MillerKnoll Inc
NASDAQ:MLKN
Earnings Call Analysis
Q1-2024 Analysis
MillerKnoll Inc
The team has reported a robust first quarter with solid top-line results and significant margin expansion. The company is navigating a recovery period with a mix of both caution and optimism, showing an increase in office leasing and a stable construction outlook in some sectors. Despite the potential headwinds from high mortgage rates and economic uncertainty, particularly in the retail segment and regions like Europe and China, the company is focused on long-term growth and seizing market opportunities as they arise.
The company witnessed a 450 basis point increase in consolidated gross margin, reaching 39%, marking the third consecutive quarter of year-over-year adjusted gross margin expansion. Factors contributing to this include realized price increases, integration-related synergies, and a positive shift in product and channel mix. The company also generated approximately $131 million in cash flow from operations in the quarter.
New orders in the quarter rose to $487 million, up 2.1% from last year, with an uptick observed in the Americas segment for the first time in four quarters. Full-year adjusted earnings guidance has been increased, ranging between $1.85 and $2.15 per share, while the second quarter revenue is expected to range between $950 million and $990 million.
While there are near-term macroeconomic challenges such as the decelerating housing market and rising interest rates affecting demand, particularly in China and Europe, the company is confident about its direct-to-consumer channel progress and is working to increase market share and position its retail brands as top choices in design.
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Good evening, and welcome to MillerKnoll's Quarterly Earnings Conference Call. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Vice President of Investor Relations, Carola Mengolini.
Good evening, and welcome to MillerKnoll's First Quarter Fiscal 2024 Conference Call. I am joined by Andi Owen, Chief Executive Officer; and Jeff Stutz, Chief Financial Officer. Also available during the Q&A session are John Michael, President of Americas Contract; and Debbie Propst, President of Global Retail. Before I turn the call over to Andi, please remember our safe harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We may also refer to certain non-GAAP financial metrics, which are reconciled and described in our press release posted on our Investor Relations website at millerknoll.com. With that, I will turn the call over to Andi. Andi?
Thanks, Carola. Good evening, everyone, and thank you for joining our call. I'm very excited to share that our team delivered a strong first quarter, as evidenced by our top line results and margin expansion. Across our enterprise, we have set ourselves up to seize opportunity as market conditions improve, and we believe we are at an inflection point. Now regarding our continuing strategy, I'd like to highlight some of the efforts we're making to become more resilient and future-proof our business, including diversifying our business both in North America and globally, streamlining our global operations, moving production and capacity efficiently and investing in e-commerce. We believe that the work we're doing is paying off with much to look forward to on the horizon.
At the same time, we remain pragmatic about the next few months. We're still in the early period of recovery, and our business segments reflect a varied economic conditions around the globe. Right now, we have cause for both enthusiasm and vigilance. We've seen companies begin to take the leap back into physical space and announced return to office policies. Office leasing in the U.S. began to rebound in the second quarter of 2023, and we're seeing this amongst our clients as companies continue to announce return to office policies. Moreover, the American Institute of Architects' Billing Index or ABI, has been flat for the last 6 months, suggesting a slow but stable construction outlook. Having said that, we're still seeing mortgage rates at 20-year highs and uncertainty remains about future rate hikes, which dampens the housing market and impacts the near term in our Retail segment. Overall, we remain focused on economic and industry activity worldwide so that we can continue to deliver with our customers and clients value most. Our research and insights team is best-in-class, bringing the latest data and learning to our customers. This fall, we'll be sharing our latest point of view on the workplace and designing ideal spaces based on quality and actionable data. This fresh, thoughtful perspective emphasizes what we believe are the key factors to designing the best basis to support thriving and engaged teams.
Internationally, we're seeing some pockets of softness, mainly centered in Europe and China. Similar to North America and the rest of world were further pursuing resilient sectors and global accounts. We've seen that our scalability and ability to deliver a wider range of products is a unique market advantage, and we'll continue to seek out these wins. In addition, over the next 12 months, we plan to transition 60 more international Herman Miller dealers into MillerKnoll dealers, expanding our offering to clients and our share of wallet with our dealers. Regarding Retail, the deceleration in the North American housing market and the upswing in interest rates across Europe have continued to influence demand in this segment when compared to the previous year. Nevertheless during the quarter, the order trajectory in the North American market surpassed that of other regions, primarily attributed to enhancements in our direct-to-consumer channel. We're strategically allocating resources to improve our digital platforms and technological infrastructure, aiming to enhance the overall customer experience and satisfaction levels, all while intensifying our efforts to fortify brand awareness. Furthermore, in the first quarter, we opened a new Design Within Reach store in Ardmore, Pennsylvania, which has delivered very promising early results, including robust foot traffic and order placement. Now I'd like to talk a little bit about our gross margins. It expanded year-over-year sequentially and across all of our business segments. In the past, I've talked about focusing on what we can control, and this performance is proof of that. We're seeing efficiency improvements derived from our synergy capture. We have pricing power. We're laser focused on inventory management and product mix, and we continue to seek cost reductions. All of these key elements that are enabling us to improve the profitability of our core operations. I'm extremely proud of all the work our teams have done and continue to do every day to seek and seize opportunities. Finally, this quarter was not short on activity, so I'll walk you through a few of the highlights. We started out strong with a successful [indiscernible] phase, the largest North American presentation of our MillerKnoll collective of contract products and services. Throughout the quarter, we debuted new products and textiles across our collective, including NaughtOne's Morse Table System, which was awarded Gold by Best of NeoCon. Herman Miller's first collaboration with Gabriel Tan launching The Luva Modular Sofa and Cyclade Tables as well as beautiful array of textiles from our textiles group, many with sustainable fabrics at the forefront. The HAY team launched a collection of lamps and other ancillary items. Holly Hunt celebrated their 40th anniversary with a collection of beautiful pieces. At Knoll, we celebrated the 75th anniversary of the iconic Womb Chair, while also introducing The Saarinen table at a modern lounge height. We relaunched Herman Miller [ archival ] classics, all with fresh interpretation, and we made significant progress towards our sustainability goals, bringing solar power to our U.K. operations facility. All in all, I'm pleased with the strong quarter we delivered. Our team is connecting and moving the business forward in exciting creative ways and we're capturing market share and growth opportunities as they arrive. While I believe the rest of fiscal year 2024 will remain a transitional year, economic indicators trending more positively pockets of weakness remaining. I'm confident in our ability to deliver shareholder value as we are operating efficiently and making decisions to further improve our margins and profitability. I'm looking forward to progressing towards our goals, positively impacting our industry and advancing our strategy to remain resilient and ready for the future. With that, I want to thank you for your continued partnership with us. I'll now turn the call over to Jeff for a deeper look at our financials.
Thank you, Andi, and good evening, everyone. As Andi just said, we are proud that our teams delivered a very strong quarter. The results reflect some of the themes that we've been communicating over the past several quarters. First, our focus on diversification, both across geographies, business sectors and customer segments; and second, our focus on margins, taking action across several fronts. For the first quarter, we generated adjusted earnings of $0.37 per share, which were $0.16 above the midpoint of our guidance. Overall, strong net sales and gross margin expansion across all of our business segments drove the overperformance. Net sales in the first quarter were $918 million, above the midpoint of our guidance, driven by strong performance in the Americas Contract segment. Our consolidated gross margin was 39%, which was 450 basis points higher than the same quarter a year ago and also improved on a sequential period basis. Moreover, this marks the third consecutive quarter of consolidated year-over-year adjusted gross margin expansion. As Andi mentioned, several factors contributed to this, including the realization of price increases, ongoing benefits from integration-related synergies and positive shifts in product and channel mix. Our consolidated adjusted operating margin was 6% for the period. Turning to cash flows in the balance sheet. This quarter, we generated approximately $131 million in cash flow from operations. This represents an increase of nearly $200 million compared to the same quarter last year, mostly driven by working capital improvements. As a result of this, we were able to retire $66 million of debt and took the opportunity to repurchase approximately 1.7 million shares for a total cash outlay of $31.7 million. We finished the first quarter with a net debt-to-EBITDA ratio of 2.5x, which puts us comfortably under the maximum limit defined in our lender agreements. New orders at the consolidated level totaled $914 million in the first quarter, reflecting an organic decrease of 1.3% from the same quarter last year. While this is lower from last year on an absolute basis, the rate of year-over-year decrease once again improved this quarter. Within our Americas Contract segment, net sales in the period were $490 million, representing an organic decrease of 1.7% from the same quarter last year. New orders in the period totaled $487 million, which was up 2.1% over last year. This is particularly encouraging as it's the first time in 4 quarters we've reported an increase in order levels in the Americas segment. I'd also like to highlight the fact that our Americas Contract team delivered another quarter of double-digit adjusted operating margin, which totaled 10.6% in the quarter. Turning to our International Contract and Specialty segment. Net sales for the quarter totaled $228 million, down 10.9% organically year-over-year, while new orders came in at $228 million, reflecting a year-over-year organic decrease of 3.6%. While we continue to be very optimistic about the medium- to long-term growth potential in this segment, near-term macroeconomic headwinds, particularly in China and parts of Europe, are impacting demand. Adjusted operating margin within this segment was 6.5% in the first quarter, down year-over-year, driven by lower sales volume. This was partially offset by improved gross margin performance, which continues to benefit from previous price increases and our cost synergy program. Moving to our Global Retail segment. Net sales in the first quarter of $199 million, were down 13.6% organically from the same quarter last year. New orders in this segment of $199 million, were 6.4% lower than a year ago on an organic basis. While the slowdown in the North American housing market and the rise in interest rates globally continued to affect the demand for this segment compared to last year.
We are optimistic about the progress our team is making in expanding our market share through our direct-to-consumer channels, given the relative order performance of some of our competitors. And as such, we are further positioning our most mature retail brands as preferred choices for authentic design. Adjusted operating margin in the Retail segment was 1.6%, down year-over-year, mainly due to a combination of lower volume and product mix. Now turning to our near-term guidance and outlook. Given the improvements we are seeing in gross margins across each of our business segments and continued signs of demand stabilization in our North American Contract business, we are increasing our adjusted earnings guidance for the full fiscal year, which we now expect to range between $1.85 and $2.15 per share. As it relates to the second quarter of fiscal 2024, we expect net sales to range between $950 million and $990 million and adjusted diluted earnings to be between $0.52 and $0.58 per share. And I'd point out that this guidance takes into consideration the relative seasonal increase in sales that we expect to experience in our Retail segment from the first quarter to the second quarter of our fiscal year. So with that overview of the numbers, I'll now turn the call back over to the operator, and we'll take your questions.
[Operator Instructions] Your first question comes from the line of Budd Bugatch with Water Tower Research.
Congratulations on the margin performance in the quarter. I would love to start just by punching into the order flow during the quarter, if you can make some commentary of how that went particularly in Americas Contract? I think if I caught your drift, you're saying we're seeing some improvement in that. And did that show up late in the quarter? And how has the second quarter started?
Yes, Budd, this is Jeff. I'll start and then John and Andi, if anyone please add as you see fit. So maybe just on the Americas segment in particular, so order activity in the first half of the quarter was positive, Budd, and showed some signs of slowing in August and the first couple of weeks of September. Now with that being said, the timing of last year's price increase, which, as a reminder, was 8% at the start of October a year ago would certainly be expected to make September's comparisons much more difficult in the current year. But when we zoom out from that week-to-week data, the general trends over the past 3 quarters have shown improved demand activity, and that gives us some confidence that more consistent growth is around the corner. So it was a bit choppy in August and early September. I think we're seeing some of that bump up against the tough comps from last year due to the sizable price increase we put in place at the beginning of October, but I'll pause there. And John, anything you have?
Thanks, Jeff. I'd just add, if we looked at additions to the funnel for the quarter, we had, I think, the second largest volume of additions to the funnel that we've had in the last 12 quarters. So from a project activity perspective, we're still seeing a fair amount of activity. And we've seen the day-to-day business maintain a steady pace as well. So I think to your point, Jeff, a lot of opportunity. I think we're seeing some regional differences, right, in terms of strength of markets, but overall, very positive.
That's interesting because we had heard and I'm sure you're aware that maybe project activity had lessened in the quarter and day-to-day business had replaced that. Is that not what you're seeing? Is that varying with what you're seeing?
We're seeing the day-to-day activity maintain a steady solid pace. And in terms of new project adds to the funnel, it's been very robust for the last 90 days.
Got you. Okay. And in Retail, what are you seeing? Debbie, are you seeing any indication that maybe we're at the bottom and not getting any much worse or bouncing along the bottom?
So Budd, just from an order pacing perspective throughout the quarter would we actually saw a very strong August. We attribute softness that we saw in June and July, obviously, to the macroeconomic conditions, but also the heightened travel spend during the summer months. And on an adjusted basis, our August order performance was actually flat until last year. So we feel like we have momentum. Additionally, we believe, as we look at benchmarks externally, we're taking share, given the increased performance of our marketing tactics and all the other investments that we're making to improve our efficiencies and how we engage with the customer.
I think one of the really important points -- Budd, it's Andi, about the Retail business is also the relative strength that we're seeing in the North America Retail segment where we are seeing momentum and demand pick up compared to the past few quarters and that's encouraging since it's one of our largest segments.
And the segment that we have a direct-to-consumer more mature strategy, our business internationally is largely wholesale where we have limitations with open-to-buy of the wholesale partners that we sell into.
So you're seeing better DTC than you're seeing in-store, is that what I understand?
We think about our direct-to-consumer business as both our store business and our e-commerce business. We also have a wholesale business, which is the sell-in of our products into third-party retail partners. Our direct-to-consumer business is performing much more resiliently right now, given the more agility we have and the levers we can deploy in that piece of our business versus in our wholesale business.
And I think we said this, and that was my understanding that your wholesale business is primarily offshore, not domestic.
Primarily international.
Yes. That's correct, Budd.
Okay. A couple of other things. You've raised the earnings guidance for the year. And I think when you were giving that guidance at the end of the fiscal year, you also mentioned a sales expectation modestly below the -- that you've just reported. Any update on that sales expectation for the full year, Jeff?
Yes. Well, I think, we're largely in the same place. I mean we're several quarters out to end of fiscal. I think what we wanted to make sure we signaled here is that the overperformance that we delivered in Q1, we believe we can take that to the bottom line to full year. I don't think there's a meaningful change in the outlook from a revenue perspective. But we were intentionally vague, as you remember, at the end of the year when we talked about the revenue guide. So I think we're basically in the same place.
I do. I do remember. And last...
Of course, you feel bad.
Sorry, that's just -- it's a fault that I just -- I'm trying to overcome. Last for me is the restructuring. Can you give us a little bit of color on what that is and where it is in the process? Do you still see more restructuring charges in the upcoming quarters? And is it primarily on the salary, the compensation side?
Yes. So Budd, maybe a point of clarity. So we have total charges in the quarter that I'll call for purposes of the discussion, special charges that totaled about $15 million. A subset of those costs were true restructuring-related expenses that tied to workforce reduction actions that are both here in the U.S. and some international that have already been announced and implemented.
I can't say that we have other imminent plans for further restructuring. Obviously, we will react to business conditions like we always do. The remainder of the cost, so the restructuring component of that was about $5 million. The balance that you see there in the total charges for the quarter continue to relate to cost to achieve and integration-related costs related to our synergy capture program. And those costs, Budd, are just ongoing in-flight integration projects. We're nearing the end of the process, as we -- our full target is a 3-year goal, and that would essentially be at the end of Q1 of next fiscal year would be that 3-year mark. And we're at a point now where most of the remaining in-flight projects are either consolidation related to showroom or some manufacturing-related moves that are planned. So you've got a combination of operating expenses from showroom moves that should be further synergies as well as cost of goods sold impact related to some of the factory work that we've got in place. So you'll see some more of that over the balance of this fiscal year as we complete those projects.
So we'll continue to see the integration side. We know the amortization of PI. That's going to continue. The restructuring, you will do that as you find projects and things that you're going to -- that may affect. And I understand this is quite sensitive compensation and workforce. But those are not yet announced. Is that the way to understand it?
That is correct. Nor do we have necessarily plans to announce them so. Again, we'll react to business conditions as we move through the balance of the year.
Your next question comes from the line of Greg Burns with Sidoti.
In North America now that we're nearing the end of the integration process, how has the consolidation of the dealer networks gone? Are we at the point now where they're fully up to speed and generating the level of productivity that you would expect them to? Or is there still a level of learning curve that they need to move up to sell the full portfolio of products?
Yes. I mean I would say, overall, Greg, we're very pleased in North America with the pace at which our dealers and our dealer designers have learned all the product lines from the corresponding legacy companies. But I'll let John add some color to that.
Yes, I think we are really, really pleased with the way the network has come together. We had just last week 22 of our largest dealers in West Michigan, 11 originally from the Miller side, 11 from the Knoll side. Honestly, you couldn't tell who came from which camp, right? They really have meshed extremely well together. Obviously, there's a learning curve to learn the new products. And I would say if I characterize our FY '23 that learning curve, we probably started up it a bit more slowly than we expected, but we finished much stronger than we expected. We really picked up a lot of momentum throughout the course of the year. And I think we exceeded our expectations in terms of what we would call cross-sell legacy Miller dealers selling no products and vice versa. So that's -- we're really pleased with the way the networks come together.
Okay. Great. And then I understand the kind of the macro issues impacting some of the international markets. Can you just talk about what the opportunity is there to sell that -- the broader portfolio? I know you're adding dealers, but how far along are you in addressing that opportunity longer term? Are we still in the very early innings? Are we not really seeing much of that yet? And is there potential for you to offset maybe some of the macro challenges that you're seeing here with some of these organic growth initiatives?
Yes, Greg, you took the words right of my mouth. I would say that we focused our attention on North America to begin this process so that we could learn it's also our largest business. And we're now focusing on International. So we are just beginning this process. We've converted dealers but as far as rationalizing product, learning product specs, continuing to convert dealers. We see a lot of runway and opportunity, particularly in selling the Knoll -- [ Studio Knoll ] ancillary products throughout the world. So we have a long way to go there, and we're actually pretty excited about what it can offset. So we're at the beginning of the process internationally.
Okay. Great. And then -- go ahead.
Knoll had very limited contract dealers in the past. They really focused primarily on the interior design and retail wholesale customers. So opening up that product line to contract dealers is a new effort, and we're excited about that. Anything you would add, Jeff?
Yes. I think, Greg, we may have mentioned this at end of year, but just recall that we've got -- I mean, this kind of builds on your comment about the dealer network that Knoll really didn't have an extensive international dealer network. And we're phasing into that -- to that MillerKnoll dealer format. And we've got about 80 of those dealers -- of 335 international Herman Miller dealers 80 of them are transitioned at this point and we expect another 60 yet this year. So we're moving forward with that in a pretty disciplined clip, I would say.
All right. Great. And then lastly, I appreciate the kind of balanced approach you're taking to capital allocation. Relative to your leverage, is there a target you're trying to get to? Are you comfortable at 2.5x? Are you trying to reduce that any further going forward?
Yes, Greg, Jeff. We're certainly comfortable with the 2.5 where we are now. We have said from the beginning, we intend to kind of follow a migration path or a glide path that would see that debt level come down over time. Nothing has changed on that front from our perspective. I think longer term, somewhere around 2x of leverage would seem reasonable. But some -- that also is highly influenced by the level of demand and earnings power that we see in the business. So I would just simply say we intend to continue to pay debt down as we move forward, but we're in no way fussed with the leverage ratio that we have today.
Your next question comes from the line of Reuben Garner with Benchmark.
So, Andi, you mentioned an inflection point. I was curious if you could elaborate on that. Is that an inflection in MillerKnoll specifically? Is it -- was that a profitability comment? Was that a macro perspective? Anything that you can kind of give on that comment would be helpful.
Yes. It's really a macro perspective and also the sentiment that we're hearing from our customers, from CEOs and from research that we've done around returning to office, around spending time together. I think that we are seeing a lot more of our clients finding ways to bring people back together, finding ways to utilize their space. I think the world has moved through a cycle of remote to hybrid to flexibility. And I think as John talked about new projects and new demand in the funnel that return and I think CEO sentiment around the return has turned to the majority in favor of being together more often, and that works well for us, and we're excited about that. That's what I meant.
And so that project funnel that John referenced, what about the willingness and maybe this goes into your inflection point comment? Are you seeing a change in the willingness to kind of pull the trigger on those projects? Or is it still kind of that planning and thinking about the new way of work phase?
Yes. We're seeing more confidence in decision-making. The less CEOs and decision-makers waiting to see what everyone else is doing and sort of boldly going into what's right for their organization, obviously, with some help and guidance from us. And the decision points, I don't think there is short and John, please add to this, as short as they used to be pre-COVID, but they've certainly shortened substantially from where they were 6 months to a year ago. Would you add, John?
I would agree, Andi, in that the -- there is still a lot of iterating that goes on before the plan is finally complete. So people are -- really want to make sure that they get it right. But I would add to that, there is a growing sense of urgency among CEOs and leaders maybe even a sense of frustration on this topic, which to Andi's point, is sort of a catalyst for activity and to kind of get off the fence on some of these projects and make decisions. So obviously, that's positive for us and for our industry.
Great. And Jeff, sorry if I missed this, but can we give an update on where we are in the price/cost. Jeremy, I know you guys had an increase out as recently as this summer, I believe. Are the current kind of double-digit margin run rates that you're seeing in the Americas fully reflecting your price cost? Have you gotten your margin back or is there still kind of room to run there?
Yes, Reuben, I would say it this way. So yes, you are correct. First of all, I'll confirm we did have an increase that was effective. John, keep me honest here, was July or beginning of July. So we -- and it was a certainly not the 8% and 10% that we had been seeing in years. Recent years past, it was closer to 3% on average. So more akin to typical history of price increases. And that will take some time to layer in. And so we think there's some further upside there. I want to maybe take this as an opportunity to highlight the fact that the synergy plan that we have been spending so much time and effort on over the past 2-plus years. We have been working hard in the background and market conditions have been such that it's largely masked all -- so much of that work. And I think what you're seeing now and you see in the Americas business, we were 800-plus basis points of gross margin expansion year-on-year this quarter. That's a big deal. And I attribute that it's pricing -- it's price cost factors, as you highlight, for sure. Those have come back in our favor a bit, and we still have a little room to run there, I believe. But the synergy plan is layering in and you heard my comments a few minutes ago on the remaining projects. We think there's still some room for further margin expansion there.
Now the precondition for that has always been in this business, you have to have some level of demand support. And so that's why we will continue to watch the macro picture very closely, as you can imagine. But if we get some support there, we think the table is set for even some further margin expansion as we move forward.
You stole my thunder. That was my follow-up question. So I think I'll end with stock repurchase. I believe that was the largest repurchase we've seen in some time for the quarter. Maybe just update us on what you're thinking is there? Is that something we'll continue to see if the stock kind of remains at these levels? It seems to speak to your confidence that maybe we're turning the corner here and that's not reflective of that, but I don't want to put words in your mouth?
Yes, I would say we believe we're oversold, but I think we have a very balanced perspective on capital allocation. We'll continue to pay down debt. But if we continue to see opportunistic time to purchase our stock, we'll do that too. We believe that's a great return for our shareholders, and we believe in the future.
Congrats on the strong results and good luck.
Thank you, Reuben.
Your next question comes from the line of Alex Fuhrman with Craig-Hallum.
Most of my questions were asked here earlier, but I guess just to -- take a look at the full year guidance, I mean, definitely much better-than-expected results in Q1 and guided to -- for Q2 on the bottom line. Certainly don't mean this to sound nitpicky or anything, but it looks like the degree to which you beat Q1 estimates and Q2 wasn't maybe fully flowed through to the full year. Is that just being a little bit conservative? Or you may be expecting that some of the headwinds you mentioned on a macro basis related to things like housing in China and Europe, is that expected to offset some of the gains that you've seen with gross margin and your North America business maybe in the back half of the year?
Yes. As I said earlier on, Alex, I think we're super enthusiastic, but we are also pragmatic and vigilant. I think we live in a very dynamic world right now. And while we have enthusiasm and optimism, we do have China that hasn't come back as quickly as we like. We have European consumer who has mortgages where interest rates are not fixed who's not necessarily back in the wholesale market.
So we're watching these things very closely. And while we feel very strongly about our diversified business model and our ability to offset these things, we want to make sure we have the right mix of enthusiasm and pragmatism.
There are no further questions. We turn the floor back to President and CEO, Andi Owen for any closing remarks.
Thank you so much, you guys for joining us on the call. We really appreciate your continued support of MillerKnoll, and we look forward to updating you on our next quarterly call. Have a great night.
This concludes today's conference call. You may disconnect.