ReposiTrak, Inc. Q2 FY2023 Earnings Call

Greetings, and welcome to Park City Group's Earnings Call for the Fiscal Second Quarter of 2023. As a reminder, this conference is being recorded.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Park City Group's Fiscal Second Quarter Earnings Conference Call. Hosting the call today are Randy Fields, Park City Group's Chairman and CEO; and John Merrill, Park City Group's CFO. Before we begin, I'd like to remind everyone that this call could contain forward-looking statements about Park City Group within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not subject to historical facts. Such forward-looking statements are based upon current beliefs and expectations. Park City Group's remarks are subject to risks and uncertainties, which actual results may differ materially. Such risks are fully disclosed in the company's filings with the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks. Park City Group does not assume any obligation to update information contained in this conference call. Shortly after the market closed today, the company issued a press release overviewing the financial results that we will discuss on today's call. Investors can visit the Investor Relations section of the company's website at parkcitygroup.com to access this press release. With all that said, I would now like to turn the call over to John Merrill. John, the call is yours.

Thanks, Jeff, and good afternoon, everyone. Our evolution to a SaaS company continues to be evident in the numbers. Our business is now easier than ever before to model, and the results reflect both our ongoing operational and capital allocation strategies. Jumping right into the numbers. Total revenue was up 9%. Recurring revenue increased 10% year-over-year for the December quarter. Total expenses were up 5%. GAAP net income increased 45% to $1.3 million. GAAP net income to common shareholders increased 54% to $1.1 million. Earnings per share increased 62% from $0.04 per share to over $0.06 per share. Year-to-date cash from operations increased 8% to $3.3 million. And we bought back 89,000 common shares at an average share price of $5.05 per share, reduced our bank debt by 83% and have $21.4 million cash in the bank. With the majority of one-time revenue now fully behind us, our comparative results have far less noise than in prior periods. Nonetheless, as I have said before, there will always be a possibility that a customer will demand to buy our services, meaning licenses versus rent, meaning subscription. Fortunately, that likelihood is less now than ever before, given where we are in our SaaS life cycle. Therefore, we expect to continue to deliver year-over-year recurring revenue growth, increased margins, accelerated profitability, and significant cash generation for the balance of fiscal 2023. The growth rate, as expected, is accelerating. Simultaneously, as we've said, our profitability and cash flow is and will continue to grow faster than revenue. Consistent with our strategy, our focus on operating leverage, many times making difficult decisions to drive high-margin incremental revenue while keeping costs in line and driving profitability and cash flow. What do I mean by that? Starting with revenue. We ended the December quarter with an exit rate of annual recurring revenue of $19.1 million, meaning fiscal year-to-date revenue plus signed contracts in hand at December 31, 2022, quarter that are billing monthly multiplied by 6, will generate $19.1 million in recurring revenue for the balance of fiscal year 2023, absent any new contracts or anticipated growth. Keep in mind, this is organic revenue growth, meaning existing suppliers or retailers expanding compliance and supply chain services, adding stores or locations, and adding trading partners from existing business lines. This does not include any revenue contribution from a projected customer or any new initiatives, including traceability due to FSMA 204. Like what we did with MarketPlace, we continue to deemphasize non-core revenue or revenue with high resource commitment and low upside. What do I mean by this? FSMA 204 is the largest opportunity in the company's history, and food is the focus. Therefore, general merchandise retailers, propane suppliers, floral and health and beauty suppliers have the same high-touch requirements as the food retailers and their suppliers. However, these non-food vendors have little, if any, long-term traceability revenue opportunity underneath the new 204 rules. With $300,000 in revenue per annum per employee, almost twice the industry average, we must make difficult decisions short term to free up internal resources to prepare for onboarding thousands of new traceability food suppliers. Expense management. Many of you have heard me say it before, it takes approximately $12 million in cash to run this place. Our annual cash spend excludes non-cash accounting costs, such as depreciation, amortization, bad debt expense, stock compensation expense, and other non-cash accounting costs. As we have said before, going forward on each incremental revenue dollar over and above our fixed cash cost of roughly $12 million per year, our goal is to push $0.80 to $0.85 to the bottom line. With a laser focus on operating leverage, there have been minimal increases in SG&A expense as a result of ongoing spending or our investment in the ReposiTrak Traceability Network, or RTN, is precisely our strategy. We accomplished this by automating as much as we can and utilizing our own proprietary tools. This drives exceptional productivity across our entire business. Despite tight controls on spending, growing recurring revenue, we were able to take excellent care of our customers without adding significant headcount or other overhead costs. While the need for profitability is our goal, it will never jeopardize flawless execution and superb customer service. Our customers are priority one. However, it looks like we are in a favorable position to provide both. As a result, profit and cash will grow faster than revenue. You can see this during the second quarter, a 9% increase in total revenue for the December quarter translated to a 45% increase in GAAP earnings and $1.5 million in cash from operations. To summarize, we are structurally profitable, easy to model with more than 5 consecutive years of GAAP profitability through strong cycles and weak cycles as well as a global pandemic. Our strategy remains very simple: grow recurring revenue, control costs, increase net income, accelerate EPS, buy back shares and drive cash. Turning to the quarterly numbers. Fiscal year 2023 second quarter revenue was $4.8 million, up 9% from $4.4 million in the same quarter last year. Recurring revenue as a percentage of total revenue was 99.8% for the quarter. Recurring revenue in the quarter grew 10% over the same period of fiscal 2022. As I mentioned, we continue to streamline our revenue, eliminating smaller non-core revenue streams that mostly sit outside the food industry and have limited growth potential. This frees up resources prepared for meeting the FDA's food traceability standards, but it also serves as a modest headwind for revenue growth. To date, we have overcome $700,000 in what I call high touch, low opportunity revenue, while still increasing both total revenue and recurring revenue for the period. Total operating expenses increased 5% from $3.4 million in Q2 2022 to $3.6 million in Q2 2023. Sequentially, operating expenses were essentially flat. Sales and marketing expenses were up approximately 6% and G&A was up approximately 4%, reflecting investments in RTN, a tight labor market, its impact on salaries, inflation pressures on software service costs, and recruitment fees and benefits. For the second fiscal quarter of 2023, GAAP net income was $1.27 million or 27% of revenue versus $872,000 or 20% of revenue. Net margins above 20% are now the norm. Net income to common shareholders was $1.12 million or $0.06 per common share based on 18.6 million weighted average shares versus $725,000 or $0.04 per common share based on 19.7 million weighted average shares. As of December 31, 2022, 18.4 million shares of the company's common stock were outstanding. You'll note we have reduced our capitalization by over 9% through the repurchase and retirement of shares since our stock buyback plan began. Turning to the fiscal year-to-date numbers. For the six months ended December 31, 2022, total revenue increased 6% to $9.5 million from $9 million in the same period of fiscal 2022. Recurring revenue for the same period grew 8% from $8.7 million to $9.4 million. Our revenue growth includes the streamlining of over $350,000 in high-touch, low opportunity revenue, which I mentioned earlier. Total operating expenses increased 4%, largely due to our investment in the RTN network. Income from operations increased from $2.1 million to $2.4 million, an increase of 13% when compared with the same period of fiscal 2022. While total revenue grew 6% in the first six months of fiscal 2023, gross margin was 82% and net income grew from $1.8 million to over $2.5 million, an increase of 40%. EPS grew 56% from $0.08 per common share to $0.12 per common share. Turning now to cash flow and cash balances. Total cash at December 31, 2022, was $21.4 million compared to $21.5 million at June 30, 2022. The $21.4 million is inclusive of the paydown of $2.1 million on a revolving line of credit during the quarter. The company carried approximately $448,000 on its revolving line of credit as of December 31, 2022, compared to $2.6 million on June 30, 2022. Subsequent to the end of the quarter, we fully paid off this line of credit. Therefore, as of today, we have zero bank debt. Let me say that again, zero bank debt. Giving rising interest rates, it only made sense to pay off and reduce our debt. Fiscal year-to-date, we generated cash from operations of $3.3 million compared to $3 million last year, an increase of 8%. In the second quarter, we repurchased 88,741 shares at an average price of $5.05 for a total of $449,000. The company has approximately $10.2 million remaining on the $21 million total buyback authorization since inception. Since inception of the buyback program, the company has repurchased a total of $10.7 million worth of stock, retiring 1.82 million shares, hence reducing capitalization by approximately 9% since 2019. In my view, our business has come a long way in a very short time. We have much more to achieve by our focus on operating leverage and implementing our capital allocation strategy is the right decision. Now more than ever before, our business is easy to model. We have growing recurring revenue, no meaningful customer concentration, very little churn, 80-plus percent gross margins, and double-digit EPS growth. We have a fortress balance sheet, including $21 million in cash, a little debt and a shrinking capitalization. It doesn't matter what John thinks or believes, the proof is in the numbers. As I communicated on our last call, the Board has added an additional lever to our capital allocation strategy in the form of a $0.06 annual dividend, $0.015 paid quarterly. We paid our first dividend in the second fiscal quarter. Subsequent quarterly dividends will be paid within 45 days at the quarter's end of December 31, March 31, June 30 and September 30. As we have said previously, our goal is to take half the annual cash generated from operations and return it to shareholders in the form of a dividend or buying back additional shares, hence increasing EPS for all shareholders. The other half goes in the bank or is used to fund initiatives like traceability. From time to time, the Board will evaluate its capital allocation strategy and may adjust the different levels, including the dividend, buybacks, considering M&A opportunities, paying down debt, and retiring the preferred shares based on whichever lever is more favorable to shareholders at that time. Therefore, it is our ongoing goal to allocate a meaningful portion of our free cash flow to returning capital to shareholders and other levers I have outlined previously in our capital allocation plan. That's all I have today. Thanks, everyone, for your time. At this point, I will pass the call over to Randy. Randy?

As John mentioned, the benefits of our transition to a SaaS company are now evident in the form of significant operating leverage and cash generation. We delivered top line growth, solid in our view, with recurring revenue growth exceeding 10% and consolidated revenue growth of 9%, even as we deemphasize non-core and our transactional revenue. More importantly, our bottom line improvement significantly exceeded our revenue growth, and our EPS grew even faster yet, exactly our plan. Park City's inherent earnings power is now obvious, sustainable, and easy to model. Our accelerated growth rate comes amidst a global economic headwind, I think it's fair to say. And our customers are not immune to these challenges. Recessionary concerns are causing everyone to question discretionary or even necessary expenditures. So far, this has had only a minor effect on us. Importantly, the uptick in our growth rate also does not include any contribution from the traceability, but does include some of the impact of our sunsetting selective engagement through the opportunity is limited. The cost of traceability are in our numbers, but not the revenue. As we've said before, we're strategically deemphasizing non-core revenue, meaning smaller, higher-touch engagements, where the ultimate revenue opportunity is limited or where the margin profile is lower than our food focus. We make these decisions to free up internal resources to prepare for the traceability initiative. And as I've been saying, that opportunity is coming fast. In fact, it's coming certainly faster than we expected. We have previously said that we expected litigation to slow the rollout, extending the FDA's target timeline in giving the industry time to react. In many ways, we actually believe this would be helpful. Why? Because contrary to our original belief, interest in adoption from the top down is moving faster than we did expect. In my view, the industry is woefully unprepared for this new requirement. A tempered adoption would allow us to execute flawlessly, which is our style, and we've always done that, versus a fast win, which, frankly, is not in anybody's interest. Awareness about the regulation, the timeline, and the enormous impact of traceability on everyone's business is surprisingly low. Perhaps it was the pandemic. Perhaps it was the economy, but many customers are simply not aware of how disruptive this traceability initiative is going to be for their businesses. In fact, a great deal of our early efforts involves actually educating customers about it. We're opening eyes. It's challenging. You have to think during the headlights. Keep in mind, Rule 204 has been in the works, however, for more than a decade. Many suppliers, in fact, believe their labeling systems or other, what we would call technical approaches, mean that they're already compliant. They're only compliant internally. Once they ship their products to the customers, any system and its associated compliance with Rule 204 breaks down. Labeling, barcodes, blockchains, and the like, don't actually contain all the information needed to comply with the new regulation and certainly, don't satisfy the needs of the retailer or wholesaler customers to be compliant. What may, in fact, work for an individual business in isolation doesn't work necessarily for the customers of that business. In fact, for traceability to work at all, the entire supply chain around an item needs to be connected and not just move products around, but more importantly, move data and information around. One participant in the chain having the correct information doesn't do it. What do I mean by that? Well, a retailer bringing in millions of cases of SKUs from hundreds of suppliers can't have dozens of different labeling protocols, different labeling designs and modify their system to work with each of those suppliers. We estimate that a medium-sized wholesaler and his thousands of customers will need to correctly create about 50 million records each and every year. That's hard enough. And without us, it's costly. But suppose that he and his supply chain have, I don't know, a 2% error rate. And a 2% error rate would be abnormally low. We're talking about them literally hundreds of thousands of errors and issues that have to be corrected. That requires humans and the inherent payroll that goes along with them. No retailer, large wholesaler, anyone in that chain is thinking about this particular problem. And no one either wants to or frankly could hire dozens or hundreds of employees to chase down this machine or inaccurate data. The industry will insist on extreme end-to-end automation. We already provide that, and that includes our ability to do the error correction. Just like with our compliance solution, this will be a mandated use model, where a large retailer or wholesaler requires that their suppliers comply. We've already signed a few wholesalers, retailers and suppliers. And recently, we signed a large Tier 1 wholesaler and retailer for both compliance management and later for traceability. Typically, each retailer or wholesaler will have a few hundred affected suppliers that need to be on our network to cover their 204 products. In short, I think you'd have to say that we feel very, very good about where we are. This onboarding process of many thousands of suppliers is going to take time, certainly several years. This is very similar to the ramp we saw with compliance 5 or 6 years ago, only it's much larger, more complex, and it's operating in a more complex and compressed timeline. The government has after all set an end date, and that will be a challenge. This is why we're freeing up and dedicating resources to longer-term opportunities and traceability. Our customers, the large retailer or wholesaler, needs us to automate just as much as we do. We still expect that the onboarding ramp will be slow at first, let's say, through 2023 calendar, accelerating in 2024 and exploding by 2025. Our technical approach is right above all of the individual solutions and make the data readable to any recipient without the end user having to do, change, or implement any other system. Think of it as, I don't know, a universal translator. It's unique, and it's key. We offer a no touch, no labor low-cost solution that enables the required exchange of data. So you have to think about, therefore, how well positioned we think we are with already the largest connected network of food companies on planet Earth. With respect to revenue, ultimately, traceability will generate significant recurring revenue and our typical margins. There's a bit of a delay to allow for setup to the start of revenue with traceability naturally, but we're seeing a growing number of trials going with our ReposiTrak Traceability Network, or RTN, as we speak. Importantly, our compliance business becomes a great catalyst to traceability. As of today, we have nearly 10,000 facilities that could use the RTN. While our focus will be on the grocery industry, importantly, please do remember that Rule 204 impacts convenience stores, restaurants and others, too. There's more than 1 million businesses, maybe as many as 1.5 million that will be affected by Rule 204. Let me say that again, more than 1 million businesses affected, including restaurants, grocery stores, food service, convenience stores, etc. So here we are. We're continuing to grow recurring revenue and manage our expenses. Recurring revenue more than covers our cash cost by millions of dollars, enabling what we consider to be a structural growing cash generation machine. Our ongoing share repurchase program shrinks our capitalization and obviously accelerates our earnings per share. As you've seen, we built a consistent cash generation business with more than 5 consecutive years of real GAAP, yes, GAAP profitability. Operational efficiency is central to how we think and everything we do. We generate nearly $300,000 a year of revenue per employee. That's more than double our typical peers. And even as we prepare to onboard thousands of traceability customers, we actually expect to do that without significantly increasing our headcount. The impact of that is our revenue per employee will get much larger, widening the profitability and efficiency gap that we have to other SaaS providers. We think the comparison is going to continue to look really, really good. We maintain and we'll continue to build a fortress balance sheet, with more than $21 million of cash and a current ratio of 6.4:1. Our business is efficient, easy to model, and we're positioned to scale. So going forward, our ongoing strategy will be to: First, continue to take great care of our customers. A major component of our position in the traceability initiative is that many of our existing customers, happy customers, will need our traceability to help. We will not jeopardize that for any reason. It's based on trust. This consumer focus, remember, is our bedrock principle, stands above everything. Second, we still maintain our goal of growing recurring revenue at the pace of 10% to 20% a year over the long run. By the way, our CAGR and top line revenue growth has been 10% over the last 5 years. Traceability will push that number a bit higher over the next few years. But in the long run, we're going to stay with that as a goal. Third, we're going to continue to drive our internal productivity with continued development of our internal tools so that 80% to 85% of our incremental revenue becomes real cash earnings. And fourth, finally, we will continue to shrink the number of shares outstanding, pay down debt, and return capital to shareholders by both buying back shares and paying a cash dividend. The result, therefore, should be faster revenue growth, even faster net income growth and faster yet earnings per share growth. We have a lot of work to go, a lot of things to do, but I'm proud of our position today and what we achieved so far. Much more to come. So with that, I'd like to open the call for questions. Operator?

Our first question is from Tom Forte with D.A. Davidson.

Great. So first off, Randy and John, great quarter. I have three questions. I'll go one at a time. I know you discussed it at great length, but I suspect the contribution margin of even the, call it, non-food customers is really good, given your just margin structure in general. So can you help me understand why it's an or instead of an and from a customer standpoint?

Okay. I apologize, I thought you usually addressed all three questions at once, which makes me forgetful. Thank you for handling them one at a time. There is a reality in our business: the more we focus on our customers and understand their potential for growth, the better it is for the company. It's true that some parts of our business, while currently profitable, do not show enough growth from our perspective. We see it as a rowboat, albeit a poor metaphor, where we have too many passengers to adequately support everyone as we would prefer. When we have customers who pay us around $100 to $150 a month for our services, and they show no growth potential, the resources required to manage them, including human resources, focus, and management structure, indicate that we would be better off replacing that customer with one who could spend $500, $700, or even up to $1,000 a month. Our goal is to ethically establish a customer base that not only has strong current opportunities but also significant future potential. We believe that traceability represents a fundamental transformation of the supply chain, a change unprecedentedly driven by an entity, specifically the government. When we discuss this educational aspect with prospects and customers, they often appear confused and unprepared. We recognize that the industry needs to prepare for substantial changes across all areas of the supply chain. Today, regarding food-related activities, the supply chain must adhere to a principle called One Forward, One Back, which emphasizes the need to be aware of both the source of your product and the destination. It is crucial to have this knowledge. For instance, if you are a supplier providing produce to a wholesaler, in the current landscape, if an issue arises, the retailer can contact you to inquire about the origin of the product, as they are tracing it back. Therefore, having a comprehensive understanding of your operations is essential. With the new standards of traceability, you are required to share this information alongside the product, not just on the packaging but concurrently with the shipment. So you have to be able to communicate with your customers, all of whom have different systems. And we're going to look at your labeling or whatever system you use to communicate this information. They're not going to be able to read it. So you're in a fundamentally different world, where you have to figure out how do I communicate with every single one of my customers. Your customers, in turn, have to create a record-keeping system, which we do for them that identifies that information that they were passed and makes it readable to the FDA when the FDA says, 'I want a sortable spreadsheet.' It may sound to a technical person as if it's trivial, it's unimaginably difficult. Today, for example, a distribution center can receive a pallet or a truckload of product and check it in, in minutes. Just take the pallets off the truck, drop them on the DC floor, and go stack them. Well, now there's a problem. Many of the cases that come in have around 15,000 or 20,000 SKUs covered by Rule 204. You would need to check each and every pallet and potentially break down each one to determine which cases on which pallets have products covered by Rule 204. For instance, if you received a pallet of produce with a layer of onions in cartons and a layer of tomatoes, you would need to access the identification codes specifically on the tomatoes, not the onions, since the onions are not covered. The logistical challenges of the supply chain are fundamentally different. We are prepared to handle it in a manner that is fairly non-invasive and non-intrusive. I'm genuinely excited about this. I believe we are uniquely positioned to help transform the industry from its current state to a much safer one over time. But to do that, we need intense focus, absolutely intense focus. If you keep customers that don't have that same future with you, you're diluting the focus and knowledge base of the business. We like to keep management lean. We want the entire business to be focused on our revenue per employee. And when you follow that kind of a mantra, you end up having customers that are not a good long-term fit. I'm sorry, that was super long-winded. You've probably forgotten your two other questions.

No, if I haven't, because I'm turning the second one on its head. All right. So based on your comments, John and Randy, it sounds like you're confident you have the headcount and cost structure to support greater than 20% revenue growth. So given everything you just said, Randy, help me understand why you're confident that you can support greater than 20% revenue growth?

In the long run, which I believe means more than just a few years, we are still confident that our growth will fall in the 10% to 20% range. As I previously mentioned, our recurring revenue has grown at a 10% CAGR over the last five years, suggesting we will exceed that in the future. I think we have a few years ahead where growth will likely exceed 20%. To explain, if we have 10,000 suppliers or facilities in our current network that are likely to be impacted by Rule 204, that amounts to about $25 million a year in revenue from our existing customers. This situation needs to be addressed by January 2026. All these customers, along with others who aren't our clients yet, will likely engage in some form of traceability. Why shouldn't we be the ones to lead in this area? When we consider the market share we believe we can capture, especially given that these are current customers and we have the lowest cost to implement these solutions, the opportunity seems great. Over the next few years, I expect our growth rate could exceed the 10% to 20% range, especially as we scale. While this will push our growth beyond the upper limit for a few years, I don't anticipate it will sustain that level for 10 or 20 years as it eventually transitions into larger figures. We do have the personnel necessary for this task. It does require some reduction of our non-go-forward customers and non-core activities. However, this allows us to focus our most experienced team on the issue, which is essential for an operational business. Additionally, we will be hiring more staff, though it's unclear how many we will need until we complete several implementations in the coming year, specifically hubs that support multiple spokes. We need to determine the resources necessary for these implementations. Our plan is to consistently add a few employees each year; it won’t be in large numbers but rather a few each year. I believe this will mainly be on the implementation and sales sides of our business, rather than other areas. I hope that answers your question well.

Given your strong balance sheet and solid free cash flow, can you share your current perspectives on mergers and acquisitions?

John, do you want to comment on M&A since you and I talk about it a lot...

We are primarily focused on traceability. Although we occasionally receive proposals related to compliance and supply chain, our current priority is on traceability. We have a solid banking relationship, lines of credit, and available cash. We're also actively buying back our shares, which gives us equity should an opportunity arise. At this time, if we're discontinuing any products that are causing distractions, it's unlikely we will pursue acquisitions unless they are particularly compelling. However, we remain open to negotiations and will not dismiss any opportunities, especially considering the valuations we've seen over the years, which have been around 14 to 15 times earnings. For now, our main focus is traceability, but we have various resources we can tap into if a suitable opportunity presents itself. I was a bit briefer than Randy.

Yes, a lot shorter. The last question is usually clear to me, but I'm asking because it's not. It isn't clear how the current environment is negatively impacting your sales. For example, you've mentioned in the past how you have a distracted customer and similar issues. I understand that the macroeconomic environment is still somewhat challenging, with a fair amount of inflation. Can you explain in simple terms how your sales and profits are currently being negatively impacted by the current environment? Maybe the answer is that there is no impact at all.

It's not significantly impacting us at the moment, but we do notice that discussions around recession and food inflation are making people in the industry cautious about their customers. This caution leads to a slowdown in decision-making, which is a prudent approach. There is a looming deadline regarding traceability set for January 2026, and we hope it gets pushed back, as we don't believe the industry is fully prepared for it. As that deadline approaches, the market participants in the global food supply chain will start to feel urgency, potentially leading to a chaotic rush. A notable attorney in the food sector recently remarked that there's barely enough time for people to panic about FSMA Rule 204, as many are still unaware of the implications. He indicated that the smaller chains will struggle, and even the larger ones may find it challenging to comply in time. Therefore, we foresee a slower sign-up rate this year, but we believe the pace will accelerate next year, and by 2025, there will be a significant surge as awareness grows. Currently, the main concern is the recession.

So Randy, maybe any other questions?

I was going to say I can give you the operator to say closing remarks.

Okay. There are no further questions at this time. I would like to turn the floor back over to Randy for closing comments.

Great. Thank you, operator. Thank you, John. Everybody, we appreciate you. Hopefully, you got your questions answered. We're obviously very comfortable where we are, but there is an enormous amount of opportunity in front of us. So we're climbing it, and we are geared, ready, and this will be a pretty exciting adventure. So fasten your seatbelts. Thanks a lot. Talk to you all soon.

Thank you. Bye-bye.

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