Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to Unifi's second quarter fiscal 2023 conference call. Today's conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by one on your telephone keypad. If you would like to withdraw your question, press star one once again. Thank you, and I will now turn the conference over to A.J. Eaker, Vice President of Finance and Treasurer. You may begin.
Thank you, Abby, and good morning, everyone. On the call today is Al Carey, Executive Chairman, Eddie Ingle, Chief Executive Officer, and Craig Creaturo, Chief Financial Officer. During this call, we'll be referencing a webcast presentation that can be found in the investor relations section of our website, unifi.com. Please turn to page two of that slide deck for our cautionary statements. Management advises you that certain statements included in today's call will be forward-looking statements within the meaning of the Federal securities laws. Management cautions that these statements are based on current expectations, estimates, and/or projections about the markets in which Unifi operates. These statements are not guarantees of future performance and involve certain risks that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted, or implied by these statements.
You are directed to the disclosures filed with the SEC on Unifi's Form 10-Q and Form 10-K regarding various factors that may impact these results. Please be advised that certain non-GAAP financial measures such as adjusted EBITDA, adjusted Net Income, adjusted EPS, adjusted Working Capital, and Net Debt may be discussed on this call. I will now turn it over to Al Carey.
Thanks, A.J.. Good morning, everyone, and thanks for joining this call. I have a few remarks to kick this off, and then I'm gonna turn it over to our CEO, Eddie Ingle. As you can see, quarter two of 2023 has been a very difficult environment to operate in. You saw that in the pre-release that we had a couple of weeks ago and also our materials for today. At this point, I think most of you have heard about apparel retailers and apparel brands that have had significant backlogs of inventory, you know, in their system and in their stores. They've been trying to discount this inventory and clear it out all the way through the Christmas holidays. This imbalance of inventory began all the way back in June of 2022, so it's been with us for a while.
This has very definitely had a significant impact on our volume and our profits in Q1, as we reported before, and then it's also persisted. This issue has persisted and actually worsened for Q2. There is good news. We have seen a pickup in the month of January in orders for our U.S. operations. It looks like we should see a gradual improvement through the balance of this fiscal year and then a corresponding improvement in profitability as well. With regards to our Asian business, that same inventory backlog from U.S. retailers is having an impact on our China business because a great portion of our business there is from, for U.S. retailers. It's had a significant volume decrease for our Asian business. This situation has continued all the way through Chinese Lunar New Year holiday that ended last week.
We expect to see some level of volume improvements coming very soon. We'll know more in the next couple of weeks. We do know that many manufacturers are opening up this week in China. While all of this has been going on, our people were busy working on several ideas. One was working with our customers on future volume increases. I'll tell you, there's a very definite increase from our customers for recycled material for their apparel, and it gives us optimism for our brand REPREVE. This activity will show up in future sales. I would say that the brand has actually gained momentum with our customers in terms of their interest all the way through the pandemic period and likely to continue right now. The organization has also been very hard at work on cost reductions.
We've managed our inventories aggressively, and we've been able to reduce North American labor and headcount by a voluntary attrition strategy and holding positions opened. That gave us the opportunity to avoid excess costs. Additionally, the team has done a good job at generating cash, even in this tough environment, and we have a strong balance sheet thanks to a new credit facility. You'll hear more about that from Craig Creaturo. We do believe the worst is behind us, and we're gonna see gradual improvements in volume and profits in the next two quarters. We also see the fundamentals for our long-term business to remain in place despite all the turbulence that we have had over the last six months. In closing, I just tell you this.
The Unifi employees and the management team during this timeframe have done a very good job, and we're proud of them. Everyone's working hard to offset these challenges, and they've kept an enthusiastic attitude, even though most of the challenges we face are well beyond their control. We are proud of them. At this point, let me turn the presentation over to Eddie Ingle, our CEO, as he'll take you through the details of our performance.
Thanks, Al. Good morning, everyone. As Al noted, our second quarter fiscal 2023 results reflect the very difficult operating environment stemming from the continued demand disruption we have experienced a result of inventory destocking measures and slowed global apparel production. As Al mentioned, our employees really have shown an amazing amount of resilience while enduring a very challenging period across the industry. I wanna thank them for their commitment to the company and their hard work.
For many reasons, we remain confident in our business model. We are optimistic towards the future growth opportunities of the business as a global leader in sustainable fibers. Turning to slide three for a close look at the quarter. Our net sales for the quarter were $136.2 million, down 32% compared to the second quarter of fiscal 2022. This resulted in an unusually large amount of fixed costs becoming stranded, which we were not able to overcome in our domestic operations, unfavorably impacting our profitability. Last quarter, we cautioned that the higher than normal inventory levels across the world's largest brands and retailers would negatively impact our results in the second quarter. The magnitude of these macroeconomic trends was unforeseen. The resulting adverse impacts to our business worsened in November and December, far beyond what we had anticipated.
In the U.S. in particular, the demand disruption caused by destocking efforts from retailers became more and more severe. This demand decline caused a slowdown in apparel production globally and led to results that fell below our expectations. Now, while these challenges have created a difficult operating environment for our business in the near term, the disruptions to our business are expected to be temporary as retailers and apparel brands work through their normalizing their respective inventory levels and supply chains. While this process plays out, our core business model remains intact, and we remain ready to meet increased demand as we return to more normalized levels.
In the last few weeks, we've already seen in the U.S., as Al pointed out, notable improvements in weekly demand trends compared to the levels we experienced in November and December, which leads us to believe that demand levels bottomed out in the December quarter. We are optimistic that our business is on the road to recovery. Profitability in the Americas during the quarter was primarily pressured by high material costs from the summer, the loss of asset leverage on lower volumes. We were glad to see that input costs stabilized during the December quarter and our pricing is healthy against current levels, putting us in a solid position moving into the third quarter. Our expectation is that both energy prices and the geopolitical situation will remain volatile. However, we don't currently have any significant pricing actions planned.
We continue to be proactive in our efforts to offset the impact of the temporary headwinds and challenges we've been experiencing in the U.S. During the second quarter, some of the cost-saving measures we took included reducing external spend programs, minimizing overtime hours, extending production shutdown periods, delaying the backfilling of open positions to lower headcount temporarily, and lowering raw material purchases and taking advantage of some of the payment term extensions we've received. Turning to Brazil and Asia, we continue to see strong demand in Brazil with higher sales volume versus a year ago. This strength was completely offset by significant margin pressure from decreasing market prices in connection with excess capacity in Asia, while Brazil's inventory cost profile remained elevated from earlier months of higher cost purchases. In Asia, our operations performed well against the much lower demand as compared to any recent historical measure.
The segment has maintained a strong margin profile with a rich sales mix. We are quite optimistic that demand will recover following the Lunar New Year. Now I'd like to move on to slide four to discuss REPREVE Fiber. In the second quarter, REPREVE Fiber products comprised 31% of net sales, significantly impacted by the lower sales in Asia. We have full confidence that REPREVE sales will rebound strongly in the near future once the operating environment normalizes as we continue to see momentum in the REPREVE brand for new products, customer adoptions, and co-branding. In fact, in the fiscal 2023 second quarter, we shipped 19.8 million REPREVE hangtags to brand customers. On the marketing front, REPREVE continues to gain traction with a mix of co-branded product launches, social media partnerships, activations, and PR placements.
During Q2, several brands launched new REPREVE co-branded products, including ASICS, Arcade Belts, Tom Tailor, and H&M. The ASICS launch was particularly successful, and we're quite proud of that activation. In order to become more sustainable, ASICS is committed to converting core styles from virgin polyester to REPREVE. The launch included several women's styles and was supported by co-branded hang tags, digital marketing, social media, and PR. We see this as the first step in a much larger partnership. For example, our mobile tour will activate at the ASICS sponsored L.A. Marathon in March. Our new PR strategy is certainly starting to bear fruit as we secured 56 placements, resulting in over 660 million impressions during the quarter. Additionally, our new creative direction is resonating particularly well on social media.
A highly curated mix of REPREVE branded content combined with imagery from key brand partners is driving increased consumer awareness and engagement. Over the quarter, we partnered with Quiksilver, Pottery Barn, Scotch & Soda, Beyond Yoga, Ruggable, and UGG among many others. Shifting to activations. Our bowl season partnership culminated with a mobile tour activation at the Duke's Mayo Bowl in Charlotte at the end of December. I was there myself watching NC State play University of Maryland with over 37,000 fans in attendance. The game was broadcast live on ESPN to over 2.6 million people. 2022 was the first year of a three-year partnership, we look forward to building on this for 2023 and 2024.
On November 28th, Unifi announced the expansion of Textile Takeback. Unifi's Textile Takeback program is designed to reduce waste generated from fabric production or at the end of an article's lifecycle. Through a strategic mix of diligent media relations, the Textile Takeback launch garnered 12 pieces of notable media coverage, with over 70.5 million impressions across the business and trade media. Trade shows remain a core tenet of our B2B marketing mix. While attendance is not back yet to pre-COVID levels, we exhibited at both ISPO in Munich and the Running Event in Austin in November. This is the first time Unifi exhibited at the Running Event and it was well-received by both existing and potential new brand customers. Looking ahead to Q3 and beyond, we are focused on building on the momentum in both REPREVE and seeing the business return back to more normal levels.
With that, I will now turn the call over to Craig. Craig?
Thank you, Eddie. Good morning, everyone. The quarter we just completed exhibited the impacts of reduced demand by retailers and brands. Softer than our first fiscal quarter, the activity flowing through the apparel supply chain drove significant margin pressure and lower than expected profitability. Outside of the short-term disruption, we believe underlying demand for our products remains strong, and our management team is focused on managing operating costs and working capital to remain nimble as we continue to pursue our long-term goals. Before reviewing the segment performance, I would like to discuss two non-routine items in the income statement. First, when we refinanced our credit facility during the second quarter, banking and transactional fees incurred were approximately $800,000, and $273,000 were recorded as debt extinguishment costs to interest expense, driving a portion of the non-routine increase in interest expense.
Second, we recognized additional benefits from our efforts in recovering prior period tax payments in Brazil. In the December quarter, we filed amended Brazil tax returns to recover certain components of income taxes paid. As a result, we expect to receive the associated cash refund of approximately $3.8 million within the next 12 months or so. You will note that this item has been included in our adjusted EPS calculation to improve the understanding of tax expense that relates to the current fiscal year. Let's turn to slide 5 of the webcast presentation to begin the review of our reportable segment performance. For the America segment, revenues decreased 25.7%, driven by significantly lower sales volumes. Price and mix impact demonstrated generally higher selling prices, with the volume reductions partially offset by a higher proportion of chip and flake sales.
In Brazil, sales levels were strong, with an 8.1% increase from volume that was offset by lower average selling prices in connection with the anticipated pressure from Asian imports that we mentioned in the prior earnings call. For our Asia segment, sales volumes were challenged by the overall apparel weakness, while pricing and mix remained strong. Accordingly, consolidated net sales were $136.2 million, with the vast majority of the decrease since December 2021 quarter characterized by near-term apparel production weakness. Turning to slide 6 for the quarterly gross profit overview. Consolidated gross profit decreased from $16.9 million to negative $8.0 million, with gross margin declining from 8.4% to - 5.9%.
The Americas segment's expected decline in gross profit and weaker gross margin percentage were attributed to the shortfall in product demand and the associated impact on fixed cost absorption. We took actions to reduce labor hours to appropriate levels while minimizing overtime, allowed attrition to help normalize our employment levels, and made diligent efforts to control operating costs during this difficult quarter. In Brazil, the gross profit and margin rate demonstrated the pressure on selling prices from low-cost import competition. Brazil's cost of goods sold were impacted by higher input costs at the start of the current fiscal year, while selling prices required adjustment to the more current market dynamics. The Asia segment maintained a strong gross margin profile with a high proportion of REPREVE products, albeit at a lower sales level due to the constrained demand.
Our asset-light model continues to prove to be a great choice for the Asia region. Outlined on slide 7, and as we described in our earnings release, we completed the refinancing of our asset-based lending facility during the second quarter. This new facility increases our borrowing capacity from $200 million- $230 million, moves the significant majority of our short-term outstanding borrowings to the expanded term loan, continues the favorable borrowing rate structure and overall loan flexibility that has been in place for several years, extends the maturity date to October 2027, and provides helpful liquidity during this current period of demand softness. It's helpful to note that the leverage ratio drives our interest rate pricing but is not a covenant for compliance purposes. Fixed charge coverage ratio only springs into consideration if our available borrowings fall below an established trigger level.
At January 1st, 2023 quarter end, the trigger level was $23.0 million, and our available borrowings was $64.7 million. Thus, $41.7 million could be borrowed before the trigger level became applicable. Accordingly, we have great flexibility and runway on our new credit facility. We ended the second quarter with $3.4 million borrowed against our ABL revolver and $115 million borrowed against our term loan. Moving to Slide 8 and our balance sheet highlights. Under our balanced approach to capital allocation, we expect to continue to invest in the business through price inflation and organic growth, maintain a strong balance sheet, and remain opportunistic for share repurchases and/or M&A prospects.
As a reminder, $38.9 million remains available for repurchases under the current share repurchase program, with no repurchases conducted in fiscal 2023 so far. During this demand-suppressed environment, we continue to assess the proper timing of vendor payments and the magnitude of our capital expenditures, ensuring we conduct the most advantageous purchases and investments. As noted in our outlook, we are expecting sequentially less cash flow for capital expenditures in this third quarter of fiscal 2023, along with further reductions in the subsequent fourth quarter of fiscal 2023. I will now pass the call back to Eddie to make some final comments. Eddie?
Thank you, Craig. Before we turn the call over to our Q&A sessions, I'll give you an outlook on the expectations we have for the third fiscal quarter. As we discussed on this call, the operating environment and demand trends we're seeing both domestically and in our international regions within the apparel and retail markets are still working through demand pressures. Although our demand signals remain choppy, we are expecting stronger results in the second half of the fiscal year. For the industry, we're expecting the operating environment and the textile demand trends from the apparel market will recover at a modest pace during the calendar year. With this, we expect modest sequential operating improvement from the second quarter to the third quarter.
For the fiscal third quarter, we expect revenue to increase sequentially after we get past the normal slowdown in Asia during the Lunar New Year. We expect significant sequential operating performance improvements on an operating income and adjusted basis. Our effective tax rate is expected to remain volatile. While there are many near-term demand challenges that we need to navigate, the long-term growth potential of Unifi has not changed. We remain optimistic about our future and position as a global sustainable fiber leader. The drivers of our business remain valid today. Of course, everyone on the Unifi team is looking forward to the time when we have a more normal environment where we can leverage our strengths.
We've been pleased with our increased liquidity through our amended and expanded credit facility, and we will continue to maintain our strong balance sheet to act opportunistically on growth initiatives as we remain well positioned and focused on being the sustainability partner of choice to brands across the globe. We will now open the line for questions. Thank you.
Thank you. At this time, I would like to remind everyone, in order to ask a question, press star then one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. We will take our first question from Daniel Moore with CJS Securities. Your line is open.
Thank you. Good morning. Thanks for taking the questions. maybe start with obviously give great color and challenging clearly challenging macro. Any more detail on what kind of, quote, modest sequential increase in revenue and, you know, significant operating improvement looks like for fiscal Q3? I guess I'm wondering, do we expect gross margin overall and/or EBITDA to turn positive, or is that, you know, visibility a little bit more difficult at this stage?
Dan, I'll take part of that question, then I'm gonna hand some of it over to Craig. You know, from a volume perspective, the three segments, Brazil is certainly coming back nicely. They didn't suffer as much as the other business segments during Q2. While they were down, not as severely down. So we expect the volumes to come back there nicely. In Asia, you know, it was very strange what happened during the end of calendar Q4 around COVID. That resulted in lower production levels even further than normal in January. We are expecting a very decent increase in the volumes relative to the December month, which was better than the November month. We're beginning to see quite a nice uplift there.
In the U.S., you know, I'm gonna refer to the first sort of two weeks of December relative to where we are now. We are seeing a nice uptick, relative to the beginning of December month outside of the holidays. Quite positive, all around in all our segments.
The little more color on the retailers, units were up 1% for the first three weeks of January. It's a very small window to look at, but it's definitely better. It's better than it was.
To Dan, to add to your question, as far as additional commentary color around the outlook, I would say for our Q3, we are expecting to return to positive gross profit. We do feel like, you know, the signs that we've seen, especially here in early January, where, you know, we're seeing our January sales volumes up, you know, 5%, 5%-10% or so, versus where we thought they would be.
I think that is giving us comfort that we will be returning to positive gross profit here in this March quarter. I think, you know, we're continuing to watch, as Eddie was mentioning, we expect a kind of a similar but slightly lagging rebound in Asia. Haven't seen that just yet as we're still finishing out the Lunar New Year. Brazil did have a tougher quarter here in this December quarter. As we noted, a lot of that was input costs kind of flowing through and some challenges on more competition, lower price. That's really got to a more reasonable level, and we definitely expect them to start to return to more normal profitability. All that adds up for a, you know, a much noticeable improvement in gross margin in Q3.
Super helpful. I appreciate it. Craig, you just jumped right into my next question, which was Brazil. I know it's impossible to tease out, but any color on sort of the magnitude of the impact from increased Asian competition as all that extra volume sort of, you know, flowed around the world versus just timing in terms of, you know, mismatch in terms of COGS and pricing. Just trying to get a sense for how much is in your control as you increase prices and how quickly those margins might snap back.
I'll jump in and answer that question, Dan. Our fiscal Q2 in Brazil was quite unusual. It was similar to what happened to Q4, fiscal 2022, where there was, you know, the Chinese and Asian importers into Brazil were putting yarn on the market at incredibly low prices. We are very market-driven down in Brazil, and that resulted in us reacting as we should have to the market conditions. The situation is changing now, where we will flow through that higher priced raw material in Q3 that we purchased, and that will improve the margin significantly down there. The volumes are, as we said, coming back nicely also. That will change the profit profile down there.
Got it. Maybe one more, and I can jump back in queue. Just what was the sort of volume versus price in the quarter? Or do we expect pricing to be maybe a little bit more of a headwind going forward as input costs have declined? Just, you know, kind of where we are. You mentioned stabilized, but have input costs stabilized, pulled back in? What's the latest, you know, both from a virgin perspective as well as bale bottle pricing?
Yeah. In Brazil, the input costs will be declining as we move through the quarter, really significantly impacting probably Q4 more than Q3. In the Americas, we have passed through all of our higher priced raw material inventories in Q2. We know that in Q3 we'll have a more stable, more normal raw material cost. Our pricing is nicely positioned relative to our raw material costs. What we're looking forward to is seeing this volume come back so we can take advantage of that.
Got it. Thank you. I'll jump back in queue with any follow-up. Thanks.
Thanks.
Thank you. As a reminder, it is star one if you would like to ask a question. We will take our next question from Anthony Lebiedzinski with Sidoti. Your line is open.
Hey. Yes, good morning, and thank you for taking the questions. Your inventory first, you know, it was down sequentially and certainly on a year-over-year basis as well. You know, have you sold most of the high-cost inventory by now? You know, how should we think about that?
Yeah. I would say, in the U.S., where we had a particular problem, the inventory has flushed through. In Brazil, it's gonna, because we have a longer supply chain, it does take a little bit longer. Their profile, you know, we saw the impact in the higher priced inventory in Q1 in the U.S., which we flushed out in Q2. They saw really the margin pressures because of their raw material costs really impacting in Q2. We're coming out of that as we move through Q3. We feel quite good about that in both regions. In Asia, we haven't had that situation occur, so.
Got it. Okay. Yeah. Thanks for that. As far as, you know, Asia, as far as what you're seeing there, we've heard from other companies that many companies have taken, you know, more extended periods of shutdowns around the Lunar New Year. Is that really what's happening here? Are you seeing any signs now that I think we're just past the Lunar New Year, that things have picked up?
Yeah. Two comments on that. You're right. A lot of our, not just suppliers, but also our customers did take extended shutdowns in January. The Lunar New Year was early also. Along with the number of people that are out in the workforce, even if you wanted to get some stuff made, it was sometimes difficult to get it made. We are seeing in February, you know, we're only just a week past the Lunar holiday, the signals we're getting are quite good. You know, this huge demand for REPREVE, the innovative products we have over there are certainly garnering some new interests. You know, when we make product in Asia, in February, there's usually a six-month lag.
We know that companies, brands and retailers are gonna be gearing up for fall sales, and they're going to start placing orders in the February, March timeframe. You know, we have seen reductions. We've heard on the street that there are reductions in inventories. There's still some work to do at the brand and retail level, but they've certainly made a lot of changes to their inventories over the last six months. They'll continue to do that over the next six months. They need to order now in Asia to meet the demands they're gonna have for fall and for Christmas. Thank you.
Got it. Okay. Yeah, thanks for that. In the quarter on a consolidated basis, your price and mix was up 4.5%, but you talked about material costs stabilizing. What is your confidence level as far as your ability to hold pricing or do you think that perhaps, you know, given the current, weak macro environment, that you may have to adjust your pricing, because of competitive pressures, perhaps?
You know, it's a question that we ask ourselves all the time. We are very strategic in how we're pricing. It's always a balance between volumes and the opportunities, but we're being very thoughtful around pricing. I think we've made changes to how we approach the market, which are very different from how we used to approach the market several years ago. I will tell you, we're being very thoughtful, and we're being considerate to our customers. At the same time, we are waiting for volumes to come back, which will allow us to be a little more strategic in our pricing.
I understand. Okay. Then, you know, last question. Obviously, I realize that you're very heavily tied to the apparel markets, you know. That being said, just curious as to what you've seen from other vertical markets. You know, is it similar, you know, downward trend that you saw in the quarter? Do you think with this current macro environment that we're in, will this make it more difficult for you guys to expand beyond apparel?
Yeah. I think everybody in the U.S. were trying to reduce their inventories as they went through December. We saw a lot of that destocking taking place, orders being canceled as people were trying to manage their cash through the quarter. You know, we some of the markets we're chasing beyond what we call beyond apparel would be home. We have seen some nice interest coming out of the holiday season in mattress. We have seen an uptick in some demand in automotive. I think the two things, one is they've gone past their inventory targets that they wanted to achieve, also there is some uptick in some demand in some of those different markets.
We are still very focused on beyond apparel, on trying to be less dependent, and especially in the U.S., on some of the apparel markets that we service.
Got it. Well, thank you very much, and best of luck.
Thank you.
We will take follow-up questions from Daniel Moore with CJS Securities. Your line is open.
Thanks. One of my follow-ups was covered, and you gave good detail. Obviously, CapEx is gonna, you know, tick lower as we go through the balance of the year. Any comments on what cash flow might look like for the back half, you know, either for Q3 or the back half of the year, you know, in terms of operating cash flow and free cash either usage or generation as it relates to that liquidity position. Thanks.
Yeah. We, I think, Dan, we've been doing a lot of things to help put ourselves into a good cash position. You know, in the release, we noted that, you know, we generated $7 million of operating cash in the first six months of this fiscal year. By comparison, we had used $4 million in that same six-month period in FY 2023. We feel like we've done a lot of good things there. We did talk about the specifics about the things that we are doing here in the U.S., being careful on inventory purchases. We've got lower amounts of inventory. We've got lower price per pound as the pricing has moderated. We've taken the actions, labor-wise and really specifically, you know, we've allowed about a 10% reduction in our U.S. workforce.
That's really, again, through attrition, though, being slow to, you know, kind of evaluate and make sure that we're backfilling where we need it. We've asked people to take on some additional responsibilities. Really, I think, back to Al's comments about really everybody stepping up and doing well, that's, that is what we're seeing. We've been able to do that, and, you know, that's about 10% or around 200 people here domestically. Those are some of the things that have set us up to be in a good spot, from a cash generation perspective.
We're actually thinking and anticipating that as the business comes back, we'll have higher levels of sales, then we'll have higher levels of accounts receivable, and we'll need to start to build a little bit more inventory to be ready for that than we have. Over the next couple of quarters, we know we'll be utilizing or using some working capital to do that. Again, we've got plenty of headroom. Good things that we've done here recently are setting us up to be able to grow that business, as it comes back. Again, we're also very fortunate, I think as we touched on a little bit, both our Brazil operation and our Asia operation are very self-sufficient. They don't need or require cash from this region, so that's very helpful.
Even in spite of some lower demand in both of those regions, both of them are doing fine financially. We are looking forward to seeing that business come back. You know, we know it's gonna take some working capital to address that, but we're prepared to do that.
Perfect. Thanks again.
Ladies and gentlemen, this concludes today's conference call, and we thank you for your participation. You may now disconnect.