Q1 2024 GrowGeneration Corp Earnings Call

Participants

John Mills; IR; ICR, Inc.

Darren Lampert; Chairman of the Board, Chief Executive Officer; GrowGeneration Corp

Gregory Sanders; Chief Financial Officer; GrowGeneration Corp

Brian Nagel; Analyst; Oppenheimer & Co.

Scott Fortune; Analyst; ROTH MKM

Eric Des Lauriers; Analyst; Craig-Hallum Capital Group

Mark Smith; Analyst; Lake Street

Remi Grey; Analyst; Alliance Global Partners

Presentation

Operator

Hello, and welcome to GrowGeneration First Quarter 2024 earnings conference call. My name is Joanna, and I will be coordinating your call today. Following prepared remarks, we will open the call to questions from analysts with instructions to be given at that time.
I'll now hand the call over to John Mills with ICR. Please go ahead.

John Mills

Thank you, and welcome, everyone to the GrowGeneration First Quarter 2024 earnings results conference call. Today's call is being recorded. With us today are Darren Lampert, Co-Founder, Chief Executive Officer, and Greg Sanders, Chief Financial Officer of GrowGen Corporation. You should you should have access to the company's first quarter earnings press release issued after the market closed today. This information is available on the Investor Relations section of GrowGeneration website at ir dot growgeneration.com.
Certain comments made on this call include forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any of the forward-looking statements made today.
During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filing, as well as the earnings press release, which provides reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are all available on our website following our prepared remarks, we will take questions from research analysts. We ask that you please limit yourself to one question and one follow-up. If you have any additional questions, please reenter the queue, and we'll take them as time allows.
Now I will turn the call over to our Founder and CEO, Darren Lampert. Darren?

Darren Lampert

Thanks, Jeremy, and good afternoon, everyone. Thank you for joining us today to discuss our first quarter 2024 financial results. As always, I want to extend my gratitude to each one of our employees across GrowGeneration for their dedication and hard work whose commitment is fundamental from the backbone to our success. I am pleased to announce that our first quarter results were in line with our expectations with revenue of $47.9 million and adjusted EBITDA of a $2.9 million loss.
Encouragingly, our retail stores in isolation were positive on a same-store sales comp basis in the first quarter, which represents the first time we've seen a positive same-store sales comp for retail stores in nine quarters. This indicates a stabilization of sales affirming the effectiveness of our strategic adjustments over the past two years. Our proprietary brand sales also continued to grow, supported sequential gross margin improvement from Q4 2023.
Lastly, through our continued focus on cost controls, we have achieved the lowest total expense base that the Company has reported in three years. Based on this quarter's results, we continue to believe that our business is strong and poised for growth. And you have seen that confidence reflected in our stock repurchase program, which we announced last quarter to help support long-term shareholder value creation.
Looking ahead, our strategic focus for 2024 remains on expanding our brand portfolio, growing and broadening our customer base and prioritizing profitability through rigorous cost control and margin expansion. I'm excited to discuss several key points today that underlines our strategic direction and future growth. We continue to see accelerated adoption of our proprietary brands, including chart core strip hydro and the harvest company.
In the quarter 22.6% of our total gardening and cultivation sales were generated from our proprietary brand portfolio, the highest mix in our company's history and above the 18.8% we reported for full year 2023. We are especially excited about the early signs of momentum within our drip hydro powder nutrients, which are now in over 300 active trials with licensed cultivators around the country, and we expect these trials to begin transitioning to sales and benefiting our P&L beginning late in Q2.
Our margin expansion strategy continues to focus on increasing sales of higher-margin proprietary products and forging close strategic relationships with key best-of-breed manufacturing partners. We are also working to develop new vertical markets within our existing offerings, including the marketing and sales, the harvest company pipeline of proprietary products, which is targeting the home and edible gardening markets. Within the harvest company. Branded products include raised garden beds, organic seeds and various gardening tools and accessories. They are now available for sale online and in our stores. We are also actively seeking opportunities to enter the high value greenhouse nursery and floral culture verticals with our proprietary products later this year.
Lastly, our commitment to investing in our customer success remains unwavering. We continue to offer a complete suite of industry leading products, competitive prices and opportunities for financing and comprehensive inventory management and logistics solutions. Additionally, our soon-to-be launched digital platform will enhance connectivity to a B2B portal, further empowering our customers' ability and convenience to do business with us.
Now before turning to guidance, I want to briefly mention two additional points. First, I'd like to address the significant news last week that the FDA agreed with the Health and Human Services and FDA recommendation to reschedule cannabis from a Schedule one to a Schedule three controlled substance.
This critical shift in the regulatory landscape is expected to ease restrictions on cannabis research and to strengthen the cash flow and balance sheets of state legal cannabis operators by allowing them to take federal tax deductions for the business expenses, while additional steps remain and additional challenges such as litigation may arise. We ultimately expect these developments to strengthen investor sentiment and broaden our market opportunities for our products as cultivators will have more capital available to invest back into their businesses, including in build with building new facilities and refreshing existing ones.
Regarding next steps, we expect a formal announcement by the DEA soon following which the proposal will go to the Office of Management and Budget for review and then to public comment period before being finalized, we are actively assessing how this regulatory change will impact our operations and strategic opportunities, and we will keep our stakeholders informed in future earnings calls as things progress.
Second, continuing from our year-end discussions, we are continuing to seek opportunities to monetize our Storage Solutions segment, MMI, which remains a leader in providing mobile shelving and racking solutions. While we did not have any news to report this quarter should have material updates become available. As it relates to the MMI. business, we will issue announcements accordingly.
Moving on to our guidance, we are reiterating our previously communicated guidance for full year 2024, we anticipate net revenue to be in the range of $205 million to $215 million. Adjusted EBITDA expected to range from a $2 million loss to a $3 million profit. This guidance underscores our confidence in our strategic direction and the underlying strength of our business model and proud of the work and effort our team has put into getting us where we are today. As we look through the balance of the year, we are optimistic that GrowGen is on a solid platform for growth in 2024 and beyond. With that, I'll turn the call over to our CFO, Greg Sanders. Greg.

Gregory Sanders

Thank you, Darren, and good afternoon, everyone. Starting with our first quarter results. Growgeneration is pleased to report revenue at $47.9 million versus $56.8 million in the first quarter of 2023, representing a decline of approximately 16% year over year. On an absolute basis, this measurement includes the impact of 15 fewer retail locations. Our same-store sales for the gardening and cultivation segment in the first quarter of 2024 was $38.2 million compared to $38.6 million in 2023, representing a 1% decline to the comparable year ago quarter.
Our same-store sales metric includes e-commerce, excluding e-commerce retail in isolation, was positive on a same-store sales comp basis for the first time since the third quarter of 2021.
Our Storage Solutions revenue was $4.8 million for the quarter compared to $7.7 million in the year ago period, representing a decline of 37.9% year over year for storage solutions revenue did not perform to plan this quarter. We expect some pickup in the second and third quarters for this reporting segment to offset gardening and cultivation. Sales were higher than planned, which is an encouraging development. And in consolidation, first quarter revenue reported at the high end of guidance.
Gross profit margin was 25.8% for the first quarter 2020 for a sequential improvement of approximately 230 basis points compared to our fourth quarter 2023 results. Although gross margin improved on a quarter over quarter basis, we observed a decline on a year-over-year basis, partially due to higher freight expense in plan relative to costs associated with relocating inventory from store closures. Further, we observe some impact from segment reporting mix.
More specifically, storage solutions, which boasts a 43% gross margin profile reported at approximately 10% of total Company sales in the first quarter compared to an average of 14% of sales in 2023. As we look forward, we expect sequential improvements in consolidated gross margins in the second and third quarters, resulting from higher planned storage solutions revenue as well as less impact from store closures.
Company's total expense base was$ 21.8 million in the first quarter compared to $23.7 million in the first quarter 2023. Withstanding any further improvements that management executes over the remainder of 2024. This was the lowest total expense base that the Company has reported since Q1 of 2021. We believe that the current cost model is sustainable going forward and it highlights our commitment to driving a more nimble and profitable business.
Long term store operating costs and other operational expenses declined to $10.6 million in the first quarter compared to $11.8 million in the fourth quarter of 2023. The Company closed and consolidated four locations in the first quarter of 2024, of which one-time closure costs were included in our first quarter results. We believe that the closures and consolidations align our operating model to future strategic priorities and allow for stronger operating leverage, selling general and administrative costs were $7.9 million in the first quarter compared to [$7.9 million] in the fourth quarter of 2023.
Within our first quarter, SG&A results were a few significant nonrecurring expenses, including $900,000 in severances and legal settlements and $250,000 in marketing samples, primarily attributed to the Nutrien powder launch from our proprietary brands, drip hydro. Depreciation and amortization of intangibles was $3.7 million in the first quarter of 2024 compared to $4.1 million in the prior quarter.
As it relates to income tax with a full valuation allowance in place, we did not recognize a significant tax benefit or expense in the period net loss for the first quarter of 2024 was $8.8 million or negative $0.14 per share compared to a net loss of $6.1 million or negative $0.1 per share for the comparable year ago quarter. Compared to the fourth quarter of 2023, the Company improved net income from a net loss of $27.3 million to a net loss of $8.8 million. Adjusted EBITDA, as defined in our press release, was a loss of $2.9 million for the first quarter of 2024 compared to a loss of $1.8 million in the first quarter of 2023.
The change in year-over-year performance is primarily related to a $3.9 million decline in gross profit dollars. Compared to the fourth quarter of 2023, the Company improved adjusted EBITDA by approximately $800,000.
Moving to the balance sheet. As of March 31st, 2024, the Company had total cash, cash equivalents and marketable securities of $61.3 million, a decrease of $3.6 million from December 31st, 2023. Within working capital inventory increased by $1.1 million, driven by first quarter bulk inventory purchases to support Q2 sales demand for which we expect favorable seasonality. We believe that the cash position of the business is in strong health, which was evidenced by our recent announcement of the Company's share repurchase program.
As Darren mentioned earlier, we are reiterating our full year 2024 guidance with revenue to be between $205 million and $215 million and full year adjusted EBITDA to be in the range of a $2 million loss to a positive $3 million profit. Our guidance assumes higher second and third quarter revenue from a seasonality perspective, along with stabilized improvements in our operating expense base from our strategic operating initiatives. That said, we are optimistic about the 2024 fiscal year and how our cost control initiatives have translated into the lowest expense base that we have reported in several years.
Our balance sheet remains strong with a healthy cash position from which we see opportunities to deploy resources towards customer growth initiatives, product development, market expansion and accretive pathways, such as the share repurchase program to drive shareholder value. Our daily mandate remains centered on executing the business strategy to drive future growth and profitability. With that, I will turn the call back over to Darren for closing remarks.

Darren Lampert

Thank you, Greg. As we continue our journey to 2024 for commitments, operational excellence, strategic market expansion and profitability remains unwavering. I am immensely proud of what our team has achieved, and I look forward to our continued growth and success. We remain optimistic about the future backed by our robust business model as strategic initiatives that are set to drive our growth in the evolving market landscape.
Thank you all once again for your continued support and interest in GrowGeneration. We will now take your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Brian Nagel, Oppenheimer.

Brian Nagel

Good afternoon. So we have team mindful, Sir, my first question, Darren, I know you talked a little bit about this in your prepared comments with regard to the I guess, let's say, potential risk here. I know it's something we've talked about for a while, but is there any I recognize it's early and there's still a lot of unknowns. But just as you think about that and your GrowGeneration business, I mean, is there any parameters you can give us how we should think about the size of the potential positive or even how how this would play out for GrowGeneration?

Darren Lampert

I think the simple part is Brian. With rescheduling to 80. He goes away and that is the tax penalty on licensed cultivators. On the the you know, basically analysts are saying almost a bit almost between $1.5 million to $2 billion will come back to the balance sheet of the cultivators, which will go to shoring up balance sheets and also going into rebuilding facilities, our upgrading facilities and going out and getting new products that are coming to market on. So there will be a tremendously different on viewed with our with our with our customers with money coming back and our customers will be making money reinvesting in their businesses over the last three years on Wall Street, pretty much pulling funding for months for most of the cultivators, most of the public companies.
Also the large private companies on these cultivators have not been able to refresh on their facilities. They haven't put money into facilities. And so we've been in this place where our durable sales have been tremendously low over the last couple of years. But in the first quarter, we did see a little up. We did see a little uptick in durables and we are starting to see much more bidding out there. And we do believe that you will see the other part of our business, the durable side of it start picking up.
And again, everyone still is waiting. It's a waiting game out there, Brian, we've been waiting 10 years since we started GrowGen. Arm is still the process is not complete right now. The FDA has agreed with the Health and Human Services to reschedule, but it could be another four to six months. And that's probably as quick as it can go, massive litigation and other issues don't arise.

Brian Nagel

Yes, that's very, very helpful. Second question back to your business, but you've done a very nice job of streamlining the model over the past several quarters of closing stores. Where appropriate as we look at the business now from a store perspective, is the base of stores appropriate?

Darren Lampert

No, right now, we're happy with our portfolio. We probably will be closing another three stores this year. But our business has changed dramatically. We're seeing much more business. The business opposed to business to consumer. We just opened up 100,000 square foot warehouse in Ohio. As our business evolves. Our stores are both marketing tools for our private label brands and also brands of our some of our top vendors.
And there still is a place for people to go people to helping our customers to go and learn from and also purchase products from us. But we believe that we can our service most of our customers from our distribution centers in our largest stores around the country through right now on, we will not be investing in new stores this year, and we probably won't be in the market buying stores right now, roads and is investing in supply chain, distribution of B2B portals for investing in our proprietary brands, which you see are growing very quickly, investing in our customers.
We're easing credit right now on that. I think we've given out more credit in the last month to customers than we have in some time. And we're investing in growth and we're investing in stock repurchase plans. So I think we're starting to see different use of our capital, and we're investing in getting GrowGen into into the IGC. world, the lawn and garden space also GrowGeneration definitely morph into a different kind of company over the last couple of years since you've seen the slowdown in the cannabis space.

Brian Nagel

That's very helpful. Appreciate it. Best of luck to your. Thank you.

Darren Lampert

Thank you, Brian.

Operator

Scott Fortune, Roth MKM.

Scott Fortune

Yes, good afternoon, and thank you for the questions. Just kind of following up, you provide emphasis on the proprietary products and the success of that segment moved up very nicely here in the quarter, but just wanted to kind of get a sense for the potential for your drip drip nutritional product that you're rolling out here. It sounds like a good interest from that level.
And then just remind us the target of proprietary beer brands, which you are and targeting your own brands for the overall business segment mix, I believe, is about 30%, but still work in that that target potentially go here.

Darren Lampert

We believe you'll see anywhere between 30% and 40% on private label proprietary brands that grow again in the future. We believe we end this year somewhere in the mid to high 20s, which is pretty aggressive, and that is dependent upon the drip launch on taking when you when you look at the amount of trials that we have around the country right now, those turning into shelves in the future on that. And we do believe you'll start seeing those late in the second quarter on the we believe that the drip, the drip powder brand arm could end you could be anywhere from a $25 million to $50 million business for growth agenda in the future, although we will keep you posted as sales, not sales turn at that trials, turn into sales, kind of color there and just kind of from a geographic interest.

Scott Fortune

You mentioned stores can write, as you know, but just wanted to see you mentioned you're seeing stabilization in the market overall, but can you provide a little more color on kind of the regions or the areas him outside California, Michigan still seem pretty weak there. Just a little more color on certain states that driving the strength here in the 2Q trends as we look going forward here, we are seeing strength in California right now, Scott, contrary to what you are hearing, we are winning a lot of new business in the California market.

Darren Lampert

We're also seeing strength in Michigan right now. We're seeing considerable weakness out in Oklahoma and back East arm in the Maine, the Maine and Massachusetts markets. But there's tremendous strength at GrowGen right now in California.

Scott Fortune

Appreciate that. I will jump back in the line for a few things.

Darren Lampert

Thank you.

Operator

Eric Des Lauriers, Craig-Hallum Capital Group.

Eric Des Lauriers

Great. Thank you for taking my questions. First one is just on the proprietary brands, how to think about margins here going forward? I mean it's nice to see the increase in mix here. Obviously, margins were down year over year. So just wondering and how to think about the overall margin profile of proprietary brands and then if there's anything to comment on sort of the subsegments within that, like if drip Hydro has a significantly different margin profile than some of the other proprietary brands that be helpful as well. Just just kind of looking to get a sense of the margin profile of the proprietary brand space.

Darren Lampert

I'm going to keep it kind of basic for you Eric on, we're seeing anywhere from 40% to 50% on average within our proprietary brands, you will see the highest margins coming out of volume out of the harvest company and usually the lowest margins you'll see coming out of our eye on brands, which is our leading brands and our nutrients and Coco charcoal brands fall somewhere in between.

Eric Des Lauriers

And that's very helpful. And then I'm wondering if you can comment a bit on some of the difference in dynamics between e-commerce revenues and brick and mortar. You called out e-commerce comps that sort of masking the positive same-store sales growth that you saw at retail. I'm just wondering how the sort of demand dynamics within those channels differ and maybe how to think about those going forward as you are investing more in B2B, I think as you see on the cannabis space, turning more B to B and B to C and what we've seen with our e-commerce division.

Darren Lampert

Some of our larger customers that started out in the e-com division have switched over to our commercial team and some some of our stores where they get white glove service where they're looking for credit, they're looking for account reps with more skills as opposed to just going on websites and buying. So it's not that our Sunset a recon division has been slow on. It's just again, it's just the mix of business is much smaller on. And again, a lot of our larger customers that were that did come in through e-com. That shaft on e-com have changed over to a different division of GrowGen. We have definitely pulled back expenses on our on our e-com divisions, how we pulled back on advertising on a lot of it is very price sensitive, opposed to service sensitive. So again, we will continue to monitor, but we are starting to open up some B2B portals for our for our proprietary brands, which will go through the e-com division, which should help drive sales to that division.

Eric Des Lauriers

All right. Great. Thanks for taking my questions.

Operator

Mark Smith, Lake Street.

Mark Smith

I guess I wanted to ask first just about the inventory came up just a little bit here, but looks good year over year. Just give us your thoughts around your comfort levels and kind of the quality of your inventory today.

Darren Lampert

Brigham's, nobody if.

Gregory Sanders

Hey, Mark, you know, today we reported inventory at $66 million for the first quarter, which was up just incrementally to the fourth quarter, primarily due to Q2 sales demand. As we look at things as we get through the year. We see opportunities to continue to take down inventory throughout the course of the year. I mean that might be five or 10 play, and we're working through in a more optimized model on the inventory side of things as we progress throughout the year.
But we want to make sure we have the right inventory in the right locations for Q2, which is from a seasonality perspective, our best performing quarter. And so that's a little bit around inventory and to the quality of the inventory, we still have decent reserves on what we have in place. We feel very, very comfortable with what we have from a quality standpoint and a mix perspective.

Mark Smith

Perfect. And then second, just big picture there. Just as we think about kind of capital allocation, you've got a good balance sheet with the cash. You know how you have kind of way and think about investing back in the business, you know, in stores or brands versus not net of share repurchases or potentially acquisitions. Walk us through kind of how you think about capital allocation today?

Darren Lampert

Yes, it has started off like when I when I answered a question from Brian Nagle, but we go over it again, there's five different buckets that we look at the home right now, especially for 2024 as we go into two. So 2025, and it's mostly organic. It's investing in growth agenda, posted growth of investing outside of project. Our first bucket is investing in the business. That's our supply chain distribution, where we just built out 100,000 square feet in Ohio. And we're just in the midst of also building our B2B portals arm for our proprietary brands.
So people can go online on an per end purchase of different portals. But secondly, we're investing in proprietary brands launches on as you saw, we have private label went from 18.6 last year, up to 22.6 this year on we have 350 Aspen, over 300 active trials, right now in Europe, we've given out over a quarter of million dollars of product last quarter and for our drip launches farm also, we have a full team of salespeople through DRIP right now how we're also investing in new products coming out of Charcot work. Some we believe will be the idea of IGC world and also new products coming out of power assign a harvest company. Kroger is spending an enormous amount of money on these product launches, developing new products that we believe will be the future of GrowGen.
Thirdly, we're investing in our customers. We've increased credit to two and a number of our customers right now are starting to invest in certain build-outs for our customers for opening up credit as we see the industry starting to turn. We believe the days of people waking up and decided they wanted to become growers or Roger, the individuals that have made it through the harder parts of this market. The last four years, we believe is going to be here for a long time to come and be wonderful customers of GrowGen. And we are starting to open up credit at GrowGen and bringing in new customers and also helping old customers.
We're also investing in GrowGen. We just announced the $6 million share repurchase that started on April first we will update Wall Street in our second quarter to second quarter event, but we have been in the market buying back stock. And with that, we are always looking at acquisitions on the gain if we find something that we believe is accretive in the best interest of our shareholders. So we will take a hard look at it. And if it's going to work for GrowGen.
We're a buyer. So we are always reviewing different products stores out there and looking what's in the best interest of GrowGen. So you let Cecile assess five steps, so a process that we are looking at on a daily basis.
Thanks.

Mark Smith

Thank you.

Operator

Aaron Grey, Alliance Global.

Remi Grey

Hi, good evening and thanks for the questions. This is Remi Smith on for Eric. My first question on, can you provide commentary on how 2Q is looking quarter to date? I know it's historically been a strong quarter for you guys. So any color and if you're seeing that typical seasonal benefit would be helpful.
Thank you.

Darren Lampert

I think the only color I can give you right now is we're reaffirming guidance for the year, which is a $2 million loss to a $3 million profit. And as you saw, our first quarter EBITDA loss was $2.9 million. So we're looking for a positive back half of the year. Starting in the second quarter, we also reaffirmed our revenue guidance that that was if we did $47.8 million for the first quarter. So if you took that you times that by four, you see that in these times that by core, we're considerably behind our guidance numbers. So we are looking for a tremendous pickup in the second quarter, our third quarter and for the remainder of the year.
Yes.

Remi Grey

Thank you. That's helpful. And then on my second question, you called out pricing pressure weighing on gross margins in the quarter. Can you speak to how you're seeing pricing in the segment going forward? Do you expect that to continue to weigh on margins and offset the benefit from increasing private-label mix? Or do you see this as transitory the path back to higher gross margins in the near term?

Darren Lampert

Greg, in the Senate over to you.

Gregory Sanders

Yes, I think when you look at the first quarter, margins improved compared to the fourth, which was a positive, but they're down year over year. And I think there was two two primary drivers that I'll tried to unpack on the first with storage solutions revenue, which came in less than planned. And yes, for the quarter, Storage Solutions was about 10% of revenue. If we look at it as 14%, which is kind of where we were for the duration of 2023, that brings us up to a mid 27% gross margin profile in the business of just at the revenue levels that we're at.
So that's that's a big lever that we're expecting continued improvement from the second and third quarters. And the other piece is we closed six locations in the fourth quarter and four more in the first. And with that, you get a certain amount of inventory that you have to move around the country have moved from the closures to stores that are open and those costs had an impact on our results as well. So when you factor in those different pieces, it kind of pushes us up into that 28% to 29% range. So that's that's kind of the area that we're looking at as we look through the duration of 2024 from a margin perspective, we're hopeful that drip powders will really take off for us as we look at really Q3 and Q4, maybe there's a small impact in the second quarter yet to be determined. Most of those trials are still ongoing throughout the country. So there's a lot of bright spots that we believe are out there right now to kind of help drive a stronger Yes, gross margin profile through the rest of the year.

Remi Grey

Really appreciate the color there. And then my last question, if I could at that time on with the Canada's reform in Germany that recently occurred in April and broader legalization efforts around Europe, do you see opportunity capitalizing some of those reforms?

Darren Lampert

We believe there is opportunity and we have not taken advantages as of yet, but we are actively speaking with certain distribution companies about getting some of our proprietary brands over into the European market. But done again, nothing has been nothing has been done as of yet.

Remi Grey

Okay. I appreciate the color on back on the quarter and the can't in queue at this time.

Operator

We have no further questions. I will turn the call back over for closing comments.

Darren Lampert

I'd like to take the opportunity to thank all our shareholders for their continued support of GrowGeneration. So wish you all the best for a very happy summer, and we look forward to updating you on our second quarter in August.
Thank you.

Operator

Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.