Echo Global Logistics, Inc. (ECHO) on Q2 2021 Results - Earnings Call Transcript
Operator: Good day and thank you for standing by. Welcome to the Echo Global Logistics Second Quarter 2021 Earnings Call. I would now like to hand the conference over to speaker today Pete Rogers, Chief Financial Officer. Please go ahead.
Pete Rogers: Thank you, and thank you for joining us today to discuss our second quarter 2021 earnings. On the call today are Doug Waggoner, Chairman of the Board and Chief Executive Officer; Dave Menzel, President and Chief Operating Officer; and Pete Rogers, Chief Financial Officer. We have posted presentation slides to our website that accompany management's prepared remarks, and these slides can be accessed in the Investor Relations section of our website at echo.com.
Doug Waggoner: Thanks, Pete. Good afternoon, everyone. I appreciate all of you joining today. And I'll start on Slide 3 of our presentation and hit some of the highlights for the quarter. The themes and results for the second quarter are going to sound familiar to our last few calls, because we've been able to maintain and even accelerate our business momentum this period. The financial highlights speak for themselves. First Echo delivered record revenue in the second quarter as total revenue was $935 million, representing an 82% increase from last year second quarter. This is our fourth consecutive quarter of record revenue. Second, that record quarterly revenue performance came with numerous records at the individual business levels as well. We had record brokerage revenues of $717 million, record managed transportation revenues of $218 million. Record truckload revenues of $687 million and record LTL revenues of $218 million. Third, we also grow a record adjusted gross profit of $136 million, representing a 55% increase from last year's comparable quarter. Fourth, the record quarterly revenues and gross profit dollars are further translating into profitability growth as we delivered record adjusted EBITDA of $36.2 million, a 145% increase over the prior year. And our adjusted EBITDA margin was also at a record high of 26.6%. Fifth and lastly, non-GAAP fully diluted EPS was also a new record at $0.84 compared to $0.19 in the year ago period, reflecting a 355% increase. On slide four, we illustrate the combination of factors behind the success. First, excellent execution by our people in a robust freight environment. Second, technology is enabling our people to become more productive and allowing them to capitalize and profitably capture market share gains. And third, data science is providing real time insight into pricing and market conditions that allow us to provide valuable services to shippers and carriers.
Dave Menzel: Thanks, Doug. Consistent with trends observed earlier this year, the market remains very tight and shippers continue to face a huge challenge to secure capacity in today's market. This has been the story for the first half of 2021 and certainly continues to be true as we head into Q3. Given the significant fragmentation in the truckload market, our unique value proposition that includes a combination of a robust carrier network, proprietary technology and highly engaged talented people continue to be big differentiators for Echo. All of this enables our consistent execution which I'm proud to say has led to Echo again being voted as the number one 3 PL and the inbound logistics annual shipper survey. As indicated on slide 5, this is the fifth consecutive year with Echo taking the number one position and I want to thank all of our clients for voting for Echo management. Last quarter I highlighted the different points of freight cycle and Echo's ability to adapt our business model and approach to each phase of the cycle. In this most recent quarter it was a lot less about adaptation and a lot more about execution and communication. I will move to our financial results in a little more detail.
Pete Rogers: Thanks, Dave. On page 8 of the slides, you'll find a summary of our key operating statement line items. Commissioned expense was $40.8 million in the second quarter of 2021 increasing 53% versus the prior year. Commission expense was 30% of adjusted gross profit down from 30.2% in the second quarter of last year. Non-GAAP G&A expense was $59 million in the second quarter of 2021 increasing 26.6% from the second quarter of 2020. The main drivers of the increased expense for headcount increases and instead of compensation. Depreciation expense was $6.1 million in the second quarter of 2021 down from $7 million a year ago. Cash interest expense was $0.7 million during the second quarter of 2021 compared to $1.2 million in Q2 of 2020. The cash interest savings was due to a lower amount of our outstanding debt. Our non-GAAP effective income tax rate was 23.5% for the second quarter of 2021. As Dough previously mentioned, non-GAAP fully diluted EPS was $0.84 increasing from $0.19 in the second quarter of 2020. The primary differences between our GAAP and non-GAAP fully diluted EPS in the second quarter of 2021 are $2.6 million of amortization of intangibles from acquisitions and $2.3 million of stock compensation expense. Slide 9 contains selected cash flow balance sheet and liquidity data. We ended the quarter with $63.9 million in cash on hand and $546.2 million of accounts receivable which is the basis for our ABL borrowing base. In Q2 of 2021 we had free cash flow of $21.6 billion and operating cash flow of $27.1 million. Capital expenditures totaled $5.5 million in the quarter compared to $5.1 million in the prior year. On slide 9 and 10 we have highlighted components of our strong balance sheet and liquidity position. As I previously stated, at the end of the quarter, we had 63.9% sorry $63.9 million of cash on hand, with borrowings of $120 million on the ABL leaving us with net debt of $55.2 million. Our combined cash on hand and available borrowings on the ABL leaves us with net liquidity of $293 million at the end of the second quarter. As a reminder, borrowing capacity on the ABL is calculated as 85% of our eligible accounts receivable with a maximum loan facility of $350 million.
Doug Waggoner: Thanks Pete. As we mentioned to start the call the story around our execution and the reasons behind it remain the same. Our unique combination of people, our technology, and our data science. It has led to record financial results and recognition by shippers that Echo is the number one logistics provider in the 2021 inbound logistic survey quite the quarter and quite the year so far. And as Pete highlighted with our guidance, we anticipate these market conditions will persist throughout 2021 and into 2022. We believe financial results will follow as we continue to focus on taking market share and scaling the business throughout freight cycles and we continue to focus on automated connectivity with shippers and carriers developing algorithms across the business that will help us shape and at times automate, decision making and refining internal processes with technology. We continue to progress in the second quarter on many of these initiatives and are confident that these initiatives will drive meaningful financial results in the future. And that concludes our prepared remarks. And at this time, I'd like to open up the call for
Operator: And our first question is from Jack Atkins of Stephens. Please ask your question.
Jack Atkins: Okay, great. Good evening, and congratulations on a great quarter guys, really impressive.
Doug Waggoner: Thanks, Jeff.
Jack Atkins: So I guess to start when we look at the volume growth in the second quarter, plus 27% obviously it's against kind of a strange comparison with COVID and 2Q ‘20 but we've now seen a string of double digit volume growth quarters out of Echo for truckload. And I guess, Doug or Dave, whoever wants to take it, maybe you both want to take it when you start thinking about breaking down what's driving that volume growth? I know, it's tough to break it down like that. But clearly there's the market and then there's internal things that are going on at Echo which really, I think are going to accelerating the flywheel here. Your API connectivity, your technology initiatives, which driving productivity. Could you kind of break that down between the market and sort of what you're doing to help us understand the differentiation between Echo and some of your other peers?
Dave Menzel: Sure, Yes. I'll get started. I mean, obviously as you indicated, it's been a growing market. It's been very tight capacity and I talked about it in my prepared remarks, I think sometimes it's hard for outsiders to kind of get their arms around what we mean when we say we've got this unique value proposition, that's a combination of a really a robust carrier network with strong relationships and long tenured relationships within our network. The ability to grow it, proprietary technology that's evolving very rapidly, which includes both predictive capabilities and direct connections with shippers and carriers to enable bookings and really a culture of engaged people that provide top notch service. And so we've been focusing on really, for the last three, four now, since 2015, aggressively it's growing our business, growing our relationships with our client base, providing great service and then getting opportunities to continue to grow. And I think it's the bundle of all those things that's working very well. And it's been very successful. Like Doug said, in his remarks, the numbers kind of speak for themselves. We've shown a lot of growth. We certainly know that the market has been positive, the tight capacity, it's a very fragmented and shippers need and that goes right into our wheelhouse. And I think that's kind of the overall summary.
Doug Waggoner: Yes, I would just add and it was in our prepared remarks, Jack that we talked about appropriately blending technology and touch and we think about the freight marketplace as being very diverse with very, very sophisticated shippers and very, very sophisticated trucking companies on one end of the spectrum. And on the other end of the spectrum you've got people that run their business on a whiteboard. And we think that we kind of have a multipronged sales and marketing approach that can touch each of those shippers and each of those carriers depending on their level of sophistication and engage with them and bring value to them. So it's really that holistic approach I think that gives us the biggest opportunity to take market share.
Jack Atkins: Okay and I guess just following up on that I mean, in the past, we've seen quite a bit of volatility for Echo between the good parts of the cycle and the more challenging parts of the cycle, but it really feels like we've hit an inflection from a market share perspective over the last several quarters. As you look forward and think about how the business can perform moving forward through peaks and troughs of cycles, do you feel like that that volatility maybe is coming down and the floor is coming up and you can maybe grow volume. I don't want to put words in your mouth through cycles, because you've got all these opportunities, whether it's in the contract market, API connection, etc. Just could you talk about that for a moment?
Doug Waggoner: Well, I think that achieving scale gives us more ability to win contract freight from the larger shippers and so when you get to the part of the cycle when the market softens we can get more aggressive on our contractual freight. I do however think that some of our new API connectivity is going to give us more access to spot freight regardless of where we are in the cycle. And then of course when the cycle starts to soften and there is a little bit less volume, you start to see margin expansion, because the buyer price falls faster than the sell price. And so that has an offsetting impact with volumes. So I do think that we can weather the cycles better than when we were smaller and that's attributable to scale.
Jack Atkins: Okay. Well, thanks so much for the time, guys. I'll turn it over.
Doug Waggoner: Thanks, Jack.
Operator: Our next question is from Bascome Majors from Susquehanna. Please ask your question.
Bascome Majors: Yes, good evening, and thanks for taking my questions. And congratulations on the results. You've had, effectively four straight quarters of just comically super seasonal revenue performance. And you're looking at the guidance and some of the commentary around the second half it sounds like you're baking in some returned seasonality from his very high base. Can you talk a little bit about maybe on the micro level, how things are trending month per month, in truckload or LTL or any other way you want to frame it? I just want understand when the semblance of seasonality has started return and how that's trending? Or if there's some conservatism in there just anything to help us triangulate why you got it what you got it? Thank you.
Dave Menzel: I think what we've seen is more of a steady, consistent performance on volume. On the rate side we saw, I would say, significant escalation beginning in May or June of last year through probably March or April of this year and it's level on a from a rates perspective kind of leveled off. So I think what you're seeing when you think about, like our forecast moving forward is more of a function of the comparable in the prior year than a softening per se. Not to say that there won't be a little bit of seasonality potentially in Q4. So I think that we'll have to wait and see how that plays out. There is typically less business days, less shipping business days in Q4 --
Doug Waggoner: in Q4.
Dave Menzel: And the holidays can kind of create a little bit of a slowdown. So -- yes, that's a small factor to consider. But having said that, I think that the last several months and going into July I'd characterize more as steady and consistent than seasonal volatile.
Bascome Majors: Into that point, can you talk a little about whether the large asset based LTLs, disruptive situation in the latter part of the quarter has created some more customer acquisition and if there's anything that really hasn't shown up in the numbers yet and that's how your business?
Dave Menzel: I would say the disruption that we've seen on the LTL side due to the capacity constraints and their overall volumes, have left some of the smaller shippers looking for options and has created opportunities for us on the brokerage side of our business to do a little more, to have a little more growth. So there has been some of that. It's not overly significant. Obviously if a smallest shipper is reliant on a single or one or two carriers and they're either embargoing an important terminal or there's a service delay in a lane we can come in with more options and that can drive growth and we're seeing some of that play out in terms of our solution to the small and medium sized shippers.
Bascome Majors: Thank you for that. Lastly, on capital allocation it's been a while since you've bought back common equity. The market doesn't seem to want to give you a ton of credit for a lot of the progress. You just went through with Jack on some of the higher highs and higher lows here. Is the buyback becoming a more attractive use of capital if this continues. Just thoughts on when you and the board will have those discussions and if they're evolving. Thank you.
Doug Waggoner: Yes. Thanks Bascome. I think we're always evaluating different uses of our capital. We've talked over the past couple of quarters on potential M&A, we've obviously still have $120 million in debt that we obviously do have, we still have $16.2 million in authorization on the common stock. And we're always kind of evaluating those against each other. So it's something we'll continue to look at in Q3 and will make that decision for our shareholders.
Bascome Majors: Thank you for the time.
Doug Waggoner: Thanks Bascome.
Operator: Our next question is from Stephanie . Your line is open.
Unidentified Analyst: Hi, good afternoon. Thank you for the questions.
Dave Menzel: Hi Stephanie.
Unidentified Analyst: I wanted to touch on a little bit on contractual renewals or what you're seeing in any kind of bidding seasons and RFPs. Obviously, you've made pretty meaningful strides every year and playing more in the spot market, just given the environment but love to give hear what some of your shippers are saying and what we could expect kind of going forward?
Dave Menzel: Yes. I think that we felt very good about the level of kind of contractual business that we've been pursuing and renewing. And expanding what we did see and we talked about this a little more on our call last quarter was as the pandemic kind of develop the RFP cycle, if you will, during really the latter part of 2020 and to some extent, rolling into 2021 was slowed down. The bid activity was a lot lower and it started to, I would say, pretty significantly increase in Q1 and again in Q2. As a matter of fact in Q2 we saw a greater number of awards kind of wrapped up, then we saw in 2019. So we've seen that escalation continue. Now, there's been a little bit of a trend toward more of these mini bids and less than annual awards as basically, shippers are trying to secure a capacity and many of the other carriers in the market participants are uncertain as to where rates are going. So and in response to that, oftentimes, a shorter award cycle is a little easier for everybody to get their arms around. And we've seen that increase a bit in Q2 probably continue relatively high and kind of catch it up from where it was in ‘19.
Unidentified Analyst: Great, thank you. And then I just want to touch on a bit just general competition. Obviously there is the large announcement from Uber freight to acquire a big managed transportation player. Managed transportation has been a nice growth driver for you guys in a strategy or over several years now. So we love to think how you're viewing the competition, just broadly speaking, but now, any changes to the strategy within managed transportation?
Doug Waggoner: Well we're familiar with both parties of that transaction and they are good competitors, but it's a huge market. We tend to offer our managed transportation services to small and midsized companies. And I think the trans place offering in general, goes to larger, larger shippers with a greater freight span. So we don't really see them a lot in our activities. We are a supplier to them as asset base carriers and brokers. So you're a good customer of ours. And we would anticipate that will remain in place.
Unidentified Analyst: Got it. Well, thank you so much.
Doug Waggoner: Thanks.
Operator: Our next question is from Bruce Chan of Stifel. Please ask your question. Your line is open.
Bruce Chan: Hey, good evening, gents. Thanks for making things easy for me here. Just a follow up on that M&A question and some of what you're seeing out there in the competitive marketplace. Obviously, Uber and translate is not the only deal that we've seen in the space. You've got some other called midsize players out there that are combining and maybe following a little bit of the echo command playbook from back in 2015. And I'm just wondering as you look for that share growth with the very large shippers are you seeing more of a crowded field as you start to respond to some of those RFPs and go in and approach those large shippers bids?
Doug Waggoner: Yes. There is I mean, as you know, we've done 21 acquisitions, and we feel that it's something that we can execute on. Most of ours, with the exception of command tended to be smaller tuck in deals. As we look at bigger deals there is a lot of competitions these days, especially from the private equity crowd. There is a lot of money, that's cheap. So it's competitive. And as a result, we've seen the prices go up. So although we're interested in M&A we want to make thoughtful decisions on valuation. And some of the valuations that we've seen don't work for us. So we continue to look, maybe we have to set our sights with smaller companies, but I think there's a lot of deals to be done. And we're very active with our own pipeline and looking at deals and, as their trend continues to be consolidation in the space, I do think that it's going to favor the bigger stronger players, and it's going to be tougher for the smaller brokers to compete as we go forward. So I'm glad to be in the club. And we're going to continue to scale our business.
Bruce Chan: Okay, so that's helpful. And it certainly answers part of my question, but I guess, the other part is that you've got a market leadership position right now. And then you also see a lot of midsize players that are combining to maybe challenge your call it ranking there in the sort of size listing. So are you concerned that as you go into some of the shipper bids you're going to have a more challenging time winning that contract business and growing the share with those large customers.
Doug Waggoner: No, I'm not Bruce. It's such a large market and all of those competitors, even prior to combining were people that we competed with and if anyone given shippers, routing guides, you're going to have lanes that you favor and lanes that you're not interested in and there's a lot to choose from. And we've had no trouble competing against people that are bigger than us and competing against people that are smaller than us. And we think some of the things we highlighted in our prepared remarks help us do that. We think our size and scale help us do that. And it's only going to get better. So I don't really see any influence on our ability to be competitive with individual shippers, just because some midsize players are getting bigger.
Bruce Chan: That's very, very helpful. Thank you.
Doug Waggoner: Thanks Bruce.
Operator: Our next question is from Tom Wadewitz of UBS. Please ask your questions.
Tom Wadewitz: Yes. Good afternoon. I wanted to ask you about the kind of, I guess, view on target mix of or maybe what's the desirable mix for you of contract and spot freight and how many bids affect that. It does seem like, maybe it gets we've seen with the biggest player in the market too much contract business can be somewhat of a burden or getting it overpriced and negative files that kind of commentary, but I know that's a good place to grow. So maybe can you give a thought on where you want to go with that? And also are we more meat bits, the good thing for an agile broker or not necessarily?
Dave Menzel: Sure, Tom. It's good question. And something that we've been asked a lot about I think, in the past and trying to help people understand. I think that the way we see it is, is that the contract space and space are both important markets for us to try to grow and be successful on. And so we were trying to grow both of those components of our truckload business at the same time and we believe that the mix shifts that we see from time to time or more of a factor of market conditions. And that, obviously, as we pursue contract business, we need to be strategic, we need to be very careful about how we pursue opportunities in that. Because the commitments we make we want honor and so when the market changes quickly, it does result in greater amount of negative loads. And you can see some in essence, basically margin fluctuation probably greater in that contract side of your business. However, we approach that in a profitable way. And we're going to continue to do that. So I think it's hard to define the mix. I think it's going to be a factor of market conditions more so than our specific strategy. And then the second piece of the puzzle on the mini bids I see that is generally a positive because it enables us to be effective and pricing something that current market prices. It doesn't expose the carrier to significant amount of risk. It meets the shippers requirements to have their network operating effectively. It takes a little bit of volatility out of the equation. And we've been, they're not new, we've been seeing these many bids have been a factor for a long time, and obviously, because of the pandemic and they significant kind of rate increases that have occurred over the last 12 months the preponderance or the amount of the mini bids has increased a bit, but I would expect as things stabilize that that gets back to a more normal rate overtime.
Tom Wadewitz: Great. Okay and then one more, I don't know, this could be for you, Dave, or for Doug. But what do you see from shippers? And how do you think the market evolves in terms of potential modal shifts, and seems like the truckload market has been so tight this year that there's probably been some meaningful spillover freight into LTL. I think tight truckload rate environment would encourage shippers to use intermodal, but you can't get the boxes, you can't get Chevy's. So how do, what's your best framework and kind of shipper feedback if you look at a couple of quarters in terms of what you might see on modal ships maybe that's a ‘22 question, 2022 question or just a couple quarters out?
Dave Menzel: Yes. It's a really great question. And it's super hard to answer because every mode you just highlighted is completely constrained. I mean LTL and intermodal capacity is at it's kind of limit and truckload capacity is close to its limit. I think truckload capacity has the ability to kind of flex up and down a little more effectively than intermodal and LTL. So I do think loads kind of becomes the default option. And as things get tied up, or delayed through the supply chain truckload tends to be one of the faster mode to get something from point A to point B. So I think it does lead more to the truckload side of the business mainly due to capacity constraints within LTL intermodal.
Tom Wadewitz: Do you think there would be like a shift to more truckload if you look at a few quarters? Or?
Dave Menzel: I don't know that there will be a material shift because all three modes that we just talked about are relatively constrained and relative to Echo specifically I would not expect kind of a meaningful shift, but I guess when I look at the brokerage side of our business it is, I think it's fair to say our truckload businesses has grown faster. The market opportunity is bigger. We serve both small and large customers in the LTL side of our business. Our niche is more about SMB and small customers. So Echo specific the opportunity is probably bigger on the truckload side than the other modes but in terms of the overall market conditions that would be pretty tough one for me to say. I just feel like the truckload side has the ability to flex a little bit more nimble than the other two intermodal or LTL.
Tom Wadewitz: Great. Makes sense. Thank you for the time.
Doug Waggoner: Thanks, Tom. Thanks.
Operator: Our next question is from Elliot please ask your question. Your line is open.
Unidentified Analyst: Great. Thanks for the question. And just one for me. So some strong growth in your technology initiatives. Could you talk about kind of how you're positioning yourself in the marketplace and among your competitors to grow both shippers and carriers on your platform that are enabling these bookings?
Doug Waggoner: I didn't hear the last part. How are we positioned in the marketplace with what?
Unidentified Analyst: To enable bookings.
Doug Waggoner: To enable bookings. Yes. We're doing a lot with API integrations with systems. So as you can imagine if you're a large shipper and you run a routing guide and you've got a bid board to offer your spot freight to your routing guide participants, we're doing that in a much more automated way and we are able to incorporate algorithms and what that does is it allows us to respond to 100% of the opportunities with more important pricing and automate the transaction. So the result that has is it's bringing more volume to us.
Dave Menzel: Yes. I don't think that the only thing I will just add like we talked a little bit about this in the past a little bit in the script the marketing tagline is technology at your fingertips experts by your side. And so I think that our strategy is to combine the best of both worlds enable online access, easy integration, automated pricing where it makes sense. And if that's what the customer wants, we're there for them in that regard, but at the same time, we value the workforce that we have and the talent and the team and the ability to do problem resolution and provide excellent service. So we are trying to combine both of those strategies and meet the needs of a broad marketplace.
Doug Waggoner: And likewise, we are carriers.
Unidentified Analyst: Okay.
Operator: Our next question is from David Campbell of Thompson, Davis & Company. Please ask your question. Your line is open.
David Campbell: Hi, thanks for taking my question. What seems like your forecast revenues for the third quarter. It looks like you're anticipating somewhat of a slowdown or less growth in August and September than you're getting in July, 53% increase in July would indicate that was sustained a lot more than your revenue forecast for the quarter. So is that because of the comparisons get more difficult in September than a year ago?
Doug Waggoner: Yes. It's simply a comparable issue David. As you get further in August and September, obviously you had the acceleration of truckload rates. And then you also had obviously things were coming back online after kind of it's up to you to see and some of the rather little build up and so it's really just a comp issue as you think about that extending into Q3.
David Campbell: Right. So you would therefore anticipate less growth in the fourth quarter as well coming from the difficult comparisons than a year ago.
Doug Waggoner: Yes. I think that's probably a fair assessment. The comps gets a lot harder the second half of the year than they were in the first and that's true in both the third and fourth quarter.
David Campbell: And, Dave you mentioned in your presentation the fact that you added employees in the third quarter, in the second quarter. And I may have written down employees wrong, but I think you said 1000, end of the quarter was 1073 employees. Is that right?
Dave Menzel: That was sales employees, not total employees. 1773 which were just in the sales organization. So total employees was a higher number.
David Campbell: Okay. That's for the sales people that compares with more employees than that last year but I can go over there.
Dave Menzel: Yes that's 187. That's 187 more people than we have on the sales team than we had last year. But that again, that's just the sales org, not the total employees.
David Campbell: That excludes a sales agents or just sales employees?
Dave Menzel: Sales employees and agents actually, roughly 240 or so agents, and not a big change in that number, very little change.
David Campbell: Right. Okay, thank you very much. I appreciate the answers.
Dave Menzel: Thanks David.
Operator: And our last question is from Jack Atkins of Stephens. Your line is open.
Jack Atkins: Okay, great. Thanks for taking the follow up. I just wanted to maybe revisit the capital allocation question for a moment to kind of go back to what Bascome and Stephanie were asking about in different ways. But when we think about you're building your cash balance, business cash flows really well. But at the same time we've had this large transaction translate sold for almost three times your enterprise value and it's the same size businesses that you and it generates similar levels of net revenue. Clearly, the market is just materially undervaluing your business relative to strategic players in the industry. So I'm just sort of curious why not lean in and be more aggressive on the buyback? I just think there's a disconnect here that's perhaps you guys could take advantage of. Dough I would be curious to get your thoughts on that.
Doug Waggoner: Well, I think we've always wanted to save our dry powder for M&A because we thought that was the best use of capital, but I think that you bring up a really good point and in the absence of those types of opportunities we have to take a strong look at buying back our own equity because that's probably the next best return on capital.
Jack Atkins: Okay. Thanks very much.
Doug Waggoner: Thank you, Jack.
Operator: And there are no further questions at this time. I will turn the call over back to Doug Waggoner, Chairman and Chief Executive Officer for his closing remarks.
Doug Waggoner: I just want to thank everybody for joining us and your kind words on our Q2 performance and we look forward to talking to you again next quarter. Thank you.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
