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Good day everyone and welcome to the Cintas Quarterly Earnings Results Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Mike Hansen, Senior VP of Finance and Chief Financial Officer. Please go ahead, sir.
Thank you, good evening and thanks for joining us tonight. With me is, Paul Adler, Cintas' Vice President and Treasurer. We will discuss our third quarter results for fiscal 2018. After our commentary, we will be happy to answer any questions.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. This conference call contains forward-looking statements that reflect the Company's current views as to future events and financial performance. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. I refer you to the discussion on these points contained in our most recent filings with the SEC.
In a moment, we are going to share with you our third quarter results which represented another strong quarter of execution and performance. There is a lot of noise in our results so we will do our best to help you to decipher the performance of the business. Before diving into the numbers though, we thought it fitting to recognize that yesterday was the anniversary of the closing of G&K services deal.
The past year has been quite transformative for Cintas. Our employees whom we call partners including our partners who came to us from G&K have done some great foundational work over the last year to position us for success going forward. We remain as excited as ever about our future. In early February, we were thrilled to be able to share with our partners a one-time cash payment. The timing couldn’t have been better for us given the work done during the past year since March 21st of 2017.
As our Chairman and CEO, Scott Farmer, indicated in today's press release, the recently passed U.S. tax reform legislation is good for Cintas, our shareholders and our customers. And again, our success wouldn’t have been possible without our motivated and engaged partners, and we were excited to share with them.
Moving onto our third quarter results, our revenue for the third quarter which ended February 28th was 1,589 billion, an increase of 26.6% over the last year's third quarter. The organic revenue growth rate which adjusts for the impact of acquisitions and foreign currency exchange rate fluctuations was 7.8%. The organic revenue growth rate for the Uniform Rental and Facilities services segment was 6.5% and the organic growth rate of the First Aid and Safety Services segment was 10%.
Reported operating income for the third quarter of 200 million compared to 192 million in last year's third quarter. However, there are some items worth noting that impacted the comparability of results year-over-year. First, our operating income was reduced 10 million in the third quarter of fiscal '18 and 9 million in the third quarter of fiscal '17 by transaction and integration expenses related to the G&K services acquisition.
Second, operating income in the third quarter of fiscal '18 was also reduced by the one-time cash payment to Cintas partners that I just mentioned, which amounted to an expense of approximately 40 million. Excluding these two items, our third quarter operating income was approximately 250 million or 15.7% of revenue. This measurement is consistent with the way in which we've reported our first two quarters of this fiscal year.
Keep in mind that operating income includes 12 million of intangible asset amortization expense from the purchase price accounting of the G&K deal and $5 million of incremental depreciation and implementation costs of our enterprise resource planning system or SAP. These two items totaled 1.2% of revenue.
Reported net income from continuing operations for the third quarter of $296 million increased 152.9% from last year's third quarter. Reported earnings per diluted share or EPS from continuing operations for the third quarter were 2.66 compared to 1.06 in last year's third quarter. Again, there were handful of items that impacted the comparability of net income and EPS results to prior year.
First, fiscal '18 and fiscal '17 third quarter EPS included a negative impact of $0.06 from G&K transaction and integration expenses. Second, fiscal '18 third quarter EPS also included a negative impact of $0.24 from the one-time cash payment to Cintas partners. Lastly, more than offsetting these negative impacts was a significant benefit to EPS of $1.59 from the benefits of the new Tax Act.
Excluding these items to provide better visibility to our financial performance, net income dollars increased to 24.1% and net income margin was 9.6% compared to 9.8% last year and EPS increased 22.3%. Note again that net income includes intangible asset amortization expense from the purchase price accounting of the G&K deal and incremental depreciation and implementation costs of SAP. These two items net of tax totaled 0.8% of revenue or $0.12.
In addition to strong execution on the fundamentals, our third quarter was one of solid progress on two important long-term investments G&K and SAP. The integration of G&K remains on track. We’ve now closed 60 duplicate operations which is 95% of the total plant closures. Also 59% of G&K locations have been converted to the Cintas operating system. This is an increase from 47% at the end of the second quarter.
The system conversions are very important as they are necessary for us to achieve numerous operational synergies. These activities helped us in the third quarter to realize about $15 million in synergies, which is in line with our expectations. Regarding SAP, significant advancement continued in our implementation, which remains on schedule. In our third quarter 24 operations were converted, a total of 79 operations have now been converted to date, which is about 25% of the total planned.
As I previously detailed, we had several third-quarter items including the benefit of tax reform that baked the comparability of our full fiscal year results to prior year complex. Rather than provide full fiscal year guidance, we believe is more beneficial for the sake of simplicity to provide specific guidance for our fourth quarter of fiscal '18. We expect fourth quarter revenue to be in the range of $1.625 billion to $1.645 million.
I want to reiterate a point we have made in the past, in our upcoming fourth quarter, we will lap the one year anniversary of the acquisition of G&K. For the first time, G&K's growth will be organic as opposed to inorganic. In the fourth quarter, we will report an organic growth rate that is the combination of the strongly growing Cintas legacy business and a significantly sized acquired G&K business that historically grew slower than Cintas and that will have declined year-over-year in the fourth quarter.
We expect this lower organic growth rate to be temporary, just as it was for our First Aid and Safety segment after it acquired ZEE Medical. With the investment in selling resources having already been made to grow the G&K business, we expect the total Uniform Rental and Facility services organic growth rate to accelerate as we move through fiscal 2019. For our fiscal 2018 quarter, we expect EPS from continuing operations to be in the range of $1.64 to $1.69.
Guidance assumes the fourth quarter tax rate of 24%. We anticipate healthy fourth quarter operating margins in excess of last year's fourth quarter. Note that while the EPS guidance excludes any future G&K transaction and integration expenses, we do expect that these expenses will be incurred in the fourth quarter as we continue to integrate this significant acquisition. We estimate that these expenses will range from $10 million to $15 million.
I will now turn the call over to Paul.
Thank you, Mike. First please note that our fiscal third quarter contains the same number of workdays 64, as the prior year third-quarter. However, on a sequential basis, it had one less workday in the second quarter. One less workday in a quarter has an impact of approximately 50 basis points on operating margin due to many large expenses including rental material costs, depreciation expense, and amortization expense been determined on a monthly basis instead of on a workday basis.
Our upcoming fiscal fourth quarter will contain 66 days, the same number of days as the fourth quarter of the prior fiscal year. We have two reportable operating segments Uniform Rental and Facility services and First Aid and Safety services. The remainder of our business is included in All Other. All Other consists of Fire Protection Services and our Uniform Direct Sales business. First Aid and Safety service and All Other are combined and presented as other services on the income statement.
Uniform Rental and Facilities services operating segment includes the rental and servicing of uniforms, mats and towels and the provision of restrooms supply and other facility products and services. This segment also includes the sale of items from our catalogues to our customer on route. Uniform Rental and Facilities services revenue was $1.284 billion, an increase of 30.0% compared to last year's third quarter.
Excluding the impact of acquisitions and foreign currency exchange rate changes, the organic growth rate was 6.5%. Our Uniform Rental and Facility services segment gross margin was 44.1% for the third quarter compared to 45.1% in last year's third quarter. The reduction in margin is attributable to the inclusion in this year's third quarter of the lower margin G&K business. The margin of the G&K business has continued to decline as the top line has lowered.
In addition, we continued to incur the typical conversion costs which impact margins in the short term. While the stimulation of the G&K business continues at a great pace, Mike mentioned 95% of duplicate operations have been closed, more work remains. The G&K gross margins will improve through Cintas legacy levels as we further integrate this business, and we increasingly realize more of the synergies, we are on track.
Our First Aid and Safety Services operating segment includes revenue from the sales and servicing of first aid products, safety products and training. This segments revenue for the third quarter was 137 million, which was 10.5% higher than last year's third quarter. On an organic basis, the growth rate for the segment was 10.0%. This segments gross margin was 46.9% in the third quarter compared to 44.8% in last year's third quarter, an increase of 210 basis points.
The third quarter was another outstanding quarter for this business. Strong new business wins and expanding gross margins are evidenced of the value businesses of all types place on having Cintas manage their first aid and training programs to help keep their employees healthy, safe and ready for the work day. Our Fire Protection Services and Uniform Direct Sales businesses are reported in the all other category.
The Uniform Direct Sales business long-term growth rates are generally low single-digits and are subject to volatility, such as when we install a multimillion account. Our fire business however continues to grow each year at a strong pace. All other revenue was 167 million an increase of 17.0% compared to last year's third quarter. The organic growth rate was 14.9%. All other gross margin was 41.7% for the third quarter of this fiscal year compared to 41.2% for last year's third quarter an increase of 50 basis points.
All other gross margin expansion was driven by the higher margin fire business. Our uniform direct sales business growth was strong in the third quarter note that the business will face some difficult sales growth comparisons in the fourth quarter. Last year’s fourth quarter benefited from the significant roll out of new uniform styles for the pilots and flight attendance of Southwest Airlines. Large roll outs such as these do not repeat each year as businesses typically rebrand only every three to five years or so. The benefit from Southwest last year will be a headwind of about $13 million to this year’s fourth quarter revenue.
Selling and administrative expenses as a percentage of revenue were 30.9% in the third quarter compared to 28.6% in last year's third quarter. Please note that the one-time cash payment at Cintas partners Mike mentioned earlier was recorded in SG&A. Excluding this one-time payment, this year’s third quarter SG&A as a percentage of revenue was 28.4% compared to 28.6% last year. SG&A benefited from improved receivables collections and favorable workers’ compensation claims experienced.
On the year-to-date basis, SG&A excluding the one-time payment is up 50 basis points over last year. However, note that current year SG&A is negatively impacted about 100 basis points by intangible assets amortization expense resulting from the purchase price accounting of the G&K acquisition and incremental SAP depreciation and implementation costs. We are getting leverage from increased revenue covering fixed costs and making good progress on reducing general and administrative expenses as a percentage of revenue.
As Mike stated earlier, our third quarter fiscal 2018 effective tax rate on continuing operations benefited from the new U.S. tax legislation. The benefit of the Tax Act to the third quarter EPS was $1.59. Our EPS guidance for the fourth quarter of fiscal 2018 assumes an effective tax rate of 24.0%. Note that the effective tax rate will fluctuate from quarter-to-quarter based on tax reserve builds and releases relating to discrete items, including the amount of stock compensation expense realized each period.
Our cash and equivalents balance as of February 28 was $152 million, and we had $33 million of marketable securities as of quarter end. Free cash flow in the first nine months of fiscal 2018 was $464 million, an increase of $200 million or 75% from the prior year period.
Capital expenditures for the first nine months of the fiscal year were $196 million. Our CapEx by operating segment for the nine month period was as follows: $163 million in Uniform Rental and Facility Services; $21 million in First Aid and Safety; and $12 million in All Other. We expect fourth quarter 2018 CapEx to be approximately $65 million.
As of February 28, total debt was $2,722,000,000, consisting of $187 million in short-term debt and $2,535,000,000 of long-term debt. At February 28, our leverage was 2.3 times debt-to-EBITDA.
Overall, our cash flow remains strong and we expect our leverage ratio to decrease to approximately 2.0 times debt-to-EBITDA at May 31, 2018.
That concludes our prepared remarks. We’re happy to answer your questions.
[Operator Instructions] And we will hear first from Manav Patnaik with Barclays.
Hi, this is Greg calling on for Manav. I just wanted to hit on G&K first sets okay. Maybe I missed it, but could you give the revenue and growth rate you saw in the third quarter? And then maybe more broadly on touch on any early signs you’re seeing from potential revenue synergy opportunity?
Third quarter revenue was slightly over $230 million and it was down about 4.7%. I would tell you, Greg that being able to specifically identify that G&K revenue gets harder and harder as we have -- as you've heard us say closed 60 locations, and now that revenue is really starting to mix in with Cintas locations. So getting a little harder and harder to identify, but those were the estimated third quarter numbers.
From a revenue synergy standpoint, we think opportunities are going to be there. We are moving somewhat slowly on that because we want to make sure that through the large disruption of closing and system conversions that we, that we maintain a very good customer relationship and introducing new things to them in addition to that kind of disruption gets to be overwhelming sometime.
So, we’re moving fairly slowly on that. I would expect it will start to see some benefit in the back half of fiscal ’19 and certainly in fiscal ’20. But from our standpoint today, early signs are we feel pretty good about that opportunity in the future.
Okay and then from the core Cintas side, I know it's a metric we don’t look at quite as much anymore, but maybe some color on what you’re seeing from the net add stops and hiring from their existing customers?
Yes Greg, its Paul. So the add stops metric was positive, I think the only thing really of note was that we had some good lift in the dust mats area, carpeted mats, wets and cold winters with a lot of snow good participation definitely give us a little bit of lift, but outside of that nothing significant to add specially in terms of anything in the garment area.
Thank you. Our next question will come from Toni Kaplan with Morgan Stanley.
Just following up on the G&K. You mentioned that was down 4.7% in the quarter. I think last quarter you mentioned in your guidance 8.95 to 9.15 for the year. So I’m just wondering, is that still like a good number for the year? Or was this quarter little bit better than what you're expecting previously?
We have been very pleased with the performance of G&K revenue block, so far and it was a little bit better than we expected in the third, and I would say were going to be at around 920 million for the year, which is slightly better than that range that we gave last quarter and we continue to see very positive things from not just the revenue performance but overall performance.
And this quarter I guess the legacy Cintas organic growth decelerated for the second quarter to 6.5%, so I just wanted to get a little bit of extra color on sort of what you’re seeing in that Cintas legacy business like, should we expect I guess the G&K will be inorganic so of course the fourth quarter will be even lower, but just on legacy Cintas businesses, is there something sort of driving the deceleration? Or is it just look the comps are getting harder?
We believe that the execution and the performance of the business is still very good, we’re very pleased with it. And as you probably noticed, we increased our guidance for the fourth quarter as well. So, we still feel very good about the performance, look in every quarter, there are puts and takes. For the first half of the year for example, we got a little bit of an energy headwind and in the third quarter -- last year's third quarter was very strong, and so there are puts and takes in every quarter, but we’re still in the range where we want to be and we feel like we’re operating very efficiently throughout this fiscal year.
When you think about our fourth quarter guidance, we effectively raise the bottom end about 67 million and the top end about 22 million, and again a bit of a signal that we still feel good about the business. And generally speaking, if we hit the top of that guidance range in the fourth quarter, I would expect that the legacy Cintas business may see a little bit of an uptick in organic growth in that fourth quarter. We won’t report it that way because we’re comingling the G&K and the Cintas business but we feel good about it.
Thank you. We’ll now go to Hamzah Mazari with Macquarie Capital.
The first question is just if you could give us a sense of how to think about utilization across your facilities? I realize facility capacity is measured locally versus nationally, but maybe just give us some sense, how many facilities are at say 75% plus utilization? What's underutilized in your platform? I know you're going through a consolidation as well, so just any color, where are we utilization wise, however you want to answer that?
Hamzah, as you mentioned, capacity is local and there’re some markets that are reaching their capacity, there’re others that have plenty. When we need extra capacity, we will do certain short-term steps before building a fully new facility like we may add a washer and dryer to our wash alley. We may pump out our wash alley and make it even larger and that will add capacity and we usually do those things, as we start to creep up on the capacity and that allows us to expand the existing capacity.
We’ll continue to do those things we have in the last several years, but we’ll also add I would say something in the way of two to four plants per year. We have done that this fiscal year and I would expect it will continue to do something like that into the future, as we or if we continue to grow like we have been. Is that the answer to your question?
Yes, that's very helpful. And then maybe any view I know its early days, there is low visibility, but any thoughts on the Trump tariffs? How that impacts your business either directly or indirectly? And anything you are hearing from customers, anything you are hearing from your procurement guys, just any sense early sense of that?
Well, we didn’t fair to well in the market today. I still start by that. We're not seeing things from our customers yet and that's too early to tell. Certainly, we do have some things that we sourced out of China, we're keeping our eyes on it and how they may be affected by the list of things that may have a tariff. But I think it's too early to tell because we really don’t know what's on and what's not, quite yet. So too early to tell, we're keeping our eyes on it. Our goal will be, if we do see some things that may be affected into the future, our goal is to do our best to resource or find efficiencies to offset, and I think we've done a fairly good job of that over the years.
Last question, I'll turn it over. Just any thoughts on how much of your market place is self operated on the uniform side and any change you are seeing in terms of outsourcing trends has that been pretty consistent any thoughts there appreciated?
We haven't we talked a lot about the no programmer new business, so that is new customers that weren’t any uniform rental program previously, and we haven't seen a change, we're still having success in finding new businesses to put into uniform rental program. So, it's not much change in our third quarter relative to the previous several quarters.
[Operator Instructions] We will go to Scott Schneeberger with Oppenheimer.
Two questions. First one, could you comment on sales force productivity and obviously you are progressing nicely through your integration? Could you just talk to some of the developments you had there and what stuff to go and how it's working?
Now, we see some encouraging science, Scott. Our productivity has improved sequentially through this fiscal year and that's with quite a few more sales people certainly than a year ago as we brought on the G&K sales team. So, we're seeing some encouraging productivity signs, but certainly, we have our ways to go. We still have productivity improvements to get and then were confident that those will come over the course of the fourth quarter and fiscal '19.
And my follow-up is on CapEx, if my numbers are right it looks like the guidance reduced by maybe 15 million or 20 million this year, if you can please correct me on that and let me know it? And where is that coming from, is that a push out? Is there anything changing with SAP or if you can tell us where if there is a change where it is occurring?
Yes, I think it’s more than anything its timing. We do have a lot going on in terms of the G&K integration and SAP implementation and some projects tend to get pushed a little bit as move through those integrations market-by-market. So I would just call it timing more than anything.
Thank you. Our next question comes from Judah Sokel with JP Morgan.
I was wondering if you can give us an update on the four buckets that you’ve talked about in the past of cost synergies, which we have talked about $130 million to $140 million. Where we -- how we're progressing on each of those?
So, let me start with the 15 million that we talked about in the third quarter, about half is G&A and the other half would be in the gross margin. So, from a G&A perspective, you probably saw in our third quarter that we’re making some nice progress in terms of leveraging and getting that SG&A down from post acquisitions levels. So we are making some nice progress and we have more to do. So for example, we still have an IT presence from the legacy G&K team as we continue to roll off of that system. And so, there will be some additional things that come but we’ve made some really nice progress.
The other bucket that we talked about our production bucket that is the cost of running our facilities, and as you can imagine, we are in the midst of closing a number of facilities and converting. And so while we have set up a lot of those synergies, there’s some inefficiency that’s going on right now in our third quarter, a little bit in our second quarter, certainly a little bit more in our fourth quarter as we do the things necessary to achieve those.
So for example, we are doing a pretty good job of getting those locations closed and eliminating some duplicate labor and other costs. And we will get more efficient as we move away from the impression market-by-market, but the production has come along very well and we still expect the same kind of results that we’d put out a year ago.
From a service perspective -- haven’t done much of that heavy lifting yet that as we’ve talked about in the past, we need to get on the same systems in markets before we can really start to get in route optimization. We have started some of that in some markets. We will continue to do that in our fourth quarter, but likely even more heavy lifting in the first half of fiscal '19. But indications are we still feel good about capturing those synergies that we’ve talked about.
And the last bucket was the sourcing bucket. And we are making progress on that area as well. As you probably know it takes longer to recognize that because we may be able to get new sourcing and new pricing but it takes a little while to purchase it, sold it out, get it into our distribution center and get it into in-service inventory and then it starts amortizing, right? So we are making the -- some really nice progress there. Just takes more time to realize it.
So all-in-all Judah, feel good about all four of those buckets.
Those are very helpful color, thanks. And other question about the 2019 comment that you guys have mention that you expect to see acceleration throughout the year. Is that purely a function of the G&K decline moderating and perhaps switching the growth? Or is that in the core legacy Cintas business also you’re expecting some sort of pick up in that business?
No more than anything it's seeing the G&K business began to level and then start to grow and more than anything seeing the productivity improving our sales team that I mentioned a bit ago.
Thank you. We will now hear from Shlomo Rosenbaum with Stifel.
Mike, are you seeing a positive impact in the business, overall, just from tax legislation, just from your customers? Maybe any pickup in hiring or being easier to sell, it's now been approximately three months, I was wondering what you're seeing on that side of it?
Shlomo, we're hearing some anecdotal thing that the sentiment is good. I would say from the standpoint of impact to the P&L probably, not much yet. You still have to take the time to sell it and get people in the uniform or get the mass out there. And as you know we’re kind of weakly billing business and it takes a little time to accumulate some of that revenue. And so, it takes a little time. So I would say the really impacted in our third quarter has not been very significant. But sentiment seems to be pretty good.
So would you expect that to be a lift in future quarters?
I think certainly that if we see our customers spending some of the cash that they are getting from the tax reform, yes, I think that will be a benefit. It's hard to tell how much, but I think that will certainly be a good thing for all of us.
Okay, and then could you talk a little bit about just what drove some of the sequentially improved results in the other business? Is it what's going on in fire safety anything in particular, that's going on, you could call out?
Shlomo, In fire, I mean nothing and particular a call out, as we mentioned in kind of our remarks that is a business that has growing very strongly organically for some time now expectation is typically a high single digits about 10%, so as Mike said, sometimes you have some puts and takes each quarter, and there might be a little bit of volatility, but you're nothing, nothing to call out so good strong growing business and then the direct sale business.
You know, they did have a very strong third quarter, they did have some nice wins nothing to the extent of a Southwest Airlines rollout that I mentioned in the comments but still some nice good winds and to be told last year's third quarter with a little light. So they had some nice statement comparisons in Q3, as we've talked about in the prepared remarks. Remember that that direct sale business will have a very difficult comp due to southwest rolling out last year.
And if you don’t mind just a little housekeeping, what’s the pro forma tax rate you’re using for the $1.37 EPS number?
It’s 32% for the quarter and so based on where we have -- had guided you previously there's probably about $0.06 of a tax benefit in that $1.37 that is non-U.S. tax reform related.
So, pro forma tax rate pretax income you would use 32% to get down to your 1.37?
Yes, for the quarter only, not year-to-date, but for the quarter only.
Thank you. Our next question will come from Andy Wittmann with R. W. Baird.
I guess let’s talk about the 40 million payment to your partners, I assume that most of that was in the rental segment but was there any amount that’s notable that we should know for our models that wasn’t in the other segment?
It was a 2.5% of revenue in each segment Andy.
And then maybe just on the guidance looking at it another way, it seemed like, well it looks like if you adjust for the tax rate bump, about $0.25 by our estimates versus what you would have previously and you had some pretty good guidance bump that you’ve mentioned. I was just wondering it sounds like G&K revenues had a plan, can you maybe talk Mike about some of the other factors that helped you get to upside and maybe the significance of them?
The good news, I'll start with, there’re two more workdays and that certainly is beneficial two workdays than in the third quarter. Same as last year's year-over-year, but sequentially that'll help us. Andy, it’s continuing to sell. It is working through the integration activities. We’re going to get more leverage as we as we go into that fourth quarter. And we’ve seen some real nice things in the SG&A area, so I think it’s just a -- it’s a lot of the execution along with some healthy revenue.
And maybe my last question is just trying to understand a little bit more detail on the characteristics of your growth in uniform rental, and you guys have answered this question about kind of add stops, new business versus no programmers, and all of things. But one other questions that I want to get a sense from you about, is specifically on penetration of existing customers, if you were to break up that as a bucket of your gross new sales in the quarter. How significant or how much of the growth rate is based on sales to existing customers in particular whether it’s cross-sell, up-sell and maybe not including pricing, if you could just help us understand how important that is to your growth, that’d be helpful?
Certainly, Andy, it’s important it’s not as a big of a driver as new business and really has never been, but it is important to us and while we haven't gotten specific in terms of magnitude -- quantifying magnitude. It is certainly second-most to the new business effort that we have. So it’s an important factor. We think there are lots of opportunities remaining in that area as, for particularly, as we continue to penetrate with things like cohort and ship works garments, and with our signature series restaurant product. So, still lot of opportunity left, but it's an important factor.
And maybe my last, last question, I was wondering you commented on last couple of quarters on the pricing environment. You said it's been always competitive, but you are getting some. How would you characterize the price that's realized in the third quarter versus the two single last few quarters?
No change to speak off remains pretty competitive, but no change from the last several quarters.
[Operator Instructions] And at this time, I would like to turn the floor back over to Mr. Mike Hansen for any additional or closing remarks.
Thank you very much for joining us tonight. We look forward to talking with you again in our fourth quarter call that will happen in mid-July and have a good evening.
Thank you. Ladies and gentlemen, again that does conclude today's conference. Thank you all again for your participation. You may now disconnect.