Inogen, Inc

Welcome to Inogen's second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. To ask a question at that time, please press star followed by one on your touch-tone phone. If anyone has difficulty hearing the conference, please press star zero for operator assistance. As a reminder, this conference is being recorded today, August 4th, 2022. I would now like to turn the call over to Agnes Lee, Senior Vice President of Investor Relations and Strategic Planning.

Thank you for participating in today's call. Joining me are CEO Nabeel Shabshab and CFO Kristen Kaltreuter. Earlier today, Inogen released financial results for the second quarter of 2022. This earnings release is currently available in the investor relations section of the company's website, along with a supplemental financial package. As a reminder, the information presented today will include forward-looking statements, including, without limitation, statements about our growth prospects and strategy for 2022 and beyond, expectations related to our financial results for the third quarter of 2022, and expectations related to a return to profitability. Our expectations with respect to supply challenges and cost inflation related to semiconductor chips and other product parts used in our POCs. Our expectations on European regulatory clearances and approvals, future reimbursement rates, expectations regarding increasing productivity of our internal and external sales team, progress of our strategic initiatives, including innovation, hiring expectations, our expectations regarding the market for our products, on our business and supply and demand for our products in both the short-term and long-term. The four little statements in this call are based on information currently available to us as of today's date. August 4th, 2022. These forward-looking statements are only predictions and involve risks and uncertainties that are set forth in more detail in our most recent periodic report filed with the Securities and Exchange Commission. Actual results may vary, and we disclaim any obligations to update these forward-looking statements except as may be required by law. we have posted historical financial statements and our investor presentations in the investor relations section of the company's website. Please refer to these files for more detailed information. During the call, we will also present certain financial information on a non-GAAP basis. Management believes that non-GAAP financial measures taken in conjunction with U.S. GAAP financial measures provide useful information for both management and investors by excluding certain non-cash items and other expenses that are not indicative of Inogen's core operating results. Management uses non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. Reconciliation between U.S. GAAP and non-GAAP results are presented in tables within our earnings relief. With that, I will turn the call over to Imogen's President and CEO, Nabeel Shabshab. Nabeel?

Thanks, Agnes. Good afternoon, and thank you for joining our second quarter 2022 conference call. We have made tremendous progress in the second quarter, driving 29% sequential revenue growth compared to the first quarter of 2022. This accomplishment can be directly attributed to the team's efforts to manage and mitigate supply chain headwinds and macro challenges to meet customer demands. From a supply perspective, the relentless focus and investments that we have made to secure semiconductor inventory from our regular channel as well as the open market, in addition to our POC redesign efforts, have allowed us to manage most of the challenges so far. As a result, we are pleased to be able to provide revenue guidance for the third quarter. We are expecting third quarter revenue to be in the range of $97 million to $100 million, representing growth of 4% to 7% versus same period in 2021. Kristen will be going into more detail regarding our outlook when she covers our financials later. Despite the improved visibility, the supply situation continues to be fluid, and we are still persistently engaging with our suppliers and working through challenges to improve coverage for the remainder of the year. While successfully managing our supply constraints this quarter, we have continued to execute on our transformation. I'm pleased with the pace of progress, the fundamental capabilities we have strengthened, and how this is impacting our execution in the current year, but more importantly, allowing us to set up for scale and profitability in 2023 and beyond. Our continued focus on improving talent and our envisioned culture are important pillars of our transformation. This quarter, we added Agnes Lee as our SVP of Investor Relations and Strategic Planning. Agnes brings more than 25 years of experience in investor relations, finance, and communication from a range of small, mid, and large cap medical device, life sciences, and diagnostics companies. We are continuing to selectively upgrade our team at various levels to drive relentless execution and add bench strength. We have also made significant strides executing on our commercial productivity while driving sales performance, specifically in our DTC and prescriber teams. Our efforts and focus to drive innovation are showing early promise of setting us up for a strong pipeline in the medium term. I will talk in more detail about this progress, but first, I wanted to provide an update on the supply chain situation. In the second quarter, we have been able to stay on top of our semiconductor supply situation. In many cases, we have actively engaged and partnered with our regular suppliers to manage commitments and delivery schedules. We have also been successful in securing supply from the open channel and have successfully completed the secondary design of the motherboard on our POCs to work around certain chip shortages. Based on our latest assessment and despite various moving pieces, our outlook is cautiously optimistic. While we have not mitigated all the supply risks, we feel we are making adequate progress to secure most of the needed parts for the third quarter, the remainder of 2022, and early 2023. Opportunistic forward buying of semiconductor parts will remain part of our strategy to mitigate risks moving forward. I would like to stress that although we have been successfully managing an unstable supply situation for several quarters, any delays in securing supply or receiving materials would impact our ability to meet customer demand potentially into 2023. Now turning to strategic initiatives, although supply chain had demanded a large amount of our time and energy, we have maintained a focus on our strategic initiatives that are essential to support durable growth in the future. I would like to walk through some of our progress in that area. One of the critical enablers of performance is commercial excellence, which we have been focused on to drive sales growth. We have been making steady progress to expand our sales footprint specifically in the prescriber team while driving increased productivity across all of our commercial operations. We continue to actively make adjustments in our prescriber sales organization aimed at addressing the makeup and performance of the team. While we remain focused on optimizing the overall capabilities, we achieved 57 staff sales positions out of our target of 60, despite the challenging hiring environment. In the DTC channel, we continue to strengthen our sales capabilities and refine our organization with focus on adding new sales talent, further deployment of greatly improved training and onboarding, and the use of analytics and tools to support sales management and productivity. We are happy with the early and promising signs of elevated sales performance and productivity across the cash and prescriber teams. Another critical part of our transformation is innovation and new product development. We are determined to build a stronger innovation pipeline to drive medium-term growth and support of our long-term growth aspiration. We have amassed patient and prescriber insights through ethnographic and quantitative primary research that are being used as part of our ideation and down selection of the concepts. We also recently added a senior leader to the organization to drive innovation strategy and projects and have partnered with an outside innovation company with several months of successful joint efforts already underway. Additionally, we are now working closely with our recently appointed scientific advisory board to seek input on clinical criteria that will augment our technical, commercial, and regulatory considerations in our prioritization efforts. The elevated disciplines, capabilities, and multifaceted external collaboration are starting to deliver higher quantity and quality projects with elevated predictability. We still have substantive work to be done over the medium term to create a solid product pipeline, and I look forward to sharing more details in the future when we are ready. As a medical technology company, we have also been building a clinical capability to support our go-to-market and innovation strategies. Our clinical efforts additionally focus on opportunities where we believe market development can help drive a higher level of adoption for POCs as part of the overall oxygen therapy. Over the last six months, we have had to direct the team's focus on meeting regulatory needs, but we recently added a clinical leader who will focus on driving clinical discipline and product development, engaging with key opinion leaders, and spearheading our clinical trial work. I would now like to move to an update on the European regulatory clearances and U.S. reimbursement. Current Inogen products are commercialized in the European Union under the medical device directive certificates, and ours expired on May 18, 2022. The review of our MDR submission is progressing, albeit a bit slower than we expected, and we will provide an update when we have approval. In the interim, we filed derogation requests in Germany, France, Spain, Italy, Belgium, the Netherlands, and a few other European countries. We have already received an approval to continue selling our POCs in France until the end of October 2022, as well as approvals in the UK. On the U.S. reimbursement front, the COVID-19 public health emergency has been extended another 90 days, which will continue to allow a lower burden in terms of medical documentation and administrative steps when physicians prescribe home oxygen therapy for Medicare patients. As we look ahead, despite the near-term challenges, the underlying demand for our offerings is strong and we are committed to increasing the POC market penetration and improving patient access. Despite the improvement in supply chain, uncertainties remain and we are committed to continue to manage that with the same focus and tenacity that we have displayed so far. I'm pleased to report that this quarter, several factors led to the improving clarity in our outlook. First, we have seen continued demand for our offerings in our core business in DTC and rentals. Second, we are seeing good outcomes from our ongoing efforts to remediate B2B backlog of orders. And third, we have been successful in our efforts to reasonably manage supply chain challenges. As a result of these factors, we will be providing Q3 revenue guidance with the hope of returning to full-year guidance as supply challenges abate. Our commercial organization continues to improve as we implement training, deploy analytics to drive performance, and strengthen our sales management disciplines to drive productivity. We have also laid the groundwork with good initial progress in terms of strengthening our innovation pipeline, and we are well positioned to continue progress with the clinical efforts moving forward. Over the last year, we have successfully strengthened our leadership team who have demonstrated abilities to strategize, execute, drive efficiency and productivity, and mitigate risks due to the challenging environment Imogen and other companies are operating in. I am particularly proud of the new fact-based and insights-driven discipline we have put in place and know that it is core to our efforts to drive successful commercial execution and results and accelerate our innovation efforts. We look forward to updating you on our progress as we stabilize our supply chain and refine our long-term strategy that articulates our short and long-term market opportunities and our runway for growth, profitability, and value creation. I will now turn the call over to Kristen. Kristen?

Thanks, Nabil. And good afternoon, everyone. Total revenue for the second quarter of 2022 was $103.4 million. a substantial sequential increase of approximately 29% from the first quarter of 2022. This improvement was made possible by higher production volumes available for sale in the quarter. Q2 revenue increased 1.8% over the comparable period in 2021. The year-over-year increase was driven by higher sales to our international B2B channel, as we prioritized product for international shipments due to the imminent expiration of the European Union medical device directive certificate. Additionally, we experienced a significant increase in sales to our domestic rental channel. This growth was partially offset by lower domestic business-to-business sales due to the prioritization of shipments to Europe through May. For the second quarter, Foreign exchange had a negative 180 basis points impact on total revenue and a negative 780 basis points impact on international revenue. On a constant currency basis, second quarter total revenue increased 3.6% over Q2 2021. Looking at revenue on a more detailed basis, international B2B sales increased 71.6% to $37.4 million in the second quarter of 2022, from $21.8 million in the prior year, driven by the prioritized shipment of product in advance of the expiration of the EUMDD certificate, as discussed previously. Domestic direct-to-consumer sales decreased 0.7% to $40.6 million in the second quarter of 2022, from $40.9 million in the second quarter of 2021, primarily driven by lower volume due to lower sales representative discount. This is offset by an increase in average selling prices. Domestic B2B revenue decreased 59.3%, to $11.2 million in the period, compared to $27.6 million in the prior year, but increased approximately 120% sequentially versus Q1-22, as we began to fulfill the backlogged orders in this channel. Rental revenue increased 25.1% to $14.1 million in the second quarter of 2022. from $11.3 million in the second quarter of 2021, primarily driven by more patients on service and higher Medicare reimbursement rates. Now on to discuss our gross margin. Sales revenue growth margin was 43.3% in the second quarter of 2022, declining 510 basis points from the second quarter of 2021, driven by higher purchase price variances and warranty costs, partially offset by higher selling prices and improved channel mix. Rental revenue gross margin was 54.2% in the second quarter of 2022 versus 58.6% in the second quarter of 2021, a decline of 440 basis points. The decrease was primarily driven by increased service costs and depreciation, partially offset by higher Medicare reimbursement rates. Moving on to operating expense, total operating expense increased to $49.1 million in the quarter compared to $38.7 million in the second quarter of 2021. This represented an increase across all categories. First, we have continued to invest in R&D with an increase in spend of $1.9 million versus the second quarter of 2021. The majority of this increased spend was for product development and regulatory activities. For sales and marketing, the $1.1 million increase in spending is primarily related to altering our prescriber business with increased consulting expenses and subscription fees associated with analytical tools intended to increase sales rec productivity. And for general and administrative expenses, The $7.5 million increase is primarily due to a $6 million decrease in the benefit from the change in fair value of the new era earn-out liability and a $1 million increase in personnel-related expenses aimed at rebuilding core capabilities at the company. In the second quarter of 2022, we reported a net loss of $3.4 million and loss for diluted share of 15 cents. On an adjusted basis, we reported a net loss of $366,000 and an adjusted loss per diluted share of 2 cents. Adjusted EBITDA is positive, $3.2 million. Moving on to our balance sheet, we continue to make investments this quarter in our inventory and create significant additional costs for the semiconductor chips purchased on the open market, but not yet sold in finished ships. This contributed to increases in pre-made expense and other current assets and inventory. As of June 30, 2022, these balances were $25.5 million and $33.5 million, respectively. Finally, We ended the second quarter of 2022 with cash and cash equivalent of $223.6 million with no debt outstanding. This was in line with our cash position in the first quarter of 2022. I will now turn to our financial outlook. As Nabeel mentioned earlier, we are providing revenue guidance for the third quarter. We are now expecting total company revenue for Q3 2022 in the range of $97 million to $100 million, resulting in growth of 4% to 7% on a year-over-year basis. This range continues to reflect uncertainty associated with the phasing of domestic B2B open orders and timing for these customers to return to normal ordering patterns. Given the ongoing uncertainty related to supply chain disruptions and the COVID-19 pandemic, we are not providing detailed financial guidance for the full year of 2022. To further help provide context for modeling, we are still actively managing our supply chain constraints, including forward buying of semiconductor chips. This has led to higher PPV, which is expected to have an impact on our Q3 2022 gross profits. and a lessening impact for the remainder of the year and into early 2023. We do not have line of sight to when the supply chain constrained environment would subside, but we believe this margin compression from higher PPV is temporary, while the offsetting impact of increases to our selling prices taken over the past year will remain. We also expect prepayment inventory levels to decline over the same period. From an operating expense perspective, we expect to continue to see increased spend in the business through the end of 2022, in line with our original long-range plan aimed at strengthening capabilities. These investments will set us up for long-term revenue growth and a return to profitability in the future. With that, we will be happy to take your questions.

Thank you. And 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 would 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 comes from the line of Matthew Michon with KeyBank. Please proceed with your question.

Hey, guys. This is Brett Bishpin on today for Matt. Thanks for taking the questions. Just wanted to follow up on some of the comments around supply chain. I think you guys were pretty clear around what you're seeing in the market and level of current visibility. But just thinking about some of the forward buying around chips, can you frame how the impact of that higher cost inventory could blow through to gross margins over the next few quarters and potentially into 2023? Hey, Brett.

Thanks for the question. It's Nabil. I'm going to take that one. So maybe let me start by saying that supply chain is, we're cautiously optimistic, as we said, but there's still a need for us to get ahead of some of the issues that we're seeing in the marketplace. And that does require us to make sure that we are opportunistically looking at the gaps that we have and buying forward From a pricing perspective, we're seeing prices remain almost where they are in terms of the open market channel. So the PPV is expected to be the same at least for the coming quarter at least and then early into 2023. All right.

And then just I wanted to also just touch on the international. Understanding there was a bull list of sales coming in ahead of the EU MDR deadline. Was this level in line with your expectations maybe this time last quarter, or was it higher? And then just looking ahead, I know there wasn't a specific timing update, but can you just touch on what needs to happen between now and then eventually getting the approval for that submission?

So Brett just wanted me to make sure. The question is a two-part question. The first part is on the level of sales that we achieved in Q2, and does it sustain in Q3? I just want to make sure I'm answering the right question.

Yeah.

Yeah, so as we had indicated before, we actually shipped in Q2 product to meet the demand that we had in place, but ahead of the expiration of the MDD certificate that we had. We do not expect the same volume to actually occur in Q3 because we met part of that demand with the shipments that we sent in in Q2. Your second question was more around what does need to happen between now and then to secure the approval on the MDR filing? It was hard to hear.

Yeah, exactly. You got it.

Okay. So like we said in our prepared remarks, our filing is going through review. It's progressing, a little bit slower than we expected, but it is progressing. We've received the first set of questions. We actually are preparing to respond to them. So we will update you once we get closer and have an approval. But until then, there is nothing that has changed in our expectation about the timing.

All right, thanks for that caller. And then last question from me. There definitely seems like there is a backlog and demand trends are healthy. Can you just touch on what you're seeing around consumer demand trends in the U.S., and then whether you think a broader pullback in consumer spending could impact energy and trajectory, you know, all things equal around the supply dynamics?

Yeah, Brett, it's an excellent question. So let me maybe start with the general context just a little bit. In medical devices, and in my discussions with other CEOs, we have not seen a lot of pullback in terms of spending on health care. specifically as it relates to disease states that are difficult to manage and the willingness of patients to spend out of pocket. And your question is specifically around the cash channel and inflation impact, as well as the increasing cost of living. So then internally from our signals and what we're seeing, we have not seen any softening in the demand. And just by way of reminding you, we actually did some price elasticity work not too long ago to make sure that we felt comfortable with taking the price increase. So far, maybe as a summary, we have not seen any impact in terms of the demand, and we're confident that this price increase that we took has worked and will stick.

All right. Thank you for taking the questions.

Thank you, Brett.

Our next question comes from the line of Margaret Cagsar with William Blair. Please proceed with your questions.

Hi, guys. This is Maggie Bowie on for Margaret today. I wanted to kind of expand on that EU MDR submission a little bit. So I think originally the expectations were for you to have approval within the third quarter. So, you know, given the fact that it's all going slower than expected, what can we expect to assume within your guide for the international market? Thanks.

Hey, Maggie. It's Nadeel. I'm going to take that one. I think we had indicated before, I'm almost sure that we indicated that the approval was slated for Q4, not for Q3, based on the timeline that we had. As I mentioned when I answered the other question now, we're still expecting this to be in line with the same timing almost. As we get more questions and respond to them, we'll have a little bit more definitive sense of is this timeline going to be met or not. But at this point in time, there is no visibility to the timeline changing. for a Q4 approval.

Okay, got it. And then just for my second question, the past two quarters, we've seen a little bit slower growth in terms of rental new patient ads. Can you talk about, you know, what you're obviously can appreciate supply chain is impacting that. But can you talk about just with your growth in your prescriber business, that prescriber Salesforce business, what you're kind of expecting for the rental channel?

So the rental channel, as you can see from the number, continues to grow at a healthy pace. I think the focus that we've had, again, going back a little bit to the strategic aspect of it, we're building a prescriber sales force. We said we're at 57 in the prepared remarks. As of this call, we're around 60 approximately. So the focus continues to be there in terms of driving prescriptions into rental. Most of these patients go into rental. driving prescriptions at the onset of care in that prescriber business and the team, because then we can maximize the available months that we have ahead of us. So as you expect, as you put these teams into the field, we actually put the team into the field between February and March. We continue to actually optimize the performance of that team and their deployment, but we're very positive in terms of, the progress we're making and what we've seen so far, as well as the potential from a rental perspective, Maggie.

Great. Thanks so much.

Thank you. Our next question comes from the line of Robbie Marcus with JPMorgan. Please proceed with your question.

Hey, this is actually Rohan on the line for Robbie. I guess I would just personally want to I was wondering if you could comment more about the U.S. Attorney's Civil Investigative Demand that you had received for or that you just kind of announced. And that was just in conjunction with the False Claim Act. And could you just give more color, whatever you're able to, on potential outcomes from this, specifically from a business perspective, as well as the general validity of the claims?

But this is something that is ongoing. We don't make comments on it while it's going through now. So we're not going to be able to make comments on that.

Okay, fair enough. And the second question is, would you be able to talk more about the variance between customer order patterns and supply headwinds just with regards to your third quarter guidance? So which one is creating more of an uncertainty for you at this point and preventing you from taking that full step or taking a step forward for full use? full year guidance. It seems like from your commentary, the supply is getting a little bit better, at least it's a more line of sight. So what is also just your outlook for customer ordering patterns as well?

So I'll answer the demand question part first. We continue to see very healthy demand in all the channels. As I answered the previous question around the fact that we continue to see a good trend on the cash sales side. The rental side continues to grow and we're making progress there. And the B2B side, which was more of a supply issue, not a demand issue, is getting remediated. And I just want to clarify a little bit of the demand, not the supply issue, supply, not the demand issue. So we actually curtailed some of the supply to the B2B channel because we were trying to manage the short supply overall and making sure that we hit our commitments from a revenue perspective. But despite that, we have not seen a lot of movement in terms of cancellation of backlogged orders. They remain in place, and we are working very diligently on remediating them. So in general, if I had to characterize it, this is more of a supply issue than a demand issue overall. We're not seeing any softening in demand.

Got it. Thank you.

And our next question comes from the line of Mike Mattson with Needham & Company. Please proceed with your question.

Yeah, thanks. So, you know, the commentary around the price increases that you've implemented about that sticking, I mean, I guess, you know, given the different channels, you've got the consumer side and then you've got the kind of B2B side, but you maybe can talk about each of those, but what gives you confidence that those will in fact stick? Because, you know, it seems like that historically, at least the B2B side has been pretty cutthroat with regard to pricing. And if some of your competitors end up having a lot of these things on the shelves at some point. It seems like they might get a little more willing to wheel and deal on price. But I don't know. I just wanted to see what your thoughts were on that.

Hey, Mike and Adil. Thanks for the question. So let me maybe make a comment on where prices historically have been. Despite the price increase that we took in B2B, we are still below the prices at 2017. And since then, reimbursement has gone up. sequentially despite the small amounts year on year. So we're fairly in a good place in terms of where the acceptance of our price increase was. Also, as a reminder, we did not take price increases opportunistically. We did it because of the increasing cost that we had, and we had to make sure that we continued to cover the basis there. So there has not been any adverse reaction. Of course, like all price increases, you get a little bit of resistance in the beginning, and you manage through it, and when people understand the reasons behind it, it sort of settles in. And we had said when we took the price increase, we expected between 70% and 80% of it to actually stick, which has materialized.

Okay, got it. And then on the consumer side, I mean, I know – the company used to sort of do these pricing tests and try to set the price to sort of maximize the, I think, um, operating profit dollars or something like that. Um, so, um, you know, I understand right now your, your supply constraints, it wouldn't make sense to do that type of approach, but, um, you know, if you were to revert back to that, what could not mean you might have to lower the prices there, you know, to kind of maximize the operating profit.

Yeah, so Mike, it's actually a very good question. I'm just going to go a little bit backward and say I think some of the discounts and the promotions that we were accustomed to at Imogen were a result of a little bit weaker performance and execution from a productivity perspective. As you know, we're going through a major upgrade of our sales disciplines and capabilities, as well as equipping our sales teams with the right analytics. And we have a sales management team that is basically very close to the team themselves and how they manage these opportunities. We do not see ourselves in the foreseeable future going back to heavy discounting or promotional efforts. And despite that, since we stopped it actually for the last couple of quarters, we have not seen an adverse impact on demand, honestly.

Okay, got it. And then just the physician Salesforce, I think you said you're up to 60 people there. Are there any kind of metrics you could share with us about, you know, how that Salesforce is doing and kind of how the data driven strategies helping drive growth?

Yes, of course we can make a comment. I'm going to split the answer into a two-part answer, one around the new prescriber team that's in place and then one around the DTP organization. So with the prescriber team, as I mentioned earlier, we put the team in the field between February and March. We've seen actually very good early signs in terms of productivity, not only for the people that were onboarding and have less tenure, but also for the people that were in place. Based on some of the targeting that we're doing with the highest prescribers in the field, where should we go, what level of frequency we should have on them. And we're not going to comment on the actual numbers yet. We'd like to get a little bit of a trend under our belt so we can start having conversations around those productivity measures. But for the time being, suffice it to say, we've seen very encouraging signs of progress in terms of the coverage we have, which we did not have before, as we commented on earlier calls. We cover roughly around now 65% of where these COPD patients are treated and prescribed and with the right focus. And then on the DTP side, we continue to deploy segment-based selling as well as some of the disciplines around improving the quality of the leads and how we're actually managing through that. And despite the fact that we continue to refine the performance of the overall team, we're seeing also encouraging progress in terms of the productivity, be it in the sales cycle time that is reducing a little bit, as well as the win-close rates.

Okay. Got it. Thank you.

And we have reached the end of the question and answer session. I'll now turn the call back over to Nabil Shabshab for closed remarks.

Thank you. I'm pleased with the incredible progress that we have made to manage and mitigate supply and macro headwinds while continuing to transform our business through steady incremental improvements to drive commercial productivity, develop an innovation pipeline, and clinical evidence. Although there is still much to be done, we are seeing continued underlying customer demand and building a solid foundation for long-term, sustainable growth and profitability. As I conclude, I would like to thank our investors for your support and your interest in Inogen, and thank the Inogen team for the continued dedication and hard work that has allowed us to continue to serve patients with oxygen therapy needs all around the world. Thank you.

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