K-Bro Linen Inc

TSX:KBL

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen, and welcome to the K-Bro Linen Systems Inc. Second Quarter 2021 Earnings Call Conference Call. [Operator Instructions] This call is being recorded on Friday, August 6, 2021.I would like to turn the conference over to Kristie Plaquin. Please go ahead.

[Kristie L. Plaquin, Chief Financial Officer]

Thank you, operator, and good morning, everyone. Thank you for joining us today, and welcome to our second quarter 2021 earnings results conference call. On the line with me today is Linda McCurdy, President and Chief Executive Officer. Following our remarks today, we will open it up for questions.I would like to remind everyone that statements made during our prepared remarks or in the Q&A portion of the conference call with reference to management's expectations or our predictions of the future are forward-looking statements. All statements made today, which are not statements of historical fact are considered to be forward-looking statements. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Investors are also cautioned not to place undue reliance on these statements. Actual results could differ materially from those anticipated. Risk factors that could affect the results are detailed in the corporation's public filings.I'll now turn the call over to our CEO, Linda McCurdy, who will provide her insights and remarks on the quarter. Linda?

[Linda Jane McCurdy, President, CEO & Director]

Thank you, Kristie, and good morning, everyone, and thank you for joining us today to review our second quarter results of 2021. I'll focus on the second quarter highlights and our outlook for the year. I'll then pass it over to Kristie, who will provide more detail on our financial performance and our balance sheet.So in terms of the highlights, I'm very pleased with our second quarter results with adjusted EBITDA of $10 million. Our healthcare revenues continue to be strong. For Q2 2021, we saw an increase of 22% over Q2 2020 and 23% over Q2 2019. The increases are coming from price increases, temporary services provided in certain markets, product conversion, usage change practices and increased demand for certain items because of COVID. As anticipated with the reduction in COVID cases in hospitalization in July, we have seen a reduction in the quarter-over-quarter increases in healthcare revenue that we expected over the last 3 -- experienced over the last 3 quarters.In terms of hospitality, it does remain subdued compared to previous quarters, but we are optimistic as we're experiencing continuing improvements in customer activity and expect this trend to follow throughout 2021 as restrictions continue to be used with vaccine rollout. So since mid-March of 2020, we've seen significantly reduced hotel occupancy rates compared to historical levels. Demand from both business and leisure airline travel has declined significantly on a global basis, and airlines have responded with significantly reduced international and domestic flights. Accordingly, hospitality volumes in all of our Canadian and U.K. markets are well historic levels. However, as a result of the COVID-19 pandemic restrictions gradually being eased during Q2 of 2021, we have seen consolidated hospitality revenue increase gradually on a month-over-month basis. And as a result, we experienced a 312% increase compared to Q2 2020. So when comparing to 2019, we saw a shortfall in April 2021 hospitality revenue compared to April 2019 hospitality revenue of 81%. In May, this reduced to 69% and in June 49%. During July, we've continued to see improvements in client activity on a year-over-year basis.We remain well positioned from a balance sheet and liquidity perspective, with $57.5 million of additional borrowing capacity under revolving line of credit and with an additional $25 million accordion for growth purposes. Total debt increased in the quarter from $36.8 million to $40.7 million, and our funded debt-to-EBITDA at the end of Q2 remained conservative at just over 1x.In addition, during the second quarter, we've successfully completed amendments to our existing revolving credit facility, which extended the agreement to July 31, 2024, from July 31, 2022.I'll now take a moment to update everyone on the situation with Alberta Health Services. In October of 2020, AHS issued a request for proposal for linen services, which encompass the linen services we currently provide to AHS under the AHS Calgary contract as well as the linen services we currently provide to AHS in Edmonton as well as volumes throughout the remainder of the province in rural and urban centers. The Calgary and Edmonton volumes are under contract as part of 2 existing agreements until 2022 and 2023, respectively.On April 27, 2021, K-Bro was awarded all of the volumes in the RFP. For greater clarity, this award renews all of the corporation's existing business in Calgary and Edmonton and as incremental volume for other rural and urban locations in Obama. We currently process approximately 70% of AHS volume. As part of the award, we anticipate that volumes will increase through the addition of new sites to approximately 95% of the AHS' volume by the start of Q2 2022. In July of 2021, the corporation announced the signing of the new 11-year contract with renewal options for up to an additional 9 years to provide laundry services for AHS province-wide. The contract is anticipated to add approximately $10 million in incremental annual revenue with margins consistent with K-Bro's historical margins associated with the existing and new volume. New pricing for AHS, which is reflective of meaningful higher volumes will take effect on existing AHS volumes in August 2021. We expect to experience a modest reduction in revenue during the transition, which will be offset by incremental volumes that will be transitioned to K-Bro.The corporation also expects to incur some onetime transition costs and have temporary margin impact as all of the new volume has transitioned into the corporation's 2 facilities in Edmonton and Calgary. It is anticipated that the corporation will achieve its new run rate revenue, inclusive of the $10 million of incremental annual revenue and normalized margin once the transition is complete in mid-2022. From a CapEx perspective, it's projected to be in the range of $10 million for new cart, linen cart and additional equipment to support the new business, and we expect the majority of these expenditures to be made in 2021.So I'll now turn the call over to Kristie to discuss our detailed financial results for the quarter. After which time, I'll return to talk about our outlook for 2021, and then we'll answer any questions. Kristie, over to you.

[Kristie L. Plaquin, Chief Financial Officer]

Thank you, Linda. The information we are discussing today is also highlighted in our second quarter and 2021 earnings press release issued yesterday, and detailed supplemental financial information can be found on our Investors Relations website under the heading Financial Documents.As a result of the COVID-19 pandemic restrictions being eased, consolidated hospitality revenue for the 3 months ended June 30, 2021, increased by 312% over the comparable 2020 period. And the corporation saw a 21.7% increase in consolidated healthcare revenue for the overall increase in consolidated revenue of 40.4%. On a year-to-date basis, consolidated revenue increased by 5.8% to $100.3 million compared to $94.8 million in the comparative period of 2020. In 2021, approximately 85.5% of K-Bro's consolidated revenue was generated from healthcare institutions, which is higher compared to 74% in 2020. This was primarily related to the COVID-19 pandemics effect on the Hospitality segment during the first quarter of 2021 compared to 2020 as well as the impact on the corporation's healthcare revenue in Q2 2020.Consolidated EBITDA in the second quarter of 2021 increased by $2.1 million to $12.2 million compared to $10.1 million in the comparative period of 2020, and margin decreased by 3.6% to 23.2%. On a year-to-date basis, consolidated EBITDA increased by $8.5 million to $23.3 million compared to $13.8 million in the comparative period of 2020 and margin increased by 7.6% to 22.2%. The year-to-date increase is primarily related to higher revenues, impairment of assets of $5.5 million in the first quarter of 2020, restructuring costs and bad debts expense in 2020 of $1.6 million and $0.5 million, respectively, and is offset by lower government assistance received in the Canadian division from $5.6 million received in 2020 to $0.9 million received in 2021.Consolidated adjusted EBITDA increased in the year to $17.8 million from $14.7 million in 2020, which is an increase of 21.2%. The consolidated adjusted EBITDA margin increased to 17.7% in 2021 compared to 15.5% in 2020. The U.K. division also received government assistance during 2021 in the amount of GBP 2.1 million or $3.7 million, which has been netted against the respective source of the expense.Beginning in the third quarter of 2020 onwards, government assistance received by the U.K. division through the Coronavirus Job Retention Scheme required the company's share in the cost of the program. And as a result, the impact to EBITDA during 2021 was a cost of GBP114,000 or $197,000, which represents the U.K. division's contribution for hours and certain benefits.Net earnings increased by $6.8 million or 381% from a loss of $1.8 million in 2020 to $5 million in 2021. And then -- and net earnings as a percentage of revenue increased by 6.9% to 5% in 2021 from a loss of 1.9% in 2020. The change in net earnings is primarily related to the flow-through items in EBITDA discussed earlier, lower finance costs related to the revolving credit facility and higher income tax expense.Wages and benefits in the second quarter of 2021 increased by $7.7 million to $18.8 million compared to $11.1 million in the comparative period of 2020, and as a percentage of revenue, increased by 6.2% to 35.7%. On a year-to-date basis, wages and benefits increased by $2.50 million to $36.3 million compared to $33.8 million in the comparative period of 2020, and as a percentage of revenue increased by 0.6% to 36.2%. The increase as a percentage of revenue is primarily related to significantly lower amounts of government assistance received in the Canadian division by $4 million to $0.8 million in 2021. Escalating minimum wage rates and is offset by improvements in labor efficiencies and restructuring costs of $1.1 million incurred in the prior year related to COVID-19 volumes.Linen in the second quarter of 2021 increased by $1.5 million to $6.7 million compared to $5.2 million in the comparative period of 2020 and as a percentage of revenue decreased by 1.2% to 12.7%. On a year-to-date basis, linen increased by $0.9 million to $12.8 million compared to $11.9 million in the comparative period of 2020, and as a percentage of revenue, remained relatively constant at 12.7%. The increase in spending is primarily related to the additional healthcare and hospitality volumes processed compared to the prior year.Utilities in the second quarter of 2021 increased by $0.8 million to $2.9 million compared to $2.1 million in the comparative period of 2020, and as a percentage of revenue remained constant at 5.6%. On a year-to-date basis, utilities increased by $0.1 million to $5.8 million compared to $5.7 million in the comparative period of 2020, and as a percentage of revenue decreased by 0.3% to 5.7%. The decrease as a percentage of revenue is primarily related to scale of efficiencies, lower commodity costs and operational improvements that have been implemented.Delivery in the second quarter of 2021 increased by $1.80 million to $5.3 million compared to $3.5 million in the comparative period of 2020 and as a percentage of revenue increased by 0.6% to 10%. On a year-to-date basis, delivery decreased by $0.6 million to $9.9 million compared to $10.5 million in the comparative period of 2020, and as a percentage of revenue decreased by 1.2% to 9.9%. The decrease as a percentage of revenue is primarily related to management's efforts to offset the impact of COVID-19 in the delivery operations of each plant through temporary reductions in the delivery labor force, logistics and delivery route optimizations, offset by fixed costs, which remain constant regardless of the increase or decreases in volumes, and price increases from renewals of outsourced freight contracts.The increase as a percentage of revenue for Q2 2021 is primarily related to increased levels of government assistance received in Q2 2020.Occupancy costs in the second quarter of 2021 increased by $0.5 million to $1 million compared to $0.5 million in the comparative period of 2020, and as a percentage of revenue increased by 0.6% to 1.9%. On a year-to-date basis, occupancy costs increased by $0.2 million to $1.9 million compared to $1.7 million in the comparative period of 2020, and as a percentage of revenue remained relatively constant at 1.9%. This includes fixed costs that remain constant regardless of the reduction in volume resulting from the COVID-19 pandemic, offset by rent concessions received in certain plants in the U.K. in the amount of $0.5 million, which were recorded in the second quarter of 2020.Materials and supplies in the second quarter of 2021 increased by $0.7 million to $1.9 million compared to $1.2 million in the comparative period of 2020, and as a percentage of revenue, increased by 0.3% to 3.6%. On a year-to-date basis, materials and supplies increased by $0.3 million to $3.7 million compared to $3.4 million in the comparative period of 2020, and as a percentage of revenue, remained relatively constant at 3.7%.Repairs and maintenance in the second quarter of 2021 increased by $0.3 million to $1.7 million compared to $1.4 million in the comparative period of 2020, and as a percentage of revenue decreased 5.6% to 3.2%. On a year-to-date basis, repairs and maintenance decreased by $0.2 million to $3.4 million compared to $3.6 million in the comparative period of 2020, and as a percentage of revenue decreased by 0.4% to 3.4%. The decrease as a percentage of revenue is primarily related to the timing of maintenance activities and fixed costs that remain constant regardless of the reduction in volumes and timing of maintenance activities.Corporate costs in the second quarter of 2021 decreased $5.3 million to $2.1 million compared to $2.4 million in the comparative period of 2020, and as a percentage of revenue decreased by 2.2% to 4.1%. On a year-to-date basis, corporate costs decreased by $0.7 million to $4.3 million compared to $5 million in the comparable period -- period of 2020, and as the percentage of revenue decreased by 1% to 4.3%. The decrease as a percentage of revenue is primarily related to a 2020 provision for bad debt expense of $0.5 million, 2020 restructuring costs of $0.5 million, the timing of initiatives to support the corporation's growth and business strategies across the plants and is offset by lower government assistance received in 2021.Now looking at our capital resources. Distributable cash flow for the quarter -- second quarter of 2021 was $7.6 million, and our payout ratio was 42.2%. In addition, the company paid out $0.3 per share in dividends during the quarter for total consideration of $3.2 million. The corporation had net working capital of $31.7 million at June 30, 2021, compared to its working capital position of $27.9 million at December 31, 2020. The increase in working capital is driven mainly from the impact of the pandemic and timing of payments as well as the timing of income tax payable.At June 30, 2021, total assets increased to $326.2 million compared to $323.8 million at December 31, 2020, and total liabilities increased to $137.9 million from $134.3 million.Shareholders' equity decreased at June 30, 2021 from December 31, 2020 to $188.3 million from $189.5 million. As far as our debt is concerned, we have sufficient room on our credit facility with an operating line of $100 million with a further $25 million accordion for growth purposes.As of the end of Q2, we have an undrawn balance of close to $57.5 million, which reinforces our strong liquidity. Debt to total capitalization for the period ended June 30, 2021 was 17.8%. Total debt increased in the quarter from $36.8 million to $40.7 million and was primarily due to the change in working capital items we discussed earlier. As Linda said earlier, our debt-to-EBITDA ratio was just over 1 time.I'll now turn things back over to Linda for additional commentary. Linda?

[Linda Jane McCurdy, President, CEO & Director]

Thank you, Kristie. As we continue to navigate through the pandemic related challenges, we're pleased with how rapidly we're able to adapt to this unprecedented crisis. In order to address the adverse effects of COVID, we had to react very quickly to implement plans to mitigate the effects, including consolidating operations, reducing headcount and accessing available governmental systems programs. Now as restrictions have listed and businesses have reopened, again, we've had to move quickly to adjust to significantly increasing volumes by changing operating hours, recalling and recruiting additional staff and ensuring all aspects of our supply chain can support the increases.Our highly experienced team has been crucial in managing the situation, and in combination with our proven operating model, we continue to leverage our experience for the challenges ahead. These actions have resulted in performance that we're quite pleased with given the circumstances.In terms of our 2021 outlook, we continue to see strong results in our Healthcare segment and expect that to continue as hospitals deal with the impact of the pandemic and continue to catch up with the backlog of procedures that have been delayed during the pandemic. As I mentioned earlier, to-date in 2021, healthcare revenue for the first half of the year is trending upward from 2019's historical rates by approximately 25%. We do anticipate as the year progresses, that healthcare revenue will trend down as cases drop and testing dimensions, and we've experienced that in July.From a hospitality perspective, as we continue to move into 2021, we believe it is reasonable to expect a modest improvement in client activity for our Hospitality segment when compared to 2020 activity levels due to a gradual return to business and international travel as COVID restrictions implemented in both Canada and the U.K. began to ease with the continued rollout of the vaccine, and we have also experienced these increases in July.While client activity on the hospitality front is still well below historical noise, the increases we've experienced since Q2 2020 have resulted in the reopening of all of our operations with the exception of our first plant in Scotland as well as increasing the days and hours of operations in all forms. We've successfully recalled employees to meet these increased demands and will continue to adjust production schedules as demand warrants. We remain well positioned from a balance sheet and liquidity perspective, as Kristie discussed. In addition, a strong concentration of our Canadian revenue is from the healthcare sector at approximately 82% of consolidated revenues.We continue to evaluate other acquisitions in both the U.K. and Canada as we execute on our strategy to grow our market share, and this will continue as we move forward in 2021, when current market conditions may lead to opportunistic situations for us.So actually the main highlights of the quarter would be solid financial performance in a unprecedented adverse environment, improvements in EBITDA, strong cash flow generation and a demonstrated resilience of our business model. We're very pleased with our strong healthcare revenues and Q2 EBITDA. On the Alberta front, I can't express just how pleased we are to have the opportunity to expand our long-term relationship with Alberta Health services. We began processing healthcare volume in Alberta in the 1980s, and we've worked collaboratively and closely with AHS over the past 30 years to earn their confidence and trust. We're happy we'll continue to provide service for all of our existing customers in Alberta while also being awarded the rest of the province.And finally, I'm very proud of our employees who have demonstrated continued flexibility and an unwavering commitment to providing essential services to our customers.Now I'll turn it over to go through any questions you have with regards to the second quarter results of 2021.

[Operator]

[Operator Instructions] Your first question comes from Michael Glen from Raymond James.

[Michael W. Glen, Equity Research Analyst]

Linda, maybe just to start. So maybe just to start. So over the past 2 quarters, healthcare, Canada healthcare revenue has been pretty stable, was $41.4 million in Q1, it was $41.1 million in Q2. So if I'm looking at the absolute figure, and I'm thinking about the back half of the year, like how much of that $41 million type number would you say is at risk as these -- as COVID cases -- they come lower?

[Linda Jane McCurdy, President, CEO & Director]

Yes. I think what we've said is about just slightly over 10%. We think our -- 10% of our increase is sustainable to maintain going forward. As I mentioned in our prepared remarks, we have seen it come off in July. I would expect that to continue going forward as cases go down, as testing centers are reduced and closed. So that's the guidance that I can provide on that, Mike.

[Michael W. Glen, Equity Research Analyst]

Okay. And then I guess the second part of that question is, when you look at the margin profile for the Canadian business or the Canadian healthcare business, as the revenues come down, is there a deleverage to the margin that we should think about, too?

[Linda Jane McCurdy, President, CEO & Director]

What I would say from a margin perspective is, as we look into Q3 and Q4, there's a number of things going on, right? We've got a bit of deleveraging, as you said, on volumes from COVID volumes going down, we have new volume coming in from our new contract with AHS, which will start in September of this year. We have new pricing on our new contract, we have increased hospitality volumes that we're seeing. So there's a lot of moving parts. But from an overall margin perspective for Q3 and Q4, and on top of that, we have transition costs. The best guidance we can provide here is that we would expect margins for Q3 and Q4 to be in the range of 2019 margins for those quarters.

[Operator]

Your next question comes from Endri Leno.

[Endri Leno, Associate]

I just wanted to continue a little bit, Linda, if I may, on the healthcare volumes, especially in the second half. I mean yes, we expect them to moderate a bit. But are you able to provide sort of a -- what is your view on the net, if you, for example, consider addition of the surgical backlog in Ontario, right? I think they want to ramp up to 115% of their normal volumes. Like what could be the net...

[Linda Jane McCurdy, President, CEO & Director]

Okay. So you were kind of cutting out. Is your question, what is our expectation for healthcare revenues for Q3 and Q4, based on increased catch-up of surgeries offset by COVID? You were kind of cutting out.

[Endri Leno, Associate]

Yes, that's what it is. I mean more volumes rather than revenues. But yes, that's what it is.

[Linda Jane McCurdy, President, CEO & Director]

We don't generally comment on volumes. What I can say is that, given the various factors that I talked about for the back half of 2021 only on healthcare revenues, we expect to see a modest decrease in the mid-single-digit range for Q3 and Q4.

[Endri Leno, Associate]

Great. Thank you. And the other question on the healthcare specialist. You mentioned price increases. I was wondering if you can quantify what they are and whether there is any room for further increases in the second half of the year?

[Linda Jane McCurdy, President, CEO & Director]

Price increases on the healthcare front, is that the question?

[Endri Leno, Associate]

Yes.

[Linda Jane McCurdy, President, CEO & Director]

Our ability to increase -- okay. So most of our contracts have price escalators in them, all of our contracts do. It's just a question of, what is the mechanism? I'd say about half of them have a minimum wage factor into it, but all of them have price increase mechanism that are either tied to specific indices or, i.e., CPI or have a fixed percent increase, but there is annual increases in all of them.

[Endri Leno, Associate]

Okay. Okay. Great. On the hospitality, the improvement that you saw in Q2 between July and April, can you talk a little bit about how is the split between Canada and the U.K. there?

[Linda Jane McCurdy, President, CEO & Director]

Sure. Definitely, the increases that we are seeing in the U.K. are much more dramatic than we have seen -- and happened earlier than we are seeing -- than we have seen in Canada. Canada is catching up. But I would say that we are seeing a resurgence of up to 70% of historical norms in the U.K., in Canada, it's not quite as strong, largely because of -- we view it as our -- the cities in which we're in service more business-oriented travel and occupancies than in the U.K. So our expectation over the next quarter is to hit somewhere in the range of 60% of historical norms? And it's kind of hard to know what Q4 is going to look like. I mean that's the guidance we're seeing for Q3. We'll give for Q3, but it's really hard to know what Q4 is going to look like based on the variant international travel and other factors.

[Endri Leno, Associate]

Great. Thank you. That's good color. And one more from me, and I'll jump in the queue. But there's been some industry reports that hotels are doing less housekeeping and using pure linen. I was wondering if you can talk a little bit about that. What are you seeing there? Any discussions that you might have had with your hospitality clients on that front?

[Linda Jane McCurdy, President, CEO & Director]

We haven't really seen that as of yet. It may be too early to comment on that, but that hasn't been our experience in terms of them using fewer linens. I mean I would say that there is definitely a focus on cleanliness and hygiene in all of our hotels. I'm not sure what the reduced usage would be the result of, but we haven't experienced that as of yet.

[Operator]

Your next question comes from Justin Keywood from Stifel.

[Justin Keywood, Director of Equity Research]

Just to follow-up on the hotel occupancy rates. And obviously, the pandemics dynamic here with the potential fourth wave and the Delta Variant. And this may be a bit of a hard question to answer, but I'm wondering if the variants do emerge again and we see increased cases, do you have any insight on what will happen to the hotel occupancy rates? Like do you anticipate that they might decline to kind of the bottom levels that we saw in Q2? Or maybe they still remain depressed, but still reasonable rates?

[Linda Jane McCurdy, President, CEO & Director]

I -- that's a very tough question. I would say, it would be shocking to me if we went back to Q2 of 2020 levels, that was basically shut down. And even now with the Delta Variant and as we speak to some of our colleagues in the U.S., business is coming back. And I suspect that's largely because as much as cases are going up, hospitalizations and deaths are still at relatively lower levels, with the exception of geographies that don't have high vaccination rates. Even in the U.K., as cases have gone up, it is very active in the U.K. We are, again, for July, and our projection for audits, we're at 70% of historical norms. So just -- I guess, that's really the only color I can give. If we're seeing hospitals overflowing again and death going up, I think that definitely has an impact on hospitality, but that's certainly not what we're experiencing with Delta.

[Justin Keywood, Director of Equity Research]

And just on the occupancy rates you're seeing now, the U.K. at 70%, and it sounds like Canada is kind of in the 50% to 60% range. Is that primarily from domestic tourism? Or is that from opening up borders and having some international travelers? Just to get a sense of, if the borders close down, can the occupancy rates still remain at a reasonable level just on a domestic basis.

[Linda Jane McCurdy, President, CEO & Director]

Yes. In the U.K., a large percentage of that is domestic travel, very much so U.K. travel.

[Justin Keywood, Director of Equity Research]

Okay. And I assume the same in Canada?

[Linda Jane McCurdy, President, CEO & Director]

Yes, yes, absolutely.

[Justin Keywood, Director of Equity Research]

Okay. That's helpful. And then just one more question on potential acquisitions. Given that the Alberta Healthcare contract was awarded and perhaps provide some stability in the outlook of the business. Are you resuming M&A plans? And if so, if you can provide any parameters of the number of potential assets that you're looking at, and where you could potentially acquire?

[Linda Jane McCurdy, President, CEO & Director]

Yes. So the #1 priority that we faced was renewing our business with AHS and securing new business, that was a very huge priority for us. Very happy with the outcome of that. I would say that that was all consuming. And now with that behind us, we are very much focused on our growth prospects in terms of growth through acquisition. We have a robust and strong pipeline of potential acquisitions with key focus -- with our key focus being in Canada and the U.K. I'd say there's a handful of acquisitions that we are very focused on. The timing, I'm not going to comment on timing, but it certainly is a focus for us with AHS behind us.

[Justin Keywood, Director of Equity Research]

And would these be like tuck-in acquisitions or of more material size?

[Linda Jane McCurdy, President, CEO & Director]

Combination of both. Some tuck ins, some expanding our geography in areas that we don't service so -- and some are smaller and some are larger. It's really a mix of all of the above.

[Operator]

[Operator Instructions] There are no further questions at this time. Please proceed.

[Linda Jane McCurdy, President, CEO & Director]

Great. Well, I just want to thank everyone for joining this morning. Again, we're very proud of our performance and very optimistic about our future in terms of our growth prospects. If anyone has any follow-up questions, Kristie and I are always around. But thank you again for your participation, and have a good rest of the summer to everyone.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.