cash flow guidance. Consistent with our prior programs, we will track our progress and keep you informed regularly over the coming quarters. Now let's take a look at the drivers of our first quarter 2024 financial performance. My comments today are primarily focused on TEGNA's performance on a consolidated non-GAAP basis to provide you with visibility into the financial drivers of our business trends as well as our operational results. You can find all of our reported data and prior period comparatives in our press release. Total company revenue for the first quarter was down 4% year-over-year, primarily due to lower subscription revenue, partially offset by higher political advertising dollars. First quarter subscription revenue was down 9% year-over-year, primarily due to net subscriber declines and the temporary disruption of service with a distribution partner in January, partly offset by contractual rate increases. Additionally, the year-over-year comparison was affected by a year-end adjustment that benefited our results in the first quarter of 2023 and did not recur in 2024. Underlying subscription revenue trends, absent the one-time impacts, are down mid-single digits. We expect to renew 20% of our traditional subscribers at the end of this year and another 45% in 2025. Moving to Advertising and Marketing Services, AMS revenue was down 3% year-over-year. While national advertising continues to show signs of softness, local advertising trends in the first quarter were resilient and continue to show positive momentum, including strong performance in automotive, services, restaurants, banking and finance, and entertainment advertising categories. Now turning to Premion. Premion continues to gain momentum with local advertisers by selling advertising in a converged linear and streaming television marketplace. The integration of Octillion Media with Premion is underway and will further drive innovation, new products, and streamline media buying processes. For the 2024 election cycle, Premion has expanded its programmatic selling capabilities, enabling advertisers and agencies to leverage a multifaceted programmatic and managed service approach to executing CTV campaigns and driving measurable outcomes. Premion's total revenue has returned to positive growth following last year's loss of that large national account. Premion's revenue was up low single digits year-over-year, driven by strong local revenue, offset by softness in national revenue. The rate of Premion's revenue growth is expected to grow sequentially throughout the year. Turning now to expenses. For the quarter, non-GAAP operating expenses of $568 million were up 1% compared to the first quarter of 2023. Notably, programming expenses were down slightly year-over-year, partially driven by that disruption of service with a distributor. As a reminder, we mentioned last earnings call that we expect the growth of reverse compensation fees to be negligible at best going forward. The majority of our reverse compensation fees are variable and tied to paid subscribers. All other operating expenses for the quarter were up 2% compared to 2023, primarily due to compensation expenses. Adjusted EBITDA was $174 million, and we generated adjusted free cash flow of $113 million for the quarter. We ended the quarter with total debt of $3.1 billion and cash of $431 million. Net leverage ended the quarter at 2.8x. We are in excellent shape to continue with our capital allocation priorities in the second quarter and beyond. Turning to our forward-looking outlook, as we noted in our press release this morning, we are reaffirming all our key full-year 2024 guidance metrics, including 2-year adjusted free cash flow guidance of $900 million to $1.1 billion. As Dave highlighted, the robust political environment and our favorable portfolio, along with the Summer Olympics this year, supports our confidence in our guidance. With the acquisition of Octillion Media, we are updating our guidance range for the amortization expense to be between $51 million and $55 million. Please refer to our press release to see all full-year 2024 guidance elements. In an effort to help forecast our near-term results, I'll provide a quarter-ahead financial guidance metric as follows. We expect second-quarter total company revenue to be down low to mid-single-digit percent year-over-year due to lower subscription and AMS revenue, partially offset by higher political ad dollars. We forecast operating expenses in the second quarter to be flat compared to last year. This is a sequential improvement from the first quarter, and you'll see this improving trend continue in future quarters as a result of transformation cost reduction efforts. With that, as we turn to Q&A, please note Tom Cox, our Senior Vice President of Digital and Chief Growth Officer, is here with Dave and me, as we take your questions.

Can you provide more details on the second quarter guidance? It seems a bit low on the revenue side, especially considering the disruptions are behind us. Subscription revenue appears to have a stronger sequential growth compared to what we typically see. Political advertising in the first quarter was robust, and we expect second quarter performance to exceed that. Can you share any additional insights on core trends or other factors that might be contributing to the year-over-year decline?

Dan, I want to emphasize that we do not have any retransmission deals in the second quarter. We had a deal in the first quarter, so moving forward until we secure new deals, we will be operating based on the current subscriber base. Julie?

Yes. And I would just say, unpacking from an AMS perspective, we continue to see softness, specifically on the national side of our business. So similar to what you saw in the first quarter, that is projected to continue into the second quarter. And from a subscription perspective, you heard us say first quarter aside from those one-time only run rate of subscription revenue is down mid-single digits. And then I would just encourage you to continue to look to Dave's point; there are no deals that are up in the second quarter. So look at that quarterly seasonal trend with prior years and sequential second to first in history.

Political should be better sequentially though, given timing, yes?

Political should be sequentially better than the first quarter slightly.

But not dramatically.

Right. And again, the quarter variances, again, if you go back to 2020, the first quarter was huge. The second quarter was very small. In 2022, the first quarter was small; the second quarter was large. This one appears to be more even, if you will. But what happens with political because of the primary calendars, Dan, it's really about the first half and second half. So the first half is usually always somewhere between 15% and 16% of the total. We believe that will be consistent through 2024, with 85% of the comps in the back half.

Very roughly, yes.

No, everyone is saying it's back half weighted this year. I was just trying to get help in the near term. Dave, can I just ask you one high-level question? You obviously got on the board with some sports deals. I love the Fever deal, obviously. I guess you guys have really done a great job on the cost side of the equation. Can we just talk about tactical investments even beyond Octillion to help reinvigorate the top line and how we should think about kind of your guys' opportunity set to sort of reaccelerate growth and where we should be looking for that?

I appreciate the question, Dan, because I know we can't share any information until it's officially announced. We're exploring various opportunities but need to be cautious for competitive reasons. Since the termination of the merger agreement last year, we have been focusing on both bolt-on and organic investments, similar to our approach with Premion. Our balance sheet and capital return to shareholders indicate that we have resources available for growth investments. We are currently engaged in numerous discussions regarding both organic and inorganic opportunities, and I feel confident about our positioning.

Our next question comes from the line of Steven Cahall with Wells Fargo.

I would love to just maybe ask a little bit more on retrans. So I understand that it's down mid-single digit on an underlying basis. You didn't have a lot of renewals in Q1, not much in Q2. Should we kind of think about down mid-single digit as a decent run rate since I think you typically have an annual retrans cadence that's pretty consistent? And then I know your reverse comp is more variable now. So maybe this still all pencils out to kind of flattish net retrans. Is that a good way to think about it? Or is there anything that I'm missing there? And then just one on the transformation and the cost savings. Are there costs to achieve associated with this? So as we think about the impact on free cash flow for 2024 and 2025, does it weigh on net free cash flow at all in 2024 and then become a benefit in 2025? Or any mix there? Lastly, this is maybe for Dave or for Tom, after Octillion and your new go-to-market strategy, do you see any other opportunities for bolt-on M&A that could benefit Premion?

Let's take those in order. Regarding net retrans, as we have mentioned previously, we expect it to remain stable moving forward. I am not providing guidance in either direction, but with the variable compensation, it should be a notably stable figure going ahead. Did you have another question related to net retrans?

Yes, gross retrans is expected to decline in the mid-single digits. Is there a way to view this positively, or are there factors that could possibly enhance that revenue run rate a bit?

Yes. From a gross top-line perspective, Steven, you're right. It's a function of the mix of revenues. The traditional subscriber declines are accelerating at that higher growth rate, offset by growth of the virtual subscribers at that net rate. So it's a mix. But yes, that mid-single digit run rate, which now first, is consistent until we have deals up, we have an opportunity to reprice another 20% of our subs at the end of 2024.

And Steven, I'm sorry, is your expense question whether we have investments to hit that number? Was that your question?

It's more that with the transformation and cost savings, is there like a cost to achieve? So cash you have to spend upfront to realize the savings, and then you get the run rate savings afterward. So it tends to benefit EBITDA. But just trying to understand as we think about free cash flow, whether it's a bit lumpier and whether that's the benefit to 2024 or not?

We do not have an answer to your question.

We do not anticipate significant upfront cost. They will be savings realized and will be a part of the free cash flow benefits in our guidance.

And Steven, I'm happy to take the question on Octillion and potential further M&A there. So as a starting point, one of the key benefits of the marriage of Octillion and Premion is their technology with our sales force. We believe that there could be further opportunities around M&A in and around the streaming landscape. That being said, as Dave mentioned, we're looking at a variety of opportunities as we look to transform the company into a more dynamic set of assets. And from that perspective, again, we feel very good about where we're positioned to compete and pursue those assets. I can't really take you into the lab on any of those things at this particular moment in time, but certainly, opportunities around streaming would be part and parcel of what we'd consider.

Our next question comes from the line of Craig Huber with Huber Research Partners.

Maybe just a little bit further. Can you just give us a little more detail, if you would, on the Octillion acquisition, what the benefit is specifically on the technology side, etc., that's making you so optimistic about the fit here? That's my first question.

Sure. So I think the Octillion acquisition is both offensive and defensive. It's offensive in the sense that it allows us to bring to market more cutting-edge software products and capabilities that we can use to maximize our local advertising relationships that we already have from our legacy business. It's defensive in that it allows us to access inventory through yet another pathway that we have greater control and flexibility around. So from that vantage point, we believe that Octillion, as Julie mentioned earlier, will allow us to accelerate the growth of Premion and over time, improve the overall margin of the business.

And then my second question, on the net retrans, you touched on that, but I'm curious about the contracts for your affiliate agreements. Are you saying you think the next say 2 to 3 years, do you think those dollars you’ll be paying will be roughly flattish? As opposed to...

We'd only have one affiliate agreement up between now and the end of 2026, and it's our smallest one, Craig. So we have the reverse comp side of the equation is very set for some period of time.

And you're quite comfortable, Dave, that number in total dollars for reverse retrans costs will be relatively stable here in the next 2 to 3 years?

That's right.

Julie, could you provide more insight into the cost outlook for the remainder of the year? Are you indicating that the year-over-year percentage change in costs will continue to improve over time, leading to a positive trend for the rest of the year? Or are you referring to the total dollar amount spent each quarter being better compared to the preceding quarter?

The former, Craig, it's about that percentage growth on a year-over-year basis. Each quarter will improve, not absolute dollars.

Our next question comes from the line of Jim Goss with Barrington Research.

A couple of things. First, you alluded to the notion that Premion and Octillion might provide some opportunity for political ad sales. I was just wondering if you could give us any scale of how important that could be and whether you think it would borrow from your broadcast side?

Sure. One of the key advantages around Premion is that it's not confined to our station footprint the way our core business is. So it allows us to participate in political races outside of our footprint. We've already seen dollars come in from markets outside of the TEGNA footprint. Ultimately, as the political races get tighter and the availability of linear inventory gets tighter, we anticipate that those dollars will cascade over to the streaming ecosystem. There, we're well positioned to pick up those dollars. As you probably saw, we've also expanded our programmatic capabilities leading into this next political cycle, and we believe that will be another tool in our arsenal to compete for those political dollars. Ultimately, I would say they are additive and not cannibalistic to the linear opportunity that TEGNA already has.

One other thing is that a number of the sports programming opportunities you alluded to involve women's sports. I was wondering if you could talk about the dynamics there in terms of perhaps getting increasingly good viewing levels with less expensive rights fees? Is there an opportunity to arbitrage that a little bit?

Yes, that's part of our thinking. For example, Caitlin Clark's audience will significantly exceed the current asset values in the marketplace from a cost perspective. That's an exception. We are pleased to partner with the Seattle Reign, but women's sports currently lack acceptance from advertisers and the market at large. However, we believe that will change.

And maybe one other thing. This is maybe getting a little ahead of things, but do you think there's any potential for regulatory changes such as dual station ownership in top markets should there be a change in administration?

I believe the last comment addresses the question. It truly depends on who is in power. We might have to wait to see how that question evolves until there’s a change in administration. If there isn’t a shift in administration, we also need to consider possible changes in leadership at the FCC. There are several variables at play. However, until we have more clarity on these issues, we don’t have much insight.

Even in the past, when there has been a Republican administration, it doesn't seem like you've made much headway in that particular area. And that seems to be the one potential change that would really be meaningful in terms of maybe rationalizing costs and getting a bigger advantage in big markets.

I believe my experience from working with the National Association of Broadcasters gives me some perspective. Historically, Republican administrations have been more supportive. There was actually an opportunity to potentially raise the ownership cap during the last Republican administration, but for various reasons, the industry decided not to pursue it. However, even without a change in leadership, the logic of the rules becomes clearer over time. Regardless of the administration, I am optimistic about regulatory changes in the future; it's just a matter of timing. The FCC was slow to adjust to changes in the newspaper industry, allowing cross-ownership regulations to be approved a decade later than necessary. Nevertheless, the industry is much better organized now, with strong lobbying efforts from television station managers and companies nationwide. We demonstrate significant value in local markets, which enhances our lobbying power. So, I remain hopeful, but it's hard to predict changes within a two-year timeframe.

Next question comes from the line of David Karnovsky with JPMorgan.

This is Ted on for David. I have two questions. The first is on your latest thoughts on the NBA rights and the potential impact to broadcast to NBC replaces Warner. My second question is on how you're thinking about national and local advertising trends moving through the year, particularly in the back half?

I will comment on the NBA and then turn it over to Julie regarding advertising. We are very optimistic about the NBA moving to NBC. As I mentioned in my Olympic remarks, we have more NBC households than any other broadcast group, and our NBC stations are quite strong. Having that content on our stations is beneficial, although we need to address some details like game placements and time zones. Overall, we're very hopeful. The situation with Turner losing the NBA raises questions for us; it seems like there was excessive concern about broadcasters when the new sports service, affectionately known as Spulu, was announced recently. This situation puts Spulu’s future into question, particularly regarding how they will negotiate rights deals while also being involved with NBA players. From our perspective, the NBA's transition from Turner to NBC is a positive development. Concerning national and local trends throughout the year, we expect local advertising to remain strong, although the national outlook is uncertain. Some aspects of the national impact are unclear. It’s important to note that we have large stations in the top 10 markets, significantly outnumbering our publicly reported peers. In this context, auto advertising is somewhat stable but not exceptionally strong, which slightly impacts us. We also see economic factors affecting certain service categories, particularly as home sales decline, creating a mix of influences. We believe local advertising will continue to perform well, and we have further growth potential with Octillion and Premion, but the national side remains uncertain.

Our next question comes from the line of John Kornreich with JK Media.

Three pretty quick questions. One on the Fever and the Kraken. I assume they are 1-year deals, which is probably good because you can renew for more games next time around. That's one question. Secondly, what goes into the low end of your free cash flow 2-year forecast versus the high end? And finally, Julie, if you assume no more acquisitions this year and you do return $350 million to shareholders your leverage will be down around 2.5x at the end of this year. Is there any purpose to going lower than that going into the future?

I’ll address the Fever Kraken comment briefly, then I'll have Julie discuss the low-end free cash flow and leverage question. To be clear, I can’t provide details as the deals are confidential, and I won’t discuss their duration. However, I wouldn’t assume that all the deals are 1-year agreements.

As far as the sensitivity on the free cash flow guide, I would bucket those into a couple of different things. First, it's a presidential year, and we have seen competitive races that are extremely hot, go flat and vice versa; those that are flat, become hot. We've had runoff seats, and then we've not had runoff seats. Political is definitely one of those factors; it could be better, it could be worse. Second is the cost takeout transformation that you heard us talk about from a timing perspective; just making sure that we execute that appropriately on time would be a second bucket. And third, I would say, is the forecasting of subscriber trends and what we believe that to be. Obviously, we've included those subscriber trends in this forward-looking guide. But again, that could be better or worse, and therefore, the sensitivity for that range is appropriate.

And the leverage question?

We're obviously very comfortable in this cautious environment. We have an industry-leading balance sheet. So remaining under 3x feels appropriate in this environment.

What about going under 2x? Is there any point at all of that?

No.

Thank you, operator. As you can tell, we feel very good about our positioning as we talked about here in the Q&A relative to how we're poised going forward, given our balance sheet, the excellence of our management team, and leveraging once again that operational excellence. It's always been a hallmark of this company to restructure our core operating model and create a new cost structure for our business going forward. We look forward to updating you on all things next quarter. And so thanks for everyone taking the time to join us today. If you have additional questions, please reach out to Julie at 703-873-6747. Thanks, and good day.

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