Blue Bird Corporation

Greetings. Welcome to the Bluebird Corporation Fiscal 2022 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mark Benfield, Head of Investor Relations. You may begin.

Thank you. And welcome to Bluebird's fiscal 2022 first quarter earnings conference call. The audio for our call is webcast live on blue-bird.com under the investor relations tab. You can access the supporting slides on our website by clicking on the presentations box on the IR landing page. Our comments today include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include among others, matters we have noted on the following two slides and in our latest filings with the SEC. Bluebird disclaims any obligation to update the information on this call. This afternoon, you will hear from Bluebird's president and CEO, Matthew Stevenson, and CFO, Rozvon Radulescu. Then we will take some questions. Let's get started. Matt?

All right. Thank you, Mark, and good afternoon, everyone. The first quarter of our fiscal year 2022 was filled with a lot of activity centered around strong demand and navigating a sea of supply chain disruption. It was also the first quarter that Razvan and I were in our respective roles, as I assumed the role of CEO on November 1st, and Razvan became CFO on October 1st. On slide six, you can see the demand for our products is now at pre-COVID levels. Our order intake for Q1 was up 18% year over year, supporting a record backlog of roughly 500 million. We believe there is a lot of pent-up demand out there, as evidenced by the fact our dealer inventories are down 50% compared to this time last year. We are making adjustments in our operations for the second half to support higher build levels to maximize all the production our supply base can support. We would have loved to produce more buses in the first quarter, but we had a critical electrical component sole source from a supplier that had a limited availability of microprocessors. Their inability to supply us negatively impacted our production rate and booking. We have since engineered a second source for this critical component, as well as the original supplier has improved its chip allocations. We are constantly driving engineering projects to create deviations in resource parts that are limiting production. Late in this quarter, we also saw disruptions in the supply chain driven by the Omicron variant of COVID. As we discussed during our last earnings call, the first half of this year's production is primarily comprised of units that should have been produced in fiscal year 21 if we had access to the volume of components needed to support our production demand. Instead, these units have been pushed out into our first half at a cost basis that is now much higher, and with contractual customer pricing that was agreed to nearly a year ago, capturing little of the recent price increases and putting pressure on first half margins. We continue to monitor the inflationary pressures in the economy and our pricing in line with our expected cost increases. We've previously announced total price increases of 11% and effective March 1st, we are taking another 4% price increase for new orders that will equate to a total of 15% in less than 12 months, which is unprecedented for our industry. Slide seven has our financial results and our ongoing business highlights. In the first quarter, we booked 1,149 units with sales of 129 million. This was 106 units less than the fiscal year 21, but only 1 million less in revenue due to an increase in our average selling price by $4,000 and stronger part sales. Our adjusted EBITDA was $4 million, $2 million less than the first quarter of 21, and our adjusted free cash flow was negative $34 million, driven by high levels of raw and work-in-process inventory caused by supply chain disruptions. In the quarter, and since our last earnings call, we have accomplished a number of key items. We continue to make progress on our first foundational objective, which is taking care of our employees. We made critical upgrades to the facility during the quarter, including improvements to the cafeteria, break rooms, and key engagement areas. We're also driving new safety culture initiatives to lower the incident rates. In November, we had the opportunity to meet in person with 92% of the Bluebird dealers at our annual dealer meeting, which had not taken place in a couple of years due to COVID. We are very transparent with our dealer partners about the inflationary pressure in the global marketplace and the resulting need to revise our historic pricing and business practices to improve our collective profitability in a volatile macroeconomic environment. In the EV sector, we are continuing our dominance, and so our EV school bus backlog in Type C and D alone go to nearly 300 units. We secured a 30-unit EV order for the Modesto City Schools, the largest single order placed by any school district to date. We were also awarded the EV Business of the General Services Administration, or GSA, a longtime customer. Our bookings for the quarter reflected an Alternative Power mix of 56%, up 10 points year over year. And our leadership in Alternative Power shows no signs of slowing down and extends past EV. with Zoom services awarding us the business for 400 units, including 350 gasoline and 50 CNG units. Overall, in a difficult quarter, we still drove improvements in our business and focused on streamlining our operations so that we can ramp up volume in the back half of the year. I will discuss additional progress in our focus areas later in the call, but first I would like to hand over to Razvan to walk through our financial results in more detail. Razvan.

Thanks, Matt, and good afternoon. It is my pleasure to share with you the financial highlights from Blueboard's fiscal 2022 first quarter results. The quarter end is based on a close date of January 1st, 2022, whereas the prior year was based on a January 2nd, 2021 close date. We will file the 10Q today, February 9, after the market closes. Our 10Q includes additional material and disclosures regarding our business and financial performance. We encourage you to read the 10Q and the important disclosures that it contains. The appendix attached to today's presentation includes reconciliations of differences between GAAP and non-GAAP measures mentioned on this call, as well as important disclaimers. Slide 9 is a summary of first quarter results for fiscal 22 and fiscal 21. It was a very tough quarter for Bluebird, with a difficult operating environment as a result of supply chain disruptions that have impacted many industries, especially those that use microchips and resin in their products. Further compounding the challenge, raw material prices continued to rise during the entire calendar year 2021, especially steel up approximately 300% and aluminum up approximately 150%. The cost of overseas transportation increased nearly tenfold. Bluebird unit sales volume of 1,149 units was 106 units lower than prior year due to supplier constraints that limited our rate of production. Supply issues were experienced for multiple components across a number of suppliers. While the disruptions continue to impact our business through the quarter, Our team has been working hard to find alternative sources for several critical parts that are constrained. In addition, Bluebird had a backlog of over 4,800 units at quarter end, or 3,700 more than at the end of the first quarter of fiscal 21. Our definition of a backlog unit is a firm order which becomes non-cancellable within 14 weeks of the expected production date. At this time, our production capacity, which is constrained for the first half of the year, is filling up quickly with only approximately 2,500 slots left open for fiscal 2022. Our ability to complete and deliver all of these units on a timely basis will depend on supply stability of key components. Consolidated net revenue of $129 million was 1 million lower than prior year due to the lower production capability already mentioned. Of that, bus net revenue was 112 million, down by 5 million versus the prior year due to lower volume. In fact, our average bus revenue per unit increased from 94,000 to 98,000, which was largely the result of a higher mix of alternative power buses, 56% of bookings versus 46% last year, due to the outstanding success of the new 7.3-liter engine in our gasoline and propane units. Supply-constrained EV sales were at a level of 40 units, or 16 higher than last year. Parts revenue for the quarter was $17 million, representing an improvement of $4 million compared to the prior year first quarter. Over the past few quarters, we have seen improvement in parts sales which is an indicator that the normal work for school districts is starting to get back to pre-COVID level, although there has been some disruption also in our parts business due to supplier shortages. Growth margin for the quarter was 12.5%, or 140 basis points higher than the same period last year. The increase was driven mainly by the higher mix of parts business relative to the bus business, combined with favorable product mix. As we noted on the fourth quarter call, we expected to see raw material and component cost pressure increase in the first quarter due to significant increases in steel and other commodities, as well as a continuation of higher costs that are being experienced in all modes of freight. As Matt mentioned, we have previously implemented a total of 11% pricing increase to help offset these headwinds, However, this will only materialize during the second half of fiscal 22, as we have to work through the current backlog first. Wherever possible, however, we took limited pricing increase actions even on the existing backlog, with the impact expected to come during the remainder of the fiscal year. In the first quarter of fiscal 22, adjusted net income was negative $2 million, or $2 million lower than last year. Adjusted EBITDA of approximately 4 million was down compared with prior year, also by 2 million, while adjusted EBITDA margin was approximately 3% for a year-over-year decrease of 1.7 percentage points. Adjusted diluted earnings per share of negative 7 cents was also slightly down from the prior year. Slide 10 shows the walk from fiscal 21 first quarter adjusted EBITDA to the fiscal 22 first quarter results. Starting on the left at 5.8, lower bus volume in the period of 1,149 units down 106 units was offset by higher pass volume of 1.9, resulting in a 0.2 million favorable impact. Pricing net of economics was slightly positive in the quarter, driven by the positive effect of revaluating the inventory we had on hand at the start of the fiscal year. which was bought at a lower cost than the new standard cost, and partially offset by higher steel and commodity costs. As we look to the balance of the year, you will more clearly see the impact of higher commodity costs. Efficiencies were slightly better than last year. SG&A and engineering expenses were close to $3 million higher than last year, primarily driven by higher wages. Recall that during the first quarter of fiscal 21, we had pay cuts and furloughs in place in response to COVID-19 demand drop, and key engineering projects were postponed. Since then, pay has been restored and also increased due to high inflation, and essential regulatory engineering projects have resumed. In order to align and energize our dealer body, we had our in-person annual dealer meeting in November 2021 in California, which was canceled the year prior. Additionally, in the other category, our joint venture results from Microbar were close to one million lower versus the prior year, but they have been also affected by supply chain shortages, predominantly the microchip shortage, which is impacting the chassis allocation from Ford and GM. Moving on to the balance sheet and liquidity on slide 11. We ended the quarter with cash of four million, down 20 million from the same time last year. That was at 165 million or 5.7 million lower than last year. Net debt was 161 million and it was 14 million higher versus the prior year. It is worth noting that we were in compliance with all covenants at the end of the quarter. There were two active financial covenants in our credit agreement for the period. First, the trailing 12-month EBITDA as defined under the credit agreement was 28 million versus a minimum requirement of 14.5 million. Second, liquidity as defined under the credit agreement was 93 million at quarter end versus a minimum covenant of 10 million. Therefore, we remained in compliance with our credit agreement covenants. Moving on to slide 12, we have already covered the cash and debt on the previous slide. The deterioration in operating cash flow and adjusted free cash flow was primarily driven by higher working capital and secondarily by lower profits due to lower volume. On slide 13, going into fiscal 22, our margins were and still are under pressure. We are facing increased costs for raw materials, freight, labor, and generally supplier-driven disruptions. And while we have a substantial backlog, many of the buses will not benefit yet from the pricing actions we took in July and October of 2021. These effects, combined with current low throughput due to supply chain constraints, will create a very low first half of 2022 profitability, even by historical seasonally adjusted comparisons. We are taking actions as outlined on this slide in order to improve our costing stability over the medium term and reduce our pricing exposure going forward. Those actions will start to show results in Q3 of 2022 and become fully effective in Q4 of 2022 due to the time lag, especially on the pricing side, given the current backlog. On the costing side, we have increased our steel hedging program and are working to extend it to our key suppliers. We have engineered second source suppliers for key components in order to increase plant throughput and our resourcing components where needed. We are also selectively exploring vertical integration options via make or buy analysis. On the pricing side, we implemented 11% price increase to recover known cost increases. So far, the response has been positive, and we will continue to monitor our win-lose rate in the marketplace. To reduce our exposure, we already reduced our code guarantee from 90 to 60 days. Additionally, due to still higher raw material price and freight developments, we have announced an additional 4% price increase, effective March 1st of 2022 for new orders. However, this will only minimally impact fiscal 2022 units sold. Another important change was the introduction in December of a variable pricing structure for our dealers and customers while maintaining a higher fixed price option if desired. While it is still early, the initial response is also favorable on this one. On slide 14, looking at the balance of fiscal 22, as previously discussed, we are expecting a difficult first half due to supply constraints and margin pressure, with the majority of the cost increases becoming effective on January 1st based on our supply contracts. We still expect to see gradual relief beginning in Q3. The supply chain constraints are resolved due to new suppliers coming on board, and the 11% price increase begins to take effect. In Q4, we expect to be at higher production levels and with normalized margins as the full 11% price increase goes into effect and an additional minimal impact from the recently announced 4% price increase becomes also effective. Therefore, we are maintaining our guidance for fiscal 22 previously released during our fiscal 21 year-end call. With that, I will now turn the discussion back to Matt who will walk you through an update on our business. Matt?

Thank you, Razvan. I would now like to walk through progress on our key focus areas for fiscal 22. This is a reminder on slide 16, you can see our three foundational objectives. The first is to take care of our employees. The second is to delight our customers and dealers. And the third is to deliver profitable growth. Around each of those, you can see the key metrics we track in the business. With those foundational objectives in mind, we are focused on four key areas for fiscal year 22. The first area is our people, making Bluebird a premier place to work, better engaging our workforce and creating an inviting environment where all our employees look forward to the opportunity to share their passion and ideas. The ultimate goals are to improve our cost and quality and reduce absenteeism and attrition. The second major focus area is on lean transformation, taking the production of Bluebird school buses to the next level, building the foundation to implement a world-class operating system that drives out cost, improves quality, increases throughput, and improves the working environment for our teammates.

The third area, is to expand our total addressable market.

Now, school buses will always be core, yet there are some markets that take a chassis so similar to our school bus that I would call them an extension of our core competency of building great chassis rather than a market adjacency. We have excess chassis capacity, and these additional segments can help absorb overhead, offset the seasonality of the school bus business, and assist us in retaining a more consistent workforce. Our final major focus area is scaling up EV. As we discussed extensively during our last earnings call, the EV market demand is heating up, and we have yet to even see the impact of the $5 billion in incentives recently approved in the infrastructure spending bill that will, pardon the pun, supercharge the increased demand for battery electric school buses. This increased EV demand impacts everything from our sales strategy, sourcing, production, transportation, and infrastructure. We have a dedicated cross-functional team that meets daily that is focused on preparing Bloober for this bright future in electrification and strengthening our leadership position. Now let's take a look at some of our progress on slide 17. On the people front, we upgraded the teammate facilities, including the cafeteria, break rooms, and main walkways. We also recently launched an employee app. where teammates can get real-time information on schedule changes, daily production rates, and other key topics. We have also put in place safety and employee councils to list the teammate feedback on how we collectively improve. We have a passionate, tenured base of employees that have great ideas for how to take Bluebird to the next level. Now, the lean transformation is just getting started with some of the basics, including aspects of visual management and 5S. We are also improving performance transparency in our facility with daily stand-up meetings on safety, quality, cost, delivery, and people, or SQCDP, with stations visible for reviews with the production teams. We are also targeting non-value-added work in our facility and see a clear path by 2025 to reduce our labor hours by 30% per bus. We're already working on initiatives to start to impact those numbers. The next slide focuses on our progress on expanding our total addressable market and scaling EV. The target segments we will focus on to expand our chassis business are motorhomes and last mile class 5 and 6 delivery vehicles. There is a clear need in this space with only two main competitors. The total addressable market for all motorhomes and last-mile chassis is roughly 30,000 units, effectively doubling the addressable market for Bluebird. We want to concentrate on offering a chassis for the higher-end motorhome segment in the EV-powered last-mile delivery vehicles. As I mentioned, I wouldn't even call these adjacencies. They're more of an expansion of our two of our core competencies, and that is chassis design and assembly. These segments only really need minimal engineering from an existing school bus chassis design. We are progressing on the engineering, and we are in the final selection process for the EV powertrain for the last mile delivery chassis. The discussions with potential customers are also progressing, reinforcing our belief in the market for a need for an OEM engineered chassis solution backed by the aftermarket support of a proven company with a great dealer network. On the EV side, we have made plans to scale up our production from our current capacity of four units per day to 12 per day by the end of this year, with a goal of an annual output of 4,000 units by 2024. Beyond that, our goal would be to add an additional 2,000 units of capacity, which would support our volume for the long-term outlook. To enable our ramp up in EV, we are repurposing an existing facility on our campus for dedicated EV chassis final assembly. We are also putting in the necessary infrastructure to accommodate DC fast chargers to provide charging of all the units in process.

Now moving on to slide 19.

In summary, the outlook for Bluebird is incredibly positive. In the second half of the year, the pricing starts to catch up with production, And although we expect the supply chain disruptions to continue, there's been some material improvement. Also, our lean transformation activities have enabled us to break some of the bottlenecks in manufacturing and deliver a more consistent daily production volume, even with the ups and downs of parts availability. We continue to be the alternative power leader with our success in EV and other non-diesel powertrain solutions, and we haven't even seen the impact yet of the $5 billion in incentives for EV and cleaner emission school buses from the infrastructure spending bill. We anticipate the EPA will roll out the program by the end of March, and that we'll start seeing orders in the second half of calendar year 2022. And although the Build Back Better bill seems to be on ice, There are elements of the program like increased funding for EV school buses that may still pass. Also, let's not forget the EV progress in Canada, which is an incredibly important market for us. The province of Quebec will only purchase electric school buses going forward, and we are one of only two players authorized to sell electric buses there. As we just saw, we are making progress and are expanding our total addressable market. yet that impact is not included in the long-term outlook we shared on the last earnings call. Bluebird will be ready to take advantage of the opportunities when the market normalizes with respect to supply chain disruptions. In the meantime, we continue to move the business forward and stay laser-focused on our priorities and deliverables. We look forward to continuing to update you on our progress and development. We would now like to open up the line questions. Thank you.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from Craig Irwin with Roth Capital Partners. Please proceed with your question.

Good evening, gentlemen. Thanks for taking my questions. Hey, Craig. How you doing? I'm great. I'm great. So margins were actually pretty impressive given the headwinds out there, you know, up, what, 575 basis points sequentially. Can you maybe talk us through a little bit more about, you know, what allowed you to get those margins in the quarter? I know total price is now 11 plus 4, so that's a pretty good amount of price to put through. But what were the items that allowed you to see the short-term benefit? I mean, that's a big step up sequentially, and it was even a step up versus last year.

Yes, Craig, thank you for the question. So on the margin side, we have a couple of elements going on. First of all, we have a higher mix of parts business relative to the bus business in this quarter versus a year ago. And as you know, the margin on the part side is higher than on the bus side. So that mix is a favorable effect. Secondly, we managed to postpone some of the increases from our suppliers into the second half of this fiscal year. So we were able to be a little bit more favorable on that front as well. Third, we have a favorable mix from our alternative power buses that have relatively favorable margins compared to diesel as well. And we also start to see more and more EV vehicles into the mix. So between all these factors, I think that is why our margins have gone up. But as I mentioned, in our As it is mentioned in our 10Q, we have one additional effect on the inventory revaluation, and it was also in the presentation earlier on. So we did get a one-time positive benefit from the inventory reval. We updated the standard cost at the beginning of October, and that gives us a one-time bump reducing the unfavorable variances.

Just to add to that, Craig, you had mentioned the 11% in pricing. We won't see that in the units in the first half of our year. That starts to come in in the back half.

Understood. Understood. So then you guys obviously did a really good job on expense control as well. But, you know, if we flatten out the impact of accelerated investing for executives that left, right, you're up about $2.5 million year over year. Can you maybe talk about what's going on with SG&A? You did mention a couple times things you're doing for the employees and retention. But is there anything that's going to sort of structurally move this over the next couple of quarters?

Yes, I will take that question as well. Thank you. The baseline, the comparison to one year ago, it's extraordinarily low. If you remember, at that point in time, we had furloughs and we had pay cuts. And this is not a sustainable level for our business. So you have a couple of effects. Once, we had to restore the pay to the normal levels. And in addition, we had to increase our pay for all the employees due to the inflation experienced in the economy and going forward to ensure we are competitive in the marketplace and retain our talent. So these are the two main items, I would say. In addition, we had the dealer meeting, which was canceled two years prior, and we had to take the opportunity to engage with our dealer network and align them and get them excited about the future. Understood, understood.

So then if we could talk just a little bit about gross margins looking forward. You know, I know you're careful about potentially giving guidance, but, you know, if we flatten the inventory revaluation impact, the benefit in the quarter, would you expect margins to continue to see a little bit of sequential pressure given the deliveries book? Or do you expect the deliveries to be incrementally favorable over the next few months?

So definitely for the second quarter, we expect increased margin pressure because as you mentioned in the presentation early on, we have many price increases from our suppliers becoming effective January 1st of 22. And we are still working through many units in the backlog that have prices set six to 12 months ago. So the pressure will be higher on the Q2 margins, and they expect gradual improvement into Q3 and more favorable margins into Q4 fiscal 22.

Great. Thanks. I'll hop back in the queue and take my questions offline.

Thank you. All right. Thank you, Craig.

As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. Our next question is from Eric Stein with Craig Hallam. Please proceed with your question.

Hi, everyone. Hey, Eric. Good afternoon.

Thanks. Good afternoon. So I believe last quarter you specifically called out approximately I think 25 parts kind of on average per bus that were causing you issues. And, you know, great to hear that you've got the one, you called out one primary, where you've got a second supplier. But, you know, curious, kind of as you think about those other main components, progress you're making in your presentation, you did call out, you know, that you are in the process of qualifying second suppliers and, if needed, third suppliers. But would love to just hear details beyond the primary one that you called out early in the call.

Yeah, absolutely. So just in general to the point you brought up, like the previous quarter we were averaging, you know, 25 plus parts a day missing. As I mentioned in my remarks, we have seen some material improvement of that. We're about, I'd say, 15 on average per production day, but it only takes one long pull in the tent to prevent us from setting up that chassis. It continues to be a daily game of whack-a-mole, but we are seeing improvements in are starting to extend further up in the supply chain to kind of look around corners, so to speak, to catch issues before they become impactful to our production. And in regards to that one component that I mentioned specifically on the call, that was an electrical component relative to our anti-lock braking system. And that supplier has improved their microprocessor allocation now where they're meeting our daily demand and also we have a plan B should be needed, that we have another supplier ready to go, so that way we're not going to lose production slots.

And if I may add, on the inventory side, we are also taking actions to pre-buy certain key components to ensure we have a little bit of safety stock or buffer so that we can react faster in case some of the shortages happen unexpectedly.

Gotcha. No, that makes sense. Maybe just to clarify. So it sounds like, as you think about the cadence of the quarters here in the fiscal year, that really it's going to be very weighted to the fourth quarter. And maybe I imagine this from the last quarter, but it did seem like last quarter you thought it would be more of a 3Q, 4Q event. I mean, is it fair to say that you're trying to be a little bit more cautious?

on that because while you're making progress there are still issues or would you kind of view that that view of you know recovery and that it's really time to the fourth quarter is basically unchanged versus last quarter yeah eric if you're talking in regards to supply chain i think we're just being cautiously optimistic right we've seen seen as it mentioned material improvement from 25 to 15 parts per day and if you're talking relative to pricing you know, we have this first half of the year where we don't have really any of that impact at 11%, and we gradually start to pick that up through the, you know, third quarter. And then, of course, in the fourth, we start to fully realize that. And then we'll pick up, you know, some units, but it'll be marginal relative to that additional 4% we just announced.

Okay. All right. No, that makes sense. Maybe a good segue to the pricing. I know you did last quarter kind of unveiled the variable price model, but I know you're also obviously increasing prices for the fixed price option. Just curious kind of what you're hearing from your dealers, what's going into that decision given all the moving parts?

Yes, thank you for the question. So we introduced the concept of the variable pricing at the dealer network at the end of last year, and we put it in effect early this year. The initial reaction is positive. So some dealers appreciate the opportunity to have a locked fixed price, and some appreciate the opportunity to have a bit more flexibility into the future. It's a bit early to call it, so I think we need a couple more months to have a more statistical relevant base, let's say. But overall, I would say the message was clearly understood by our dealer network, and it's something that we absolutely have to do in order to align the equation on the pricing and costing given the current inflationary environment.

Okay, I'll take the rest offline. Thanks. All right. Thank you, Eric.

We have reached the end of the question and answer session, and I will now turn the call over to Matthew Stevenson for closing remarks.

All right. Thank you, Kyle. And thank you to all those joining us on the call today. As you heard during our prepared remarks, incoming orders for our school buses continue to trend at pre-COVID levels, and our backlogs at a record 500 million. And we are continuing our dominance in alternative power buses. Plus, we're making progress on our key focus areas, improving the workplace for our teammates, transforming our processes, scaling operations for the growth in EV, and expanding our total addressable market. The supply chain disruptions we have seen over the last few quarters appear to be moderating. We expect recovery to support ramping up production significantly in the second half of this fiscal year. We look forward to updating you again on our progress next quarter and appreciate your continued interest in Bluebirds. Should you have any follow-up questions, please don't hesitate to contact our head of profitability and investor relations, Mark Benfield. And thank you again from all of us here at Bluebird.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.