Earnings Call: Q1 2016

Jun 9, 2015

Earnings release

Good day, and welcome to the Oxford Industries Incorporated First Quarter 2015 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Anne Shoemaker. Please go ahead, ma'am. Thank you, Blake, and good afternoon, everyone. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q and A session may constitute forward looking statements within the meaning of the federal securities laws. Forward looking statements are not guarantees and actual results may differ materially from those expressed or implied in the forward looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our fiscal 2014 Form 10 ks. We undertake no duty to update any forward looking statements. During this call, we will be discussing certain non GAAP financial measures. You can find a reconciliation of GAAP financial measures to certain non GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com. Please note that all financial results and outlook information discussed on this call, unless otherwise noted, are from continuing operations and all earnings per share amounts are on a diluted basis. As a reminder, in March, we announced that we are pursuing a sale of the Ben Sherman business. Therefore, the results from the Ben Sherman Business are now reflected as discontinued operations for all periods presented. And now, I'd like to introduce today's call participants. With me today are Tom Chubb, CEO and President Scott Grassmeyer, CFO Terry Pillow, CEO of Tommy Bahama and Doug Wood, President of Tommy Bahama. Thank you for your attention. And now I'd like to turn the call over to Tom Chubb. Good afternoon, and thank you for joining us. I am very pleased with our Q1 results, which exceeded the prior year and our forecast for the quarter. On the heels of what is a very good start to the year, we have increased our 2015 earnings guidance. This performance and our confidence in the future flows directly from our strategy of owning and growing strong lifestyle brands that make an emotional connection to our consumers. As Terry will discuss in more detail, Tommy Bahama had a solid Q1. The brand's relaxed island lifestyle continues to resonate well with consumers. Our 9% top line growth was fueled by an 8% comp increase as well as solid performances by stores opened during 2014. This included our retail restaurant in Jupiter, Florida, which beautifully reinforces the brand's image and has clearly struck a chord with the consumer. The passion, enthusiasm and emotion exhibited from Lilly lovers this spring was clear. We had an incredibly strong spring offering in our stores and online. In addition, our collaboration with Target and the capsule collection it featured wildly exceeded expectations and was a great way to generate a lot of consumer awareness and excitement across the whole country. So put it all together and in the quarter, we saw an extraordinary 20% comp increase while expanding both gross margin and operating margin. We believe Target's extensive national media campaign, elevated imagery, social media innovations and spot on product went a long way in reinforcing Lilly Pulitzer as the resort chic brand. We will be following up with additional marketing initiatives to drive home Lilly's resort chic positioning, including a fashion presentation of the 2015, 'sixteen resort line in New York, a seaplane wrapped in lily print, junketing fashion influencers and editors between New York and Nantucket, gift with purchase events emphasizing resort travel and a non comp mailer to support an extended summer selling season. Basically, the message is, if you are going somewhere fun and beautiful like Palm Beach, Palm Desert, Cape Cod, St. Mart's or wherever your sunny place is, you want Lilly in your suitcase. We frequently point out that one of the key concepts of delivering a truly omni channel experience to the consumer for any brand is viewing the consumer as the ultimate point of sale. We then make the brand and the product accessible whenever and wherever the consumer wants it. For Lilly, e commerce makes up 28% of net sales, a very significant online business. Lilly took another big step forward last week with the launch of its mobile app, which gives our customers a fantastic way to shop, share and learn more about Lilly. This app also contains exclusive content about Lilly's authentic brand heritage, makes it easy to share looks with friends and peruse products specifically by print. This app is one more step in the positioning of our customer as the point of sale. I'll turn the call over to Harry Pillow to discuss Tommy Bahama's solid first quarter results and their plans for the Q2. Terry? Thanks, Tom. We were pleased with our Q1 results and saw year over year growth on both the top and bottom line. Tommy Bahama products resonated with customers across the country. Our biggest product category is NIMS woven shirts and for the quarter, this was also our strongest category in both our retail stores and on e commerce. We also saw solid growth in our women's swim business in all channels of distribution. In addition to a solid 8% comp increase in the quarter, we also saw strong performances in our non comp stores. As Tom mentioned, our Jupiter, Florida retail restaurant location, which we opened in November, has come out of the gate very strong and is exceeding our plans. While we have historically been very strong in Southwest Florida with our locations like Naples and Sarasota, Jupiter gives us our first retail restaurant location on the East Coast of Florida. As you may be aware, Jupiter is a very affluent community in Palm Beach County and is a popular second home destination for people from the Northeast and other parts of the country. As always, a strong Father's Day is key to our Q2 results. This year, Father's Day is not until June 21, so we still have a lot of important selling days ahead of us. Tommy Bahama is the go to brand for Father's Day and we are excited about our plans around this very important holiday for our business. We have got a strong marketing campaign with a fantastic gift guide included in our summer mailer. The next week and a half are exciting and important days for us and we look forward to updating you with our 2Q results in September. I'll now turn the call over to Scott Grassner to discuss our consolidated highlights and plans for the rest of the year. Scott? Thanks, Terry. I'd like to walk you through a selection of highlights from our consolidated results for the Q1 of fiscal 2015. Please refer to our press release issued earlier today for the complete results for the Q1. As Tom mentioned, Lilly Pulitzer had a remarkable Q1, which coupled with a solid performance at Tommy Bahama drove our results with consolidated sales increasing 7%. Our adjusted gross margin expanded 124 basis points, primarily due to a shift in sales mix. Lilly Pulitzer's gross margin expanded over 200 basis points in the quarter, reflecting a greater proportion of sales coming from their direct to consumer businesses. We saw SG and A grow at a pace slightly higher than our sales growth percentage as we incurred the cost of operating additional Tommy and Lily stores and as we continue to make important investments in the infrastructure of these two brands. Royalty and other income increased $500,000 in the quarter with strong contributions from Tommy Bahama, furniture, fragrance licensees as well as the seasonal beach products. Our consolidated operating margin as adjusted in the Q1 was 13.7% compared to 13.8% in the prior year period. For the Q1 of fiscal 2015, interest expense declined to $800,000 from $1,000,000 last year. Our effective tax rate in the quarter also declined to 38.6% from 40% in the same period of the prior year, reflecting higher domestic earnings and lower international losses. Adjusted EPS rose 9% to 1 $0.30 ahead of our previously issued guidance. GAAP EPS increased 11% to $1.29 Now to the balance sheet. We ended the Q1 with inventory at $114,000,000 compared to 106,000,000 at the end of the Q1 of fiscal 2014. We believe our inventory is at an appropriate level to support anticipated sales growth. Our capital structure is well positioned to support growth. As of May 2, 2015, we had $131,000,000 of borrowings outstanding and $99,000,000 of unused availability under our U. S. Revolving credit facility and a weighted average borrowing rate of 1.8%. Our capital expenditures for the Q1 of fiscal 2015 were $12,000,000 and we expect CapEx for the year to be approximately $70,000,000 In addition to our typical investments in retail stores and IT, I'd like to remind you of 3 significant investments we'll be making this year. Tommy Bahama will move into new leased office space in Seattle and will open a retail restaurant location in Waukeke and Willie Pulitzer will require additional distribution space. Note that of the $70,000,000 we'll record as capital expenditures, approximately $13,000,000 will be funded by landlords through tenant improvement allowances. And looking forward, with our strong start to the year, we're pleased to raise our full year guidance. For fiscal 2015, we now expect net sales of $970,000,000 to 985,000,000 dollars Adjusted earnings per share is expected to be between $3.50 $3.65 and GAAP earnings per share are expected to be in a range of $3.41 to $3.56 On a comparable basis, fiscal 2014 net sales were $920,000,000 Adjusted EPS was $3.46 and GAAP EPS was $3.27 For the Q2, which ends on August 1, we anticipate net sales in a range from $245,000,000 to 255,000,000 dollars compared to net sales of $228,000,000 in the Q2 of 2014. Adjusted earnings per share is expected to be in a range of $1.15 to $1.25 and GAAP earnings per share in the range of $1.13 to $1.23 This compares with 2nd quarter fiscal 2014 adjusted EPS of $1.07 and GAAP EPS by 1.05 dollars The exceptionally strong momentum in our Lilly Pulitzer business is the primary driver behind our expected year over year increase in the Q2. We expect our Q3 to continue to be the smallest quarter of the year, reflecting the seasonality of the Tommy Bahama and Lilly Pulitzer businesses. This along with a meaningful fixed expense structure of the business leads to significant lower results compared to other quarters. In fiscal 2015, the Q3 will also bear the brunt of costs associated with the relocation of the new lease space for Tommy Bahama as well as the Waha Quay retail restaurant location. As a result, we expect to report a modest loss in the Q3. Our 4th quarter is planned to be strong with year over year increases in both top and bottom lines. Thank you for your attention this afternoon. Blake, we're now ready for questions. Thank you, sir. And we'll take our first question from Ed Yruma at KeyBanc Capital Markets. Please go ahead. Hi, good afternoon and congratulations on a very strong quarter. Thanks, Ed. I guess first on Lilly, obviously extraordinary performance there, particularly in light of the very difficult compare. I was wondering if you could talk a little bit about the performance at Lilly kind of before the target promotion and after, and kind of if you've seen that kind of consistency flow through after quarter end? Yes. We'll talk about that, Ed. We started out the quarter a little bit soft. February was not the strongest month of the quarter. As we moved into March, particularly the second half of March, business really started to pick up and then has really been quite strong since that. I think some of that has to do with the Target collaboration that was on April 19 and all the buzz and media attention that we got out of that. But frankly, a lot of it, I think, has to do with the strength of the product that we have had on the floor and do have on the floor now, as well as the strength and the clarity of the other marketing messages that we're sending out. So no doubt the Target collaboration helped, but I think we would have had a good strong quarter even in the absence of that. And again, to your point against what was a tough compare because we had a very strong Q1 last year as well. Great. And some other quick housekeeping questions. I guess, any update on Ben Sherman? The tax rate, I know I think changed a little bit. I think you were looking for 39% before you're now looking for 38%. Is this kind of the tax rate we should look for going forward? And then finally, I think the spread between the comp and sales growth at Tommy was the narrowest it's been in some time. Is there anything that drove that? Thank you. Well, I'm going to start with the Ben Sherman situation and tell you the same thing that we've been saying. We launched the process on March 26, really with our announcement, but at the time we announced, we were literally ready to go. So we've been running the process quite hard since then. We're very pleased with the level of interest that we've had in the Ben Sherman business and brand and the number and the quality of the potential buyers that we've had and we're pleased with the progress that we're making and we'll continue to keep you updated on it. With regard to the Tommy, the spread between the comp and the overall growth rate, I think it's fundamentally a matter of arithmetic in the fact that the wholesale business is basically flat at this point. And so the growth in the business is coming from that portion of the business that's comp retail plus the non comp retail. And it's really just arithmetic. And on the tax rate, I'll let Scott comment on that as well as elaborate on the Tommy growth rates, if he wants to. Yes, the tax rate, 38.6 percent for the quarter, that's pretty indicative of what we expect for the year. So a bit lower than last year as we there's the domestic earnings increase and the international losses decrease. Did we get all your questions there, Ed? We did. Okay, great. Thanks very much, guys. Okay. Thanks a lot. Thank you. And we'll go next to Rick Patel with Stephens Incorporated. Good afternoon, everyone, and I'll add my congrats on a terrific quarter. Thanks, Rick. Can you talk about the performance of Lilly on the West Coast and other markets where you don't have physical store locations? Did you see a meaningful uptick in business over there? And just in terms of the success that you had at launching at Target, can you talk about what it means for Lilly from a wholesale perspective? To what extent did the Target initiative excite your other wholesale accounts? And have you seen an uptick in that business since the Target initiative ended? Yes. Well, the short answer is this spring, we've sort of seen an uptick in all of our business, so all parts of the country. So while we have seen stronger business in some of the areas where we don't have a physical presence, we've also seen uplift in the areas where we do have a physical presence. And we have clearly bought some new customers into the brand, but we've also reengaged old customers who maybe hadn't seen us in a while and excited existing customers and compelled them to come back for additional visits and additional purchases. So it's really been positive all the way around. And then just to keep the target collaboration in perspective, while it was a huge event and it was wildly successful, we do think it's only one piece of the puzzle. We think we also have we've got beautiful distribution with our own stores, our e commerce and our great wholesale partners. We've got fantastic product. I think the product that we've had out there recently and have now is as strong as I ever remember seeing it. And then we think our marketing messages have been very strong and very clear as well sort of driving home that resort seat message. So you add all that together and it creates a lot of strength in the business, not just in our own channels of distribution, but our wholesale customers are having a good year as well. Great. And then can you also provide some details on the outlook for expenses just for modeling purposes? Perhaps talk about how much of the headquarter move and the new restaurant will add to expenses for the year? And within that context, how much of those expenses will hit the Q3 versus the other one? Okay. I'm going to let Mr. Grassmayer field that one. We're expecting roughly $2,200,000 for the Waukeke preopening cost. And for the Seattle office move, the occupancy expense, so we're expecting to be about $2,600,000 higher year over year. So together, about $4,800,000 Third quarter is going to get about 2.9 of that's going to be in the 3rd quarter. So 3rd quarter is taking a big piece of it. 3rd quarter is when Waukesha actually they're actually hiring the staff and doing all the pre opening training happens in that quarter in addition to the rent going through for the whole quarter. And the time of Hama lease, they're going to have a period where they'll have a double rent from both the old location, new location plus they're going to have the physical moving costs. So Q3 gets it heavily from both of those. Great. And just one more if I may. On Tommy Bahama Women's, how did that perform during the quarter? And perhaps update us on that opportunity? Well, Rick, we continue to believe that Tommy Bahama's women's is a great long term growth vehicle for the company. And there's a lot of effort and resources that are going in to trying to capitalize on that. We've succeeded in growing that business significantly over the last 5 years where it's gone from being, I think, about 16% or 17% of the total Tommy Bahama business to 25% or 26%. So it's grown significantly in proportion to the total at a time when men's was growing too. And bottom line, it's grown about twice as fast as the men's business has. So we continue to be excited about that. And I'll maybe let Terry chime in with some of the things we've done on the team to try to build that effort over the longer term as well. Rick, we still consider women's business one of the biggest opportunities we have in the brand. We just successfully we've just hired a new head of design and got that transition in place. We've moved the sportswear business into Seattle, where we can get synergies, so we can get our real hands around it. And we've had a peek and a look at the look. But it's looking great. And we saw growth in Q1, which is what your question was. So, we're very happy. And the long term, we see a significant growth vehicle in our Lumber's business. Great. Thanks for all the details. Thanks a lot, Rick. Thank you. We'll go next to Eric Feder with Wonderlic. Good afternoon. Let me add my congratulations. Thanks a lot, Eric. Thanks. Could you talk a little bit about Taimo Hama International, what we're seeing there? And how should we think about the Waikiki opening in terms of its ability to help with the international business? Well, I think the story overall on international really hasn't changed from what we said back in March and that's that we expect about $1,500,000 improvement in the operating loss this year. We continue to be very pleased with the way our Canadian business is performing, which we don't report in international, we report as part of North America. But it is in fact part of the overall international effort. We're pleased with Australia. We're pleased with the Middle East, Asia being Japan and some of the other markets is where we've got a bit of work to do still. And as you know, we're very much focusing in on Japan as being the key market where we see a long term opportunity. So it's really the same thing that we've been telling you for a couple of quarters now. And we're working very hard on improving the Japanese business. Doug was just over there, I think, week before last and maybe he wants to add a little bit of color to what he's seeing in Japan. This is Doug. So I guess the exciting thing that we're seeing is the same type of guest reaction to the brand with regards to the restaurant and retail store where people are buying product in the retail store and then we're in it back to the restaurant. We're seeing also in Japan. The Waikiki opening is really critical for us from a marketing effort. If we could go back, I would love to have Waikiki open 2 years ago and it has everything to do with the fact that somewhere between 1,200,000 to 1,500,000 Japanese travel to Waikiki on an annual basis. And it's really a 4 to 6 block area of Waikiki that they go to. And right in the middle of it, we've got this wonderful retail store and restaurant that we're about ready to open. And it's really our business model is not just to attract the folks in the States, but to also speak directly to the Japanese in that market. Great. Thank you. Thanks, Julien. It depends on Lilly Pulitzer. You've obviously been having great results, got the product really right. What should we think about in terms of store rollouts this year and going forward? Is there the opportunity to really kind of ramp up the store rolls? Actually, where are we in the merch stores? And where should we think about this going given how strong the results continue to be? Well, we've got 30 stores open right now. The plan for this year is and has been to open 6. Of that, we've got 2 open already. So we've got 4 more to go. Really happy with the 2 that we got open. 1 is a small sort of resort store in Kiowa Island, South Carolina and great location, small store, but a great place for the brand. And the second one is in the Green Hills Mall outside of Nashville, which has gotten off to a terrific start in a market that you would think would be a good Lilly market and it's turning out to be very much so. And then we've got 4 more coming through the rest of the year. I would point out, Eric, that we're growing very rapidly in e commerce as well and have a lot of exciting things going on there, including the launch of the app last week, which we think is just terrific. And as you think about longer term growth, I would encourage you to think about the growth of the total direct to consumer business, not just the store count. So as we're developing those growth plans, we're putting a pretty high priority on not the store count growth, but e commerce growth. We do have one exciting opening well, all the remaining openings this year are exciting, but one key one is in Chicago, which is sort of a new market for us. It's a little bit further west than our sweet spot has historically been. But given the amount of traffic that we see in some of our West Coast Florida stores that's coming down from the Midwest and some of the other indicators, we think that's going to be a really good store for us. Okay. And let me throw on just one more. The smaller Thai Bahama, I believe the resort stores are called, how are those doing and kind of how do those change your thought process for talking about HAMA store openings? Thank you. Well, I'll let Doug maybe add some color to this in a minute. But I would say we've been pleased with what we've seen. And from my perspective, they give us a whole lot of opportunity to fill in a lot of nooks and crannies that we think can work for our brand and our ability to adapt our store format to smaller and more unique markets, because we don't really roll out cookie cutter stores. We think we can do that successfully and we think it gives us a lot of great opportunities. Doug, you want to No, I think you hit on it. We've opened a couple this year, but we've had these size of stores in our portfolio in the U. S. But also if you look at several we have in Australia. So it's really about getting the right seasonal product into those markets at the right time and given our strength with swim both in men's and women's and just overall that relaxed product really works in resort. Great. Thank you. And Dave congratulations. Thank you, Eric. Thanks a lot, Eric. Thank you. And we'll take our final question today from Pam Quintiliano with SunTrust. Please go ahead. Great. Thanks so much and congrats guys on really outstanding results in such a challenging environment. Thanks, Pam. I have a few questions for you guys. I guess starting with Lilly, Tom, you spoke in the beginning about some of these new initiatives like fashion presentation in New York and Seaplane. And just how are we supposed to think about that, the cost of it, the just what made you decide now is the time to seize the opportunity to do that? And then also thinking about Target, just any learnings that they shared with you that maybe help change your thoughts on potential new store locations or product extensions? I know I saw all the women fighting over your household products the day of the launch and how much those were going for on eBay along with everything else. But just how we should think about that? Yes. Well, starting with the first thing, the marketing initiatives, if you think back through that list I read through, so the fashion presentation of the New York of the 2015 2016 Resort line, then taking the fashion influencers and editors and flying about a Lilly Pulitzer print wrap seaplane from New York to Nantucket, the non comp mailer that's going to be attempting to support an extended summer selling season. These are all things that pick up on the resort seek messaging that was broadcast so broadly and so loudly by the Target collaboration. So the theme to all of this is really reinforcing as clearly as we can Lilly's positioning as a resort seat brand, the original American resort seat brand. And that's what we stand for is in terms of the cost, these things are not especially expensive for us. I mean, they fit well within the marketing budget and combined with the great distribution that we have, including our own stores, the e commerce site, the mobile app and our great wholesale customers as well as the terrific product that we have. And I can't underscore enough how strong the product has been. It's a winning combination that grows comp store sales growth and overall growth rates that are well above what is happening in the marketplace. And the timing on that, with the Well, the all of that's coming up within the next 6 or 7 weeks. And that doesn't mean that's the end of our marketing initiatives. Those were just the ones that I wanted to highlight today as sort of things that are following on and continuing the messaging from the Target collaboration. And then as far as the Target collaboration, any learnings on that one? Yes. I think there it's interesting because it's hard to say what the best sellers were since everything sold out in about 2 hours. I guess a best seller is something that sold out in 2 minutes instead of 10 minutes or something. But so it's a little hard to determine what were the best sellers. Everything sold well. But you can certainly see that there were some product categories that we don't typically offer that the consumer clearly had an appetite. It's up to us now to sift through which of those really make sense to be the priority opportunities for us to pursue and that's still work and thinking that's being done at this point. Okay. And then as far as Mother's Day, can you just talk about how Mother's Day went in each division? Well, it's certainly within the results for the quarter and it was when you see the strength of our quarter, I think it goes without saying that Father's Day was good for us. It's and I think the most natural sort of holiday we have in that vein is really Father's Day for Tommy Bahama, where Father's Day is sort of, as Terry said in his remarks, the go to brand for Father's Day. And have you seen more momentum on Tommy Women's for Mother's Day than you have historically with the product improving? Doug, do you want to talk about this year's Mother's Day event and just any difference or highlights that you would call out? Yes. It's overall we had a good Mother's Day. I think the great thing for us right now is that we actually have a Mother's Day business because 5 years ago I couldn't have sat here and pointed to anything. But we do have a Mother's Day business. We put out a mailer that we send out right in that April timeframe. We also do a loyalty program that actually kind of ignites both our e commerce and our retail businesses. So in that time period, we saw a lift in women's. And but it's hard to tell with us right now is that we're seeing it across not just sports wear, but swimwear and footwear. Yes. And Pam, I misspoke obviously a minute ago about Mother's Day being in our Q1 results. It's in our Q2 to date results, which have been obviously, we're not formally reporting on, but we've been pretty happy with what we've seen. Understood. And then just lastly, you guys have navigated so well with the port delays. But is there anything to speak of? Were there any issues this quarter just because it's out in the news so much about port delays? Any weather impacts that you could call out that maybe things would have been a little bit better? And then, if you could just remind us any exposure in Texas that's meaningful with what's been happening there recently? Yes. Let me talk about the ports for a minute and Doug can add to this if he wants to. But I'm going to comment on it first because I want to brag about Doug and his team. For us, the ports issue was really limited to Tommy Bahama and Doug and particularly his operational team and his retail planning team and marketing team, which had to support it, the whole team out in Seattle just handled the port situation extraordinarily well. And while it did create some issues for us, the way they handled it, we were able to get past those issues in the Q4 and early in the Q1 without them noticeably impacting our business. So they did a terrific job. And at this point, that's all really ancient history for us. We know some other people have some lingering effects, but for us, it's sort of ancient history. Okay. And then I would add some color on the weather. Yes. Weather clearly impacted us a bit across all of our business, but obviously we had enough strength to overcome it. But if you're asking, would it have been a little better if weather had been better? I think it probably would have. And your Texas exposure now, you have a few restaurant, right, combo locations that We currently have one restaurant in Texas in The Woodlands outside of Houston. And then our total store count in Texas, I'm not sure is probably we got 2 Lilly and 10 Tommy stores in Texas, including outlet stores altogether. And then this is really the last one because I know I'm the last one to ask questions. So I apologize for taking a little bit of advantage. But Tommy, just curious about Maui Jim, any early reads you have there and how you're feeling about it? And online, I don't know if I missed it, because you spoke a lot about Lilly online, but just anything Tommy to speak of? Well, in the quarter, Tommy's as it's been with in most quarters for a long, long time with both Tommy and Lilly, e comm was led the way really, stores were good, but e comm was really good. And then as to Maui Jim, there's clearly a lot of excitement in the company about that. And I'll let Doug maybe elaborate on that a little more. I mean, it's more of a we were able to get some of it in at the end of the Q1, but I'll just kind of tell you that those two brands couldn't fit better together than Maui Jim and Thai Bahama. And they're a great organization to work with. And it's fun to actually see it in the store. Our guests are responding to it. And now that we have it online, it's working in both areas. Excellent. Well, thank you so much. Best of luck. Okay. Thanks a lot, Tim. And that concludes today's question and answer session. I will now turn the call back to Mr. Tom Chubb for closing remarks. Okay. Thank you again for your time this afternoon. We're obviously very excited about our Q1 results and we've got a lot of other things to be excited about here. And we appreciate your interest and support. Thank you. And that does conclude today's conference. We thank you for your participation. You may now disconnect.