Rocky Brands, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands' fourth quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided for you at that time. If anyone has difficulties hearing the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded. I will now turn the conference over to your host, Brendan Frey of ICR. Thank you. You may begin.

Thanks, Rob, and thanks to everyone joining us today. Before we begin, please note that today's session, including the Q&A period, may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such statements are based on information and assumptions available at this time and are subject to changes, risks, and uncertainties, which may cause actual results to differ materially. We assume no obligation to update such statements. For a complete discussion of the risks and uncertainties, please refer to today's press release and our reports filed with Securities and Exchange Commission, including our 10-K for the year ended December 31, 2023. I now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky Brands. Jason?

Thank you, Brendan. With me on today's call is Tom Robertson, our Chief Operating and Chief Financial Officer. After our prepared remarks, we would be happy to take questions. The fourth quarter marked a solid conclusion to 2024, a year in which we navigated Microeconomic headwinds, lapped business model changes, and non-reoccurring sales from 2023 that made our year-over-year comparisons more difficult. Looking at our results on an apples-to-apples basis, the performance of our core business was encouraging, especially in the fourth quarter while sales trends accelerated as the holiday season progressed, led by demand for our Durango and Extra Tough brands. Demand was particularly strong in our direct to consumer channel, which fueled the highest ever sales volume quarter for our retail segment. At the same time, reoccurring wholesale sales returned to a growth in Q4, increasing mid single digits for the quarter. Helping to drive our recent top line performance was additional investments in demand creation. We under invested in marketing in a year ago period and made the decision to bring spending back in line with historical levels this fourth quarter. We are pleased with the momentum this generated and we plan to make further incremental investments going forward to increase brand awareness and drive traffic to our sites and our wholesale partner doors. Before I hand over Tom, For a more detailed look at the financials, I'll take a few moments to walk through our brand and channel performance. Much like last quarter, our Durango and Extra Tough brands were the standouts in our portfolio that helped deliver better anticipated top line results in Q4. Durango built upon its recent momentum, driven by strong sell through across key accounts and farm and ranch partners and an uptick in at-once business. Our recent work to clear overstock and discontinued styles allowed us to better position our inventory to meet the strongest pockets of demand, serve new niches, and accelerate turn rates. In the near term, we are excited about the launch of new on-trend products as well as expanding the brand into new categories, providing potential catalysts for upside with Durango. Extra Tough delivered another exceptional quarter, finishing with strong double-digit gains. Growth was strong in both the wholesale and e-com channels, driven by better-than-expected holiday performance and strong consumer reception to both our core product and new Fall 24 styles. Of particular note, this summer's new tailgate collection of ankle deck boots in sports-inspired colorways, along with our new Kids Tufts collection, continue to be successful and drive incremental growth for the brand. These new products are opening up a whole new customer set with women's and kids' offerings now making up approximately 40% of the brand's sales collectively. Overall, Extra Tough performed very well in 2024, surpassing expectations and ending the year with a strong momentum. Our focus remains on the launches of our highly anticipated 2025 summer, fall, and holiday lines, keeping our customer shelves well-stocked and the Extra Tough brand top of mind for our consumers. Our other rubber-based brand, Muck, delivered solid overall performance in the fourth quarter, driven largely by cold, wet weather across much of the US, particularly late in the quarter. In fact, December was the best month for the brand in some time. While some factory delays and capacity issues were headwinds in the period, this dynamic allowed us to work through closeout items and position the brand for continued success into the new year. Our new digital advertising efforts continue to drive incremental demand, helping delivery a successful holiday for the brand's new fall 2024 styles. Looking ahead, we increased our digital campaign spend in December and pivoted focus to our Arctic cold weather products and are optimistic that we can continue December's momentum into the first quarter. Georgia Boot delivered a slight increase in Q4 compared to a year ago period. A combination of better boot weather and post-election clarity drove a strong November and December for the brand. Throughout the quarter, we saw solid demand across our account base and also had success adding new accounts in the period. Throughout 2024, the Georgia team has focused on finding and delivering the value sweet spot for our work-based product. This strategy is now beginning to deliver results, with new product being adopted by a number of our large retail partners in the fourth quarter without cannibalizing existing SKUs. Looking ahead, we remain cautiously optimistic that we can continue to build Georgia from here with our new product approach. Turning to Rocky, we saw pockets of strength across the work, western, and outdoor segments in our DTC channel. However, the promotional holiday period and continuing inventory challenge for key retail partners weighed on overall fourth quarter results. Our work segment was the best performing during the period with modest declines compared to a year ago. We continue to adjust the work product mix and value propositions to better match consumer needs while offering unique product that will set us apart from other work competitors. While the work team had a challenging quarter in wholesale, we were pleased with the level of work demand on our own DTC site, demonstrating that our new product continues to resonate with consumers. In Rocky Western, similar efforts to reposition with new value-driven product at more competitive price points are gaining traction. However, the elevated level of holiday promotions in the marketplace during the fourth quarter pressured demand, and slowed our progress. We continue to believe our revamped strategy and product is resonating with our customers as we saw steady DTC volumes during the period, along with solid dropship sales through specialty Western distributors that provided confidence in our more value-focused strategy moving forward. With respect to rocky outdoor, another poor season for hunting and outdoor weather in the critical narrow sales window weighed on fourth quarter sales. As we shared, back-to-back years of more mild weather has led to an over inventory of hunting footwear and apparel with many of our key retail partners. While better boot weather later in the quarter did help offset some of the early weaknesses, The short seasonal window, primarily October through early November, for much of the hunting specialty product made it challenging to make up ground. Looking ahead, we are optimistic that our non-hunting footwear led by rugged, casual styles will continue to provide a degree of mitigation as the more hunting-focused inventory works its way through our retail partners. Lastly, in our commercial military and duty segments, was down in line with our expectations. We are still facing a sizable military blanket purchase agreement that elevated 2023 sales on a comparison basis. Additionally, in Q4, we saw hesitancy to spend allocated monies due to anticipated administrative change. We did see some offsets to these headwinds, primarily from the continuing strength of our fire category. Looking ahead to 2025, we anticipate being able to return the segment to a positive comparison with 2023's elevated sales behind us. Shifting to retail, our branded e-commerce sites and marketplace business continued their recent positive momentum in the fourth quarter. Across our digital platforms, we successfully navigated and consented holiday shopping season through targeted promotional strategies and enhanced consumer engagement initiatives. Notable areas of strength included Extra Tough and Durango, which both delivered their best month ever in December. Strong double-digit gains in Rocky and solid increases for Muck and Georgia online. Shifting to our B2B Lehigh business, sales were up double digits compared to a year ago perioding. marking two consecutive quarters of double-digit growth. We credit recent success to our work in the first half of the year to significantly realigning our sales organization to improve our sales pipeline and provide greater continuation in account setup, rollout, and implementation. These positive results continue to accelerate with new account openings jumping meaningly for Q3 and forward. Along with these sizable gains, customer spending continues to be strong, which inspires confidence that Lehigh will be able to continue its momentum into the new year. We feel good about the overall health of our business as 2025 gets underway. Like any portfolio, we expect varying degrees of performance among our brands and channels, but collectively, we're expecting another year of solid growth. Our optimism is being somewhat tempered by continued uncertainty around the consumers as recent purchasing behaviors has been more unpredictable, which is causing many retailers to be cautious with their inventory commitments in general. However, based on the sell through of our brands over the past several months, both in stores and online, we believe we are in a position well versus the competition to continue gaining share in our categories. In closing, I want to thank the entire Rocky Brands team for their hard work this past year and their commitment to delivering great product and great experience for our consumers. I also want to thank our loyal consumers, retail customers, suppliers and shareholders for our ongoing support of our brands and company. I will now turn the call over to Tom. Tom?

Thanks, Jason. As Jason shared, we had a good fourth quarter highlighted by strong gains in our retail segment and a nice improvement in our wholesale segment when comparing results on a recurring basis. This brought full year sales towards the midpoint of our guidance range and profitability in line with our expectations as meaningfully gross margin expansion helped to offset higher expenses associated with planned increases in marketing, incentive compensation, and fulfillment costs associated with the increase in direct-to-consumer sales. For the fourth quarter, sales increased 1.7% year-over-year to $128.1 million, or 8.8% when you exclude certain non-recurring sales in the fourth quarter of 2023 related to the change in the distributor model in Canada and temporarily elevated commercial military footwear sales to a single customer. By segment, wholesale sales were $81.3 million, a decrease of 5.2%, but up 4.5% on a recurring basis. Retail sales increased 15.3% or 16.3% on a recurring basis to $43.6 million, the segment's highest ever quarterly sales figure. contract manufacturing sales increased 39.1% to $3.2 million. Turning to gross profit, for the fourth quarter, gross profit was $53.2 million, or 41.5% of net sales, compared to $50.7 million, or 40.3% of net sales in the same period last year. The $120,000 Basis point increase in gross margin as a percentage of net sales was attributable to an increase in the wholesale gross margin, as well as higher mix of retail segment sales, which carry higher gross margins than the wholesale and contract manufacturing segments. Gross margins by segment were as follows. Wholesale, up 310 basis points to 38.5%. Retail gross margins were down 370 basis points to 49.2%, and contract manufacturing was up 110 basis points to 14.8%. Operating expenses were $44.7 million, or 34.9% of net sales in the fourth quarter of 2024, compared to $36 million, or 28.6% of net sales last year. During the fourth quarter, we completed our annual impairment testing of Goodwill and other intangible assets And as a result, we recorded a $4 million non-cash trademark impairment charge related to the Muck brand. Excluding this charge and acquisition-related amortization, adjusted operating expenses were $40 million in the fourth quarter of 2024 versus $35.2 million in the fourth quarter of 2023. As Jason said in his remarks, we underinvested in our brands during the year-ago quarter, and we purposely increased investments this year more in line with historic levels. We also incurred higher logistics costs this year associated with the 15% increase in retail segment sales and higher incentive compensation based on our performance. Compared to two years ago, adjusted operating expenses as a percentage of net sales were 31.2% this year versus 29.8% in the fourth quarter of 2022. Income from operations was $8.5 million or 6.6% of net sales compared to $14.7 million or 11.7% of net sales in the year-ago period. Adjusted operating income was $13.2 million or 10.3% of net sales compared to adjusted operating income of $15.5 million or 12.3% of net sales a year ago. For the fourth quarter of 2024, interest expense was $3 million compared with $5.3 million in the year-ago period. The decrease reflects lower debt levels and lower interest rates in the quarter compared to the fourth quarter of 2023. On a GAAP basis, we reported net income of $4.8 million, or 64 cents per diluted share, compared to net income of $6.7 million, or 91 cents per diluted share, in the fourth quarter of 2023. Adjusted net income for the fourth quarter of 2024 was $8.9 million, or $1.19 per diluted share, compared to adjusted net income of $7.3 million, or $0.98 per diluted share, in the year-ago period. For the full year, net sales were down 1.7% on a reported basis, but up 5.3% on a recurring basis to $453.8 million, By segment, recurring wholesale sales increased 0.7 percent, recurring retail sales up 10.2 percent, and contract manufacturing increased 202.2 percent. In terms of profitability, gross margins increased 70 basis points to 39.4 percent. Adjusted operating income was $37.8 million, or 8.3 percent of net sales. adjusted net income was $19 million, up from $14.3 million in 2023, and adjusted EPS increased to $2.54 from the $1.93 in the prior year. For the full year, interest expense was $17 million, inclusive of a $2.6 million one-time loan extinguishment charge compared with $21.2 million in 2023. Excluding this one time charge, interest expense decreased 32.1% year over year. Our effective tax rate for 2024 was 19% compared to 26.3% in the prior year. Driven primarily by a return to provision adjustments resulting from foreign tax credits recognized in the fourth quarter of 2023, we expect our tax rate for 2025 to normalize around 22 to 23%. Turning to our balance sheet, at the end of 2024, cash and cash equivalents stood at $3.7 million, and our debt, net of unamortized debt issuance costs, totaled $128.7 million. We've made excellent progress paying down our debt over the last 12 months, with total indebtedness down 25.7% compared to the end of last year. We also returned $4.6 million directly to shareholders through quarterly dividends in 2024. Finally, As we announced in our earnings release today, the board has approved a new share repurchase program of up to $7.5 million of the company's outstanding common stock. This program replaces the previous repurchase program that expired in March of 2022. Now to our outlook. To reiterate what Jason said, we feel good about the health of our business, but are aware that consumer uncertainty continues to generate an elevated level of caution among our retail partners. The good news relative to a year ago is that the channel Inventories are much cleaner, so good sell-through should translate into improved replenishment orders. In terms of costs, we are facing pressure from the 10% increase in tariffs on products sourced from China recently enacted by the new administration. In 2024, approximately 50% of our footwear was manufactured in China, either at our own facility in Chuzhou or by third-party suppliers. We are working to reduce our third-party exposure and anticipate total goods coming from China to be below 35% by the end of 2025, but plan to maintain manufacturing presence in China as our cost to produce products remains competitive, even with the increase in tariffs. For the year, we expect revenue to increase in the low single-digit range over 2024 revenue of $453.8 million. This expectation is based on the anticipation of another year of strong gains from our retail segment, along with steady growth in wholesale, partially offset by roughly $4 million less in contract manufacturing sales. We are forecasting gross margins to be down modestly from the 39.4% we reported in 2024. This includes roughly 110 basis point headwind from higher tariff, which without gross margins would be up year over year. SG&A is expected to be up in dollars as an increase in our marketing spend to support growth and realize higher logistics costs from the projected increase in retail sales. However, as a percentage of revenue, expenses will be similar to last year. Interest expense will take another step down this year based on our year-end debt levels and current interest rates, helping to nearly offset the 110 basis point impact on operating margins from higher tariffs. This puts 2025 EPS just below 2024's adjusted EPS of $2.54, but up approximately 20%, excluding the impact from higher tariffs. That concludes our prepared remarks. Operator, we are now ready for questions.

Thank you. At this time, we'll be conducting a question and answer session. 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 2 if you'd like to remove your question from the queue. One moment, please, while we poll for questions.

Our first question comes from Jonathan Kopp with Baird.

Please proceed with your question.

Yeah. Hi. Good afternoon. Thank you. Can I just follow up the commentary around more mixed recent indicators? Could you just clarify? a little further what you're seeing. It sounds like, you know, sell-through is maybe holding up better. So just curious, you know, some of the observations you have there.

Yes, you know, John, I'll start, and Jason certainly will chime in here. I think, you know, obviously with the weather that we saw later in the fourth quarter and at the beginning of this year, we've seen, you know, good sell-through from the retailers, but we recognize that they are being cautious as they go forward. And so, you know, we're being cautious as we give guidance, you know, for the rest of the year. Jason, I don't know if you've got any more clarity there.

Yeah, I think it just, as the weather came into January and then, you know, still continued through February, I think the retailers said, hey, eventually it's going to stop. And so they've been working through the inventory they had and, you know, coming to us when they need to.

But it's been a little bit different pace. Okay.

And then if you look forward to, you know, low single-digit growth for revenue for the year, can you talk about some of the factors that are giving you confidence and any shaping as we think about Q1 relative to, you know, the full year targets?

Yeah, I think as we look at our order book and our bookings for the rest of the year, we're up year over year, so that makes us feel good. I think that we're just hearing a lot of cautious behavior from the retailers and maybe at once ordering, and so we're probably being a hair conservative there. As we look to the quarters and the cadence for the year, You know, Q1, we've been talking about this the last couple of the earnings calls. You know, we've been chasing a little bit of inventory for extra tough and mock particularly. And so we're continuing to chase here in, you know, through Q1. And so we're anticipating a little bit of a late delivery of some spring product as we were trying to replenish active styles. And so we're going to see a little bit of a shift from Q1 into Q2 a little bit. And so, you know, for all intents and purposes, we see Q1 sales, you know, flattish with last year. and really the increases in sales that we called out, you know, the low single digits really happening in Q2 and more so in Q3 as inventory is back in stock and just given where we can see our booking sitting today.

Okay, great.

And then a follow-up on the tariff impact. I think you called out 110 basis points. Is that Can you just clarify, is that the gross impact or is that a net of any offsets? And is that just the current tariffs expected as of today? Any more color there? And then how should we think about any, you know, any decisions around pricing or other actions that you could take?

Yeah, I'll start here, John. So it's definitely – only considering the existing tariffs that have been put in place. And we are evaluating all options to try to cover those, right? So we are evaluating some price increases. We've seen some of our competitors already do that in the marketplace. We are also going to our vendor partners and talking about different options and ways they can support and help. And then raw materials are obviously another way. So I think we have a really good plan in place there. And we think we'll be able to ultimately find a good positive there. But it's going to take us probably into, it's definitely going to take us into 2026. So that's why we think the impact is really going to be more in Q3 and Q4, maybe a little in Q2. But, you know, we've got pretty good inventory, and I feel pretty good about that right now.

Yeah, I think, John, just to add on there, you know, I think as we look at margins throughout the year, Jason touched on it, right, the 110 base points, you know, it's an implied $5-ish million of tariffs. Some of that's already been mitigated. That number was north of that, you know, a couple months ago when we – We're anticipating the tariffs are coming. And so we've mitigated some of that. To Jason's point, we're going to continue to mitigate that. And so that's just kind of where we view the world today. Obviously, a lot of uncertainty, again, to Jason's point about any new tariffs or incremental tariffs or reciprocal tariffs and other areas. So we're going to continue to mitigate that. We have plans. You know, we've seen a couple peers of ours adjust some pricing. Nothing dramatic, but we've seen that. And so we're monitoring that as well. And I think big picture, I think we're in a really good position comparatively. The fact that we have our own and operated manufacturing facilities allows us to be a little bit more nimble potentially than some of our peers. And so we're going to continue to do that. We're continuing to push our partners in Asia to either expedite their plans to get into other countries in Asia or even to push more capacity in countries like Vietnam, Cambodia, and partners of ours in the Dominican Republic. So we're going to continue to mitigate that, but the 110 basis points is kind of how we see it today. I did want to call out maybe one other thing from earlier, you know, a slight increase in maybe wholesale margins in the first quarter of this year because we still have, and this will be the end of that one-time contract that we had with that one, the elevated non-recurring sales that we talked about, you know, all year. Q1 of 2024 was the last quarter that we shift on that contract. So there is two, three million dollars of recurring sales that we're not going to, or non-recurring sales, I'm sorry, that we're not going to have this year. But there should be a slight improvement on our wholesale margins because of that. So just wanted to call that out for the why we think Q1 will be more flat to LY.

Okay, great. Maybe last one for me, just

as you think about the key growth drivers in 2025, I know you've highlighted some of the strength for extra tough, you know, parts of the mock business, you know, women's Western for Durango and recent quarters. Can you, can you just maybe, you know, rank order discuss some of the biggest contributors as you look forward to, you know, the key drivers in 2025. Thanks again.

Yeah. Yeah. Sorry. Thanks, Sean. And sure. Tom will add some, but, You hit on them, right? Extra Tough is definitely one of our strongest growing brands right now. And as Tom had indicated, we are chasing it. We are still chasing it. And some of that product for spring is moving into Q2. But we're going to continue to chase it. And you even touched a little bit on the women's and kids, or I touched on it too. We're seeing some nice growth there, and that's exciting to get out of our men's footwear business because that's the majority that we have. The Muck brand is also seeing some nice bookings for fall. We've got some new product out there that's doing really well, particularly in the camouflage hunting market, which is kind of an odd thing. because I know we talked about how that's hindering Rocky, but in the rubber boot business, it seems to be a little bit better. Durango continues to be a strong brand, and as we all know, our partners at Boo Barn are doing well, so we'll continue to see some things going there. And then some of the places we're seeing some different success, and it's small for us, but it's exciting, is a little more – what I call is just casual type footwear. Rocky is seeing a little bit of it. Rocky introduced a six-inch casual kind of work boot with a BOA system on it that seems to be checking pretty well at retail. Georgia's got a few little things happening. We've been expanding into some other retailers with Georgia. So nothing huge in those two areas, but I think those are some places that we're pretty excited about and have seen some new bookings for fall, which I think is great.

Yeah, I think just to add on, John, I think, you know, echo all of Jason's comments, but also as we look to that retail segment, the strength of Lehigh over the last few quarters has been phenomenal. And it's been really exciting to see this shift. And, you know, we reorganized the sales team and how this seems to be clicking and checking with our consumers. And they continue to to see success. So we're optimistic for them in 2025. But then also we've kind of reinvigorated our marketplace team. And so we've been using our marketplace team to really unload discontinued or slower moving product at a reasonable margin. It's a little bit of why you saw the margins tweak down a little bit in that retail segment as we're selling more discontinued product there. Ultimately, it's a more profitable way of selling that product. And so we're going to continue, hopefully, to see that be successful throughout 2025. But I think the one thing out here, and it's something that we're going to be able to take advantage of in 2025 that we really couldn't in 2024 or 2023, is really we're being more aggressive when it comes to an inventory perspective, particularly for the extra tough and the muck brands. And so we recognize that with muck, you have to have the inventory when the weather shows up. We have very long lead times on our rubber product. So we're going to be investing in inventory for MUC, but also we're trying to get ahead of bookings and demand for extra tough. And so, you know, with where our balance sheet is today, that's going to allow us to be more aggressive there. So if the demand is there, we'll be able to capitalize on it more so than we did in 2024. And then the other call out there just from a modeling perspective is, you know, if we looked at the seasonality of our business, historically that inventory grows in the second and third quarters to be sold off in the third and fourth. We anticipate that happening again, and so we will see meaningful inventory growth in the middle of the year. where if we look at the last couple years, because we've been bringing inventory down, you know, from a high of $290 million to the $167 million that we had at the end of this year, it's kind of muted that seasonality of our inventory. So, you know, from a modern perspective, you will see that ebb and flow a little bit more this year than we had the last few years.

Paul, really helpful color. Thanks again. Thanks, Sean.

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad.

One moment, please, while we poll for questions. Our next question comes from Ethan Saggy with BTIG.

Please proceed with your question.

Hey, thanks for taking my questions. Could you just give us an update on your... Hey, could you give us an update on your sourcing exposure to Mexico and given the Potential for 25% tariffs on the country, I think, set to begin next week. Just how you're navigating that situation, and if those ducks do come to fruition, how that would impact your guide.

Yeah. Yeah, so we do source a very, very small proportion of our inventory from Mexico, less than a few percent, to be quite frank. And it's really on more of our exotic Western markets. footwear product. And so while it would negatively impact us, I think it would potentially disrupt the other Western boot market a little bit more so, meaning that our peers may be detrimented worse by a tariff there. And so we've definitely evaluated it, and we're looking to potentially resource some of that exotic Western wear in other countries, but it won't be that meaningful to our business. Got it.

That's good to hear. And then just nice to kind of hear some of the momentum that's carried into the beginning of 2025 so far. I was just wondering if you could give a little more color on what you're seeing quarter to date across brands and categories. Thanks.

Yeah, I think we've continued to see a little bit of just a continuation of what we saw in the fourth quarter. So our mock brands has continued to be strong in the first quarter. Certainly, the weather has helped that. Extra Tough has continued to be strong. Our e-commerce business has continued to be strong as well. And so... As we look to the first quarter, we feel pretty positive about it, but we're just cautioning our guidance in the first quarter as we know that we've got a few million dollars of non-recurring sales from that one contract that we've been talking about, but then also that shift of us getting spring product that's going to ultimately shift in the second quarter. So we're just being a little cautious with our guidance there, but we've been happy and pleased with the start of the year.

Yeah, and I would just add, you know, the sell-through, we're really good. We're comfortable with our sell-through retailers, but the retailers are just being a little more cautious, and, you know, they are buying back in, but not at the levels I would have anticipated. So, again, I think, as Tom indicated, we're still comfortable here, but Q1, we're being cautious.

Got it. That makes sense. Appreciate the color. Thanks.

Yeah, absolutely.

Thank you. We have reached the end of the question and answer session. I'd now like to turn the call back over to Jason Brooks for closing comments.

Thank you, Rob. Appreciate it. Once again, I would just like to thank the entire Rocky team for the efforts they put in in 2024. We navigated an interesting year. and uh ended up pulling off um what i would once again say was was a nice 2024. i'd also like to thank our customers consumers shareholders and also our board members for their support and we look forward to a great 2025 and the future thank you very much this concludes today's conference you may disconnect your lines at this time and we thank you for your participation