Group 1 Automotive, Inc.

Good morning, ladies and gentlemen, and welcome to Group 1 Automotive's 2021 Second Quarter Financial Results Conference Call. Please be advised that today's conference call is being recorded. At this time, I'd like to turn the conference call over to Mr. Pete DeLongshaw, Group 1's Senior Vice President of Manufacturer Relations, Financial Services, and Public Affairs.

Please go ahead, Mr. DeLongshaw.

Good morning, everyone. And welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we will refer to on this call for comparison purposes have been posted to Group 1's website. Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the conference call, Statements made by management of Group 1 Automotive are forward-looking statements that are pursuant to the safe harbor provisions of the Private Securities Litigation and Reform Act of 1995. Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecast results. Those risks include, but are not limited to, risks associated with pricing, volume, inventory supply due to increased customer demand, and reduced manufacturing production levels due to component shortages, conditions of markets, and adverse developments in the global economy, as well as the public health crisis related to the COVID-19 virus, and resulting impacts on the demand for new and used vehicles and related services. Those and other risks are described in the company's filings with the Securities and Exchange Commission over the past 12 months. Copies of these filings are available from both the SEC and the company. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me today on the call, Earl Hesterberg, our President and Chief Executive Officer, Darrell Kenningham, our President of U.S. and Brazilian Operations, and Daniel McHenry, our Senior Vice President and Chief Financial Officer. I'll now hand the call over to Earl.

Thank you, Pete, and good morning, everyone. I'm pleased to report that for the quarter, Group 1 generated adjusted net income of $190 million. This equates to adjusted earnings per share of $10.31 per diluted share, an increase of 173% over the prior year, and an increase of 264% over the pre-pandemic second quarter of 2019. Our adjusted results exclude non-core items totaling approximately $800,000 of net income and 4 cents of earnings per share. This income consists of gains on dealership and real estate transactions and a tax benefit related to the revaluation of deferred tax items in the UK. Partially offset by a non-cash loss, associated with certain interest rate swaps due to decreased vehicle inventory levels. These profit results were largely the result of a strong recovery in vehicle unit sales, vehicle margins, and after sales activity in all three of our markets, along with continued impressive cost control. Consumer demand for vehicles remains extremely strong heading into the third quarter, and we continue to sell most units almost immediately upon receipt. This dynamic should continue throughout the third quarter and potentially much further out, assuming no material change in consumer demand. As mentioned in our July 8 pre-release, we believe our June 30 new vehicle inventory levels have just about dropped at 5,400 units in a 16-day supply. Our used inventory situation is much stronger at 12,800 units and a 29-day supply. Darrell will speak more about inventory shortly. Perhaps the most important element of our second quarter results is the very strong recovery in our after sales business, which suffered throughout the pandemic from less driving, and a variety of lockdown conditions in all of our markets. Our U.S. market saw an 8.4% increase in same-store gross profit versus the pre-pandemic second quarter of 2019. Again, Darrell will provide more detail on our U.S. results in a moment. Relative to the U.K. market, which was finally allowed to reopen in mid-April, we saw after-sales revenues increase sequentially throughout the quarter, with the month of June seeing an 11% same-store increase over June 2019. As with the US, we expect to see continued sequential growth throughout the second half of 2021. As with the US, consumer demand for vehicles in the UK is extremely strong. We retailed nearly 18,000 new and used units in the second quarter, a 31% sequential increase from the first quarter. We believe pent-up demand built over the past several years, due to both Brexit and the pandemic, will help drive strong UK vehicle demand into the foreseeable future. Finally, I want to acknowledge the impressive work all of our regions have continued to do on cost control. Our US adjusted SG&A as a percentage of gross profit was 55.9%. The UK was 63.4%. And Brazil came in at 68.8%. While there is certainly a level of transitory impact due to vehicle margins, we continue to witness very high levels of productivity that will remain after vehicle inventory is normalized. To provide some color on our U.S. and Brazil second quarter performances, I'll now turn the call over to Darrell Kenningham.

Thank you, Earl. The factors contributing to our U.S. second quarter were a result of outstanding growth in all segments of our business. Our teams also executed very well in our relentless focus on cost. Compared to the pre-pandemic second quarter of 2019, our same store new and used sales increased by 11% and 12% respectively. Our team did a great job increasing vehicle margins throughout the quarter as new vehicle inventory supply continued to decline. We anticipate that new vehicle inventories will remain tight and we will continue to adjust our operations as necessary. Our same store used vehicle unit sales improved by 12% both sequentially and versus the second quarter of 2019. Our used inventories are in much better position than new because of our aggressive sourcing. We continue to be very aggressive yet judicious with our used inventory sourcing strategy, which has allowed us to hold day supply relatively constant while largely avoiding public auctions. This approach is also evidenced in our outstanding used vehicle PRU level of $2,556, an increase of 62% year over year. An example of our sourcing effectiveness in June, we sourced over 3,000 used vehicles from our service departments and through individual purchases. Another significant profit driver was our after-sales performance. Our customer pay business continues to ramp up following a very strong first quarter with 17% same-store dealership gross profit growth compared to the second quarter of 2019. That allowed us to grow same-store dealership after-sales gross profit by over 8% versus the second quarter of 2019, despite continued headwinds in warranty and collision, both of which will reverse in time. We foresee after-sales continuing to ramp up over the near term. The third major factor driving our outstanding profit performance was continued cost discipline. Our second quarter adjusted SG&A as a percentage of gross profit was 56%, down from 70% in the pre-pandemic second quarter of 2019. A material part of the improvement is due to productivity gains, which will largely be a permanent benefit. Our service departments are over 20% more productive, and our vehicle sales departments are over 30% more productive compared to the second quarter of 2019. I would like to provide another update on Acceleride, our digital retailing platform. Our customers continue to vote yes on Acceleride. Our employees also vote yes on Acceleride. We continued our upward trajectory in the second quarter by selling a record 5,600 vehicles through Acceleride, more than double the prior year. We continue to advance the customer and employee experience with Acceleride. Our customers find our process differentiated in several ways, most of them due to our flexible and dynamic nature of Acceleride. Some examples include customers are seamlessly able to switch from a new CPO or used vehicle transaction without reentering their information. With today's tight inventories, that's a tremendous benefit. Trade valuations and soft credit pulls transition automatically to any vehicle that a customer selects. Acceleride has modular buying flow, allowing customers to complete as many actions as they would like in any order they would like. And customers have the ability to place a down payment within the software. Lastly, our salespeople utilize the exact same software as our customers. This makes the shopping process perfectly transparent for customers and extremely efficient for our employees. We're in the process of piloting video chat and screen sharing capabilities along with integrated delivery fees. There will be more to come on these topics in the weeks ahead. And we're already seeing tremendous benefits from CDK's acquisition of Roadster. The ability to electronically and instantly transmit information from our digital retailing software into our CRM and DMS has started to come to fruition, and we will see continuous evolution there. This integration is huge and will allow us to spend even less time working on a car deal. That is great news for customers. Another recent efficiency is streamlining our credit applications through Acceleride. In the second quarter of 2021, nearly 50% of all Group 1 credit applications were digital. That's an incredible convenience for customers and a huge time saver. Lastly, since Group 1 dealerships are utilizing Acceleride now in their everyday traditional sales process, including penciling deals, running credit applications, and any other action in the software, this can be done with customers who started on a third-party website or someone who calls or visits the dealership. In the future, we will report Acceleride uses on that complete basis, rather than just the 8% of customers who may have started their journey on Acceleride. When incorporating all steps of the sales process, nearly 30% of our customers are using Acceleride. Turning quickly to Brazil, despite a nearly 50% decline in retail units sold versus the second quarter of 2019, driven by tight inventories and additional COVID lockdowns, Our team once again did a fantastic job growing margins across all lines of business and capitalizing on our lean cost structure. This resulted in our first ever sub-70% SG&A as a percentage of gross profit quarter in the region's history. After a record first quarter performance in 2021, our Brazilian team easily set a record for their most profitable all-time quarter in the second quarter of 2021. We continue to be well-positioned to benefit from a sales rebound, coming out of the pandemic. I will now turn the call over to our CFO, Daniel McHenry, to provide a balance sheet and liquidity overview. Daniel?

Thank you, Daryl, and good morning, everyone. As of June 30th, we had $199 million of cash on hand and another $326 million invested in our floor plan offset accounts, bringing total cash liquidity to $525 million. There was also 255 million of additional borrowing capacity on our U.S. syndicated acquisition line, bringing total immediate liquidity to 780 million. We also generated 203 million of adjusted operating cash flow in the second quarter and 178 million of free cash flow after backing out 25 million of CapEx. This brings June's year-to-date free cash flow to 312 million. During the second quarter, we repurchased approximately 125,000 shares at an average price of $148.79 for a total of $18.6 million. We have $150 million of our authorization remaining on our share repurchase program. While the first priority for capital allocation remains M&A, we continue to be open to returning cash to our shareholders in the form of both share repurchases and an increase in our quarterly dividend. Our rent adjusted leverage ratio, as defined by our U.S. syndicated credit facility, was reduced to 1.7 times at the end of June, leaving plenty of flexibility for capital deployment. On a net debt basis, which considers all U.S. cash at hand, our leverage was 1.2 times as of June 30th. Finally, related to interest expense, Our quarterly floor plan interest of $8.8 million was a decrease of $1.3 million or 13% from the prior year. The quarterly expense included a non-cash charge related to certain interest rate swaps of $2.3 million due to the decreased inventory levels. Non-floor plan interest expense decreased $2.5 million or 15% from prior year, primarily due to last year's bond debt refinancing. Our balance sheet and liquidity position have never been stronger, which provides a good platform to support our top priority of external growth. For additional detail regarding our financial condition, please refer to the schedules of information attached to the news release, as well as the investor presentation posted on our website. I will now turn the call back over to Earl.

Thank you, Daniel. Related to our corporate development efforts, We previously announced the July acquisition of nine franchises in the UK, which increased our UK franchise count to 75, and will contribute approximately $300 million in incremental annual revenues. We also expect to announce some US acquisitions in the months ahead. As Daniel mentioned, we continue to prioritize external growth in our capital allocation process, and we're optimistic that we will have beneficial opportunities as the year progresses. This concludes our prepared remarks. I'll now turn the call over to the operator to begin the question and answer session. Operator?

Ladies and gentlemen, at this time, we will begin the question and answer session. To ask a question, you may press star and then 1 using a touch-tone telephone. To withdraw your questions, you may press star and 2. If you are using a speaker phone, we do ask that you please pick up your handset prior to pressing the numbers to ensure the best sound quality. Once again, that is star and then one to ask a question. And our first question today comes from Mike Ward from benchmark. Please go ahead with your question. Thanks. Good morning everyone.

Um, last night on Ford's earnings call, They talked about moving more towards an order-to-build type model, suggesting that dealer inventory levels would be much lower going forward, which is, I assume, great news for the dealer group. How does that change your model? And maybe specifically, does it have any specific impact on pickup trucks, which typically tend to carry higher inventories?

Mike, this is Earl, and I'll let Darrell add what he would like. I think that would be a massive improvement. With our geography, we're very big truck retailers, also very big with Ford and the other domestics. You traditionally have to carry a pretty high day's supply of those domestic brands because of the proliferation of models on full-size pickup trucks in particular. So if we could run a leaner distribution system, it would really reduce our inventory carrying costs and our land requirements. And I think we'd all be excited about that approach going forward.

One of the other things, if you look at going through the data on a regional standpoint, it looks like one of the biggest differences between the variable growths between the U.S. and the U.K. is the F&I on a per-unit basis. And it looks like the U.S. is about double, a little more than double F&I than the U.K. Can the U.K. gravitate more towards the U.S. model in that regard?

Well, I think there are some... There are some kind of legal and market differences, so I believe we can improve our performance in the U.K., but I don't expect them to ever be nearly equal in terms of the financial contribution per unit. I'll let Daniel give you a little more color on that.

I think, in addition, one of the key differences between the U.K. and the U.S. market, particularly in the luxury sector where we largely compete, is that The change cycle is a lot more regular in the UK, and our average customer will change their bagel within about 24 months. So I think whenever you look at the life, effectively, of a bagel in the UK versus the US, you'll find that the PRUs are more similar.

Thank you. And just one last thing on the SG&A. How much of that is sticky, the savings that you've had? It sounds like the third quarter is going to be similar in performance to the second quarter.

Yeah, that's pretty much exactly what I was going to say. On the basis of where our margins are currently, I wouldn't expect any kind of significant change in SG&A versus quarter two. Beautiful.

Thank you, guys. Thanks very much.

And our next question comes from John Murphy from Bank of America. Please go ahead with your question.

Good morning, everybody. Just a first question around acquisitions. I mean, you've been on a relative hot streak here year-to-date, doing $420 million early. You mentioned there might be some more in the U.S. in the coming months. That run rate is pretty high, I mean, $420 in the first half of the year. We're hearing from some of your peers, these multi-year acquisitions, you know, large targets, but your run rating, you know, at levels that are similar to, if not higher than them. So just curious, you know, if you may, you know, start communicating, you know, more round targets about where you're going with these acquisitions, or are you going to remain a little bit more conservative and reserved and pick things off more opportunistically? Just trying to understand how we should think about, you know, the inorganic acquisition growth over time and where it will land.

Yeah, John. No, I don't think we're going to get numeric targets. Clearly, you can see financially we continue to have the ability to do a billion dollars a year or more in annualized revenues. But the acquisition market is probably as frothy as it's ever been. And, of course, it's best if our acquisitions are accretive, if you know what I mean. So we're going to continue – to keep that as our top priority for capital allocation. I think things will settle down. We're coming up to what's going to be perceived as a different tax environment on January 1st. I think the market will start to normalize a little bit. I'm confident we're going to be able to grow the company externally, and we're going to continue to try hard to do that. You know, it seems to me that if you get too hung up on a target, then you start putting pressure on yourself to do deals that maybe financially you shouldn't. So we're trying to keep some discipline, financial discipline for our shareholders.

Okay. And then just a second question around the used vehicle opportunity. I mean, there's also some of your peers that, you know, an increased focus on used, sometimes outside the four walls of the business. or the assets in the franchised dealerships that exist. But with Acceleride, is there an opportunity to maybe sweat or should say leverage your existing assets and drive increased use unit growth, particularly with value vehicles or other sort of maybe market share gains that you could drive through Acceleride without creating, you know, a whole new channel or burdening yourself with, you know, incremental, you know, assets? I mean, what is the opportunity there, particularly as Acceleride, you know, takes off?

Hi, John. This is Daryl. You know, the short answer to that is, yes, there's opportunity to leverage Acceleride to expand our used vehicle business through our existing footprint. We're doing that in some ways through acquisitions right now. In the quarter, we acquired almost 4,000 units through Acceleride, and that was in a lot of markets that we're not in today. And we're considering how we might stretch Acceleride into markets where we're not. I don't see us going nationwide or anything like that, but it's certainly something we look at on a regular basis.

Okay. And then just lastly, on parts and service, I mean, we're seeing a recovery here. You know, what's your gauge on how much, you know, pent-up demand there is to be released, you know, over time? And also just, you know, curious if you're back to four-week work with your techs or, you know, are your service base full enough to run that kind of efficient, you know, work schedules again?

This is Darrell again. Lots of pent-up demand is what we see. Excuse me. Lots of... opportunity going forward. We see strong second half for after sales. We are back reconverting many of our stores back to the four-day work week. We're about halfway through that now. And we see that as critical to expanding our capacity to be able to manage that. So I guess the short answer to your question is Lots of growth ahead, and yes, the four-day work week is coming back with a vengeance.

One last question, I'm sorry, on the inventory side. You mentioned that you thought this would be the bottom on the new vehicle inventory crunch, yet you're kind of getting conflicting signals from automakers and semi-chip manufacturers. It seems like through the second half of the year there might be some sequential relief but not something that would be that material. I mean, Ford's got the renalysis issue, so they're stepping up because of that specific issue. But other automakers, forecasters, appear to be looking at something that's just very barely improving sequentially through the rest of this year and then maybe getting a bit better early next year. I mean, what is your view on sort of what's in vehicles in transit and what your deliveries are? are gonna look like over the next few months where you have some visibility and maybe your longer term, longer term meaning rest of the year and into next year thoughts.

Yeah, well I'm continuing to listen to those announcements like you are, John, and I do keep getting the impression that this is going to last longer and longer and longer than I originally expected. We are kind of bouncing around the bottom right now. The question is how long are we gonna bounce around the bottom? And that's another reason we really have to put a lot more emphasis on our used vehicle business, because we're able to maintain close to a normal inventory level in that part of our business. And we can actually control that. We're the tail on the dog on the new vehicles. So it doesn't seem that it's getting worse, but it doesn't seem that it's getting better in the near term. And I think it will take a long time to fill up the big hole that's been created in our inventories. We had 29,000 new vehicles in inventory in March pre-COVID, and we're bouncing around below a fifth of that. So we've got a long way to go before we start to build any meaningful amount of inventory. So it's clearly going to go through this year. Okay. Thank you very much.

And our next question comes from Rajat Gupta from JP Morgan. Please go ahead with your question.

Great. Thanks for taking the question. I just had a follow-up on, you know, like Ford's commentary yesterday around their order bank model and, you know, with inventories likely to be leaner than pre-pandemic. You know, my map would suggest that, you know, on a four-card basis, you know, you know, on a poor car basis, you know, looking at F&I for a car, you know, not adjusting for penetration and just looking at the retail GPU, you know, roughly $4,000. It seems like you're making roughly $7,000 to $8,000, you know, upfront on a car, including all of the F&I. Now, with the autobank model and leader inventories, like how much of that $7,000 to $8,000, you you know, would you expect to retain, you know, once, you know, these OEMs, you know, move to more of like a reservation model, you know, where consumers could probably pay online or finance online through their website and fulfill the transaction through the dealer. So just curious, like, do we expect any change to that commission, per se, that you're making? Just curious how that ultimately shakes out. And I have a follow-up. Thanks.

Rajat, this is Daryl. I'll take a stab. don't really know exactly how it might change our margin structure. I think a positive of that model is more disciplined supply, which I believe a lot of the OEMs are trying to embrace moving forward on a long-term basis, which I think will only be good for margins and for for dealers and the health of the network and for customers, honestly. There will be less desperation selling, I guess would be, supply side selling. So I believe it will be good. How good, we don't know at this point. And no OEMs have talked to us about any changes in any kind of structure or anything like that.

Got it. And in this scenario, if this really proliferates across other OEMs, you've taken a lot of headcount over the last year. Do you think for a similar level of volume, you could operate with an even lower level of headcount at the stores if this order bank model just does become a lot more prevalent?

I think there's a couple of things there. I think in terms of headcount for sales, I think certainly as Acceleride and online platforms continue to gain traction, I think that you could see further headcount reduction within sales and sales management. Clearly, one of the things that Daryl has expressed earlier on in the call was that parts and service business is very buoyant and my expectation would be I could see some headcount increases in terms of technicians, but that's kind of the exception.

Got it. And just lastly on capital allocation, you talked about the floating multiples for deals. You hinted in the release that while M&A remains a priority, you could consider doing more buyback. So Should we expect, like, you know, the existing free cash flow or the excess free cash flow being more aggressively being deployed into buyback in the near term, you know, given where M&A multiples are?

Well, I would say that it's clear that share buybacks have been our second priority when we're not able to find acquisitions that meet our financial return hurdle. Of course, that's a dynamic situation that our board determines, but my operating assumption right now would be that would be our second priority if we can't execute positive growth for the company externally.

Got it. Great. Thanks for the call, and good luck.

Our next question comes from Rick Nelson from Stevens. Please go ahead with your question.

Thanks. Good morning. I would like to circle up on inventory. We saw a big decline during the quarter. If you could talk about where you sit now to apply, and do you think you have enough inventory to sustain a momentum that would be fun to do?

Are you asking about new car inventory or used car inventory, Rick?

Well, I would say both.

You know, new car inventories are still lean on a day supply basis. We're about the same as where we ended the quarter, and we expect them to stay lean. Used car inventories are in much better shape, and they're continuing to be fairly steady because we've – We've established some new sourcing practices that we've seen some success in. And I quoted the 3,000 units that we were able to source out of our service drives and from individuals in the month of June. And that continues to be a focus for us to make up for the units we're losing on trades because of the lack of new cars.

Great. Thanks for that. Also, so in Europe,

Rick, you're breaking up. We can't hear your question. I'm sorry.

Sorry. So in Europe, some of the OEMs are engaging in an agency model. They're going direct to consumer with electric cars. I'm curious if you see that potential and the UK market and what implications that have.

Yeah, we've had some discussions, Rick, with a couple OEMs on a potential agency model. It's not the same big deal in the UK and Europe that it is here because, quite frankly, you don't have much land with your facilities there anyway. And the real key there is if If it is implemented as designed, it would become a demand-pull system, which, assuming that the fixed commissions for the retailer were appropriate, would not be a bad model. The U.K. has suffered for many years pre-COVID with a distribution channel that's been overstuffed. And there's been a lot of self-registered vehicles, a lot of fleet vehicles, and some really bad practices by more than just a couple of OEMs. So a demand pool model seems to work a lot better for the retailers. And it's not like we're sitting there with five or 10 acres of land on our UK dealerships that we own and wouldn't be used if there was an agency model.

Thanks for that, Earl. So, you've worked for some major OEMs. Do you think that they, in fact, will adopt this model, run tighter inventory, or do we yield back to the past practices?

Well, I have my doubts, of course. There's a higher probability of that discipline with luxury brands. Volume brands that push for market share is generally where the risk comes into play.

Thanks for the commentary, and good luck.

And our next question comes from David Whiston from Morningstar. Please go ahead with your question.

Nice morning. Earlier, I think I heard you say you don't want to go nationwide with Acceleride. And I was just curious, is that purely a financial issue or just what's stopping you from wanting to do that?

This is Darrell. One of the things that we try to do is leverage our local brands. Most vehicles are still bought locally, and the profit model on local purchases is much better, and the opportunity locally is still significant. To some degree, when we launch a separate brand and go out and advertise to a great degree, you're competing with yourself. At least that's our view. That's not other views, and we understand that. But our view is if we were to go launch Acceleride out there and compete with ourselves in several of our markets, then we're trying to support two brands to feed them to the same physical plant and market. We don't know that that's the most efficient use of our capital. So for now, that's where we are. We feel like there's still so much opportunity with Acceleride inside our current platform. And we continue to see that. The sales volumes keep growing. The engagement keeps growing every month. And we see more stickiness with it every month. So if that starts to change, then perhaps we'll start to look further, David. But to this point, we feel like there's still a ton of opportunity inside our own markets, inside our own stores.

Okay. I guess what I don't understand, though, is if you're doing it because there's lots of opportunity within your own stores, aren't you competing against those local brands

We're not advertising Acceleride as a separate brand. It's a retailing process and a retailing tool. Okay.

Okay. I understand.

It's a transaction today. That's what it does.

Okay. On the bill-to-order discussion, I'm just curious what your thoughts are on the American consumer being willing to wait when they're used to instant gratification going into a store.

Well, history tells us that the American consumer does not like to wait. And the way that is generally addressed in the UK market when it's normally functioning is that the new vehicle inventory is held at central holding centers that are owned and operated by the OEMs, and they generally guarantee you that you can have the vehicle within five working days. Under normal conditions, they can fill a very high percentage of the orders. In the US, we can deliver cars much more quickly because we can get instantaneous insurance and temporary tags, license plates and things. You can pay your sales tax later when you register the car. We have a system in the US that will support almost instantaneous retailing. It's just a matter of the logistics. and where the vehicles are going to be located.

Okay, and the F-150 Lightning, I'm just curious, especially in your Texas, Oklahoma stores, what kind of feedback or desire to get that vehicle or lack of desire you're hearing from truck customers in large truck markets?

Feedback from customers has been terrific. Interest is very high. in all of our Ford stores for the Lightning.

Okay, and just the last question probably for Daniel. I know it's a bit early to ask this, but the Biden administration may raise the corporate tax rate. I was just curious if you can give any rough estimate of for every 100 BIP increase in the rate, how does that impact Group 1's tax rate?

I think whenever we looked at it, we anticipate that the tax rate could go up, but it's perhaps 28%. The UK tax rate has also increased to 25%. So I think, you know, on the assumption that the UK is 20% of the company and the US is approximately 80, the expectation is the blended tax rate will be something around 27%. Okay, thank you.

And ladies and gentlemen, with that, we'll be ending today's question and answer session. I'd like to turn the conference call back over to management for any closing remarks.

Thanks, everyone, for joining us today. We'll look forward to visiting with you on our third quarter earnings call in late October.

And ladies and gentlemen, with that, we'll conclude today's presentation. We do thank everyone for joining. You may now disconnect your lines.