Good day and thank you for standing by. Welcome to the Kratos Defense & Security Solutions Second Quarter 2023 Earnings Conference Call. All participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Marie Mendoza, Senior Vice President, General Counsel. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us for the Kratos Defense & Security Solutions second quarter 2023 conference call. With me today is Eric DeMarco, President and Chief Executive Officer, and Deanna Lund, Kratos' Executive Vice President and Chief Financial Officer. Before we begin the subject of today's call, I'd like everyone to please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in the forward-looking statements we will make this afternoon. Please keep these uncertainties and risks in mind as we discuss future strategic initiatives, potential market opportunities, operational outlook and financial guidance during today's call. Today's call will also include a discussion of non-GAAP financial measures as that term is defined in Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today's press release, we have provided a reconciliation of these non-GAAP financial measures to the company's financial results prepared in accordance with GAAP. With that, I will now turn the call over to Eric DeMarco.

Thank you, Marie. Good afternoon. Q2 came in better than forecasted which provides us additional confidence in achieving as our full year 2023 financial objectives, including increased second half profitability as our fixed price and other contract mix continues to improve. We are on plan for 2023 to be a transition year for Kratos including reduced internally funded investments and increased year-over-year financial performance. Kratos' largest business, space and satellite communications, which includes our first to market software based OpenSpace virtualized C2, TT&C and ground system products momentum continued, including additional new customer awards and several new opportunities we are now pursuing. The large number of satellites being launched into LEO, MEO and GEO orbits is providing a macro level catalyst for our satellite business, in both the commercial and national security areas. Our OpenSpace platform is a representative example of Kratos' strategy of identifying a potential opportunity area, working with the customer, Kratos making the internally funded investment to be first to market with relevant system software and technology. Kratos' internal funding also enables us to own and protect the proprietary intellectual property we develop, which is an important element in protecting our market leadership position. Kratos’ OpenSpace architecture enables us to address both the commercial and the national security areas, providing us a larger overall total addressable market opportunity and the associated scale, cost leverage and increased potential margins that come with it. We are also invested in and self-funded Kratos' owned and operated global space domain awareness or SDA network. Our SDA network monitors the behavior of space based radio frequency or RF signals to identify critical information about satellites and objects in orbit, including their position, maneuvering health, proximity to other satellites and more. Kratos' SDA network includes over 20 worldwide sites currently hosting approximately 150…

Thank you, Eric. Good afternoon. As we have included a detailed summary of the second quarter financial performance as well as the third quarter full-year 2023 financial guidance in the press release we published earlier today. I will focus on the highlights and my remarks today. Revenues for the second quarter were $256.9 million up from $224.2 million in the second quarter of 2022, reflecting a 14.6% increase. Revenues came in above our forecasted range of $230 million to $240 million and most of our KGS businesses, with the most notable increases in our space and satellite, turbine technologies, microwave products and C5ISR businesses. Excluding the impact of the SRE acquisition, which contributed $13.1 million in revenues in the second quarter of 2023 as compared to $4.1 million in the second quarter of 2022. Kratos' consolidated revenues grew organically 10.7%, including a 17.1% organic revenue growth rate in our KGS segment with organic growth across all businesses within KGS. Cash flows generated from operations for the quarter of $23.6 million included cash collections resulting from favorable milestone payment terms, which accelerated receipts into the second quarter, partially offset by working capital requirement to support revenue growth and continued advanced purchase of inventory in an effort to mitigate potential supply chain disruptions and delays. Also included in our working capital uses are continued internal investments of approximately $3 million related to nonrecurring engineering costs to complete new rocket systems and hypersonic and related products, including for Kratos' Zeus, Erinyes, and Dark Fury Systems and continued development of certain software products supporting our OpenSpace platform. Free cash flow generated from operations was $28.7 million after funding capital expenditures of $11.2 million and receipt of $8.3 million of proceeds for Valkyrie's that were built as capital assets prior to contract award. Our contract…

Thank you, Deanna. We'll turn it back over to the moderator for any questions.

Thank you. [Operator Instructions]. Our first question comes from Joe Gomes with Noble Capital. Your line is open.

Hi. Good afternoon. This is [Josh Fazilple] (ph) filling in for Joe Gomes. He's just on another call. I wanted to start off the congratulations on the quarter, you guys. It seemed like hitting nail on the head and even more so with the growth. So, I just wanted to start off just actually just kind of going into the growth rate as well. Obviously, you guys thought it'd like right around like, 3% or 7% increase over the last quarter and obviously came in at really 15%. So like, what was kind of like, obviously, the big impact behind that large growth?

Yes. So it was organic growth literally in every business unit within KGS across the board. Space satellite training, C5ISR, microwave products, turbine technologies, air and defense rocket, all across the board.

Perfect. And so I just wanted to see, you guys mentioned last quarter that you guys had, enduring shield was going into kind of LRIP in the back half of 2023, when do you guys expect that, again, more towards the third and more towards the fourth?

Yeah. As you know, we're partnered with Dynetics on this and they're the prime. We're building the ground infrastructure for [indiscernible] and enduring freedom. I would speak with them. Things are consistent with where we were previously. There have been no changes. We expect to begin sometime in the second half of this year, but I just -- I don't want to get ahead of the prime. There's nothing wrong here. I just don't want to -- I have respect for the chain of command. So just circle up with Leidos Dynetics on that for the specific please.

Okay. That'd be fine. And then, just lastly, you guys sounded like you guys are really hiring a good amount of people. It seems like well over a 100, at least. So, is the market been just favorable towards that for you guys as well like, it has some retention for those employees been extremely positive.

It's the market for the type of employee we're looking for continues to improve over the past several months. It is still difficult on a cost standpoint. It's very costly, especially for individuals that want to and will obtain and retain a security clearance. So it's getting better it’s one of the reasons we're feeling better about the business in the second half of this year and 2024. But it's still expensive for people with very specialized capabilities. So that's the nature of it right now. And yes, we have a lot of openings. If we could fill all the openings we have based on our existing backlog and not just the backlog, the programs we have where we're going to get options exercised and it's not in the backlog yet. And we're going to win some big opportunities. As I mentioned, we've been told we've won some and they're going to be coming out soon. We are growth rate organically, which we're laser focused on could be substantially higher. It really could be, but we just can't -- we can't get the people right now in the industry.

Okay. And I'll jump back in the queue, but once again, great quarter guys.

Thank you.

Thank you.

One moment for our next question. We have a question from Pete Osterland with Truist Securities. Your line is open.

Hey, good evening. I'm on for Mike Ciarmoli tonight. Thanks for taking the question. First, I just wanted to ask, given that you maintained full year outlook after putting up a pretty strong quarter. Was there any pull forward in demand versus what you originally expected or any maybe unexpected easing in the supply chain. Just what drove the outperformance versus what you originally expected, 2Q to look like?

Yes, it's not really the supply chain. The supply chain is as expected and it continues to be challenging, right? Maybe a couple things move forward a little bit, a couple, but the team is executing very, very well. And as I tried to allude to in my prepared remarks, the fact that Q2 came in better than we had hoped, it gives us higher confidence in the full-year, but frankly it takes some pressure off of the year. Right now, obviously, you guys, if you do the math, at least on the revenue side, Deanna talked our mix is getting better and better why margins are going to be up. We continue to do $250 million quarters Q3, Q4, we're going to drill our guidance. So there's no ramp. There's no hockey stick. And as Deanna mentioned, as we all know, we're probably going to have a continuing resolution. We expected that, but what I'm starting to worry about is, is it going to be worse than a continuing resolution, will the government shut down for a period of time? And so we're factoring all those things in where we just don't want to get ahead of ourselves. We have a lot of good things going on here across the company. We want to deliver on what we say. That's where our heads at.

Great. That's very helpful. And then, there's a follow-up, just as we think about the opportunities internationally for target drones, have you seen any signs of increased momentum for demand on that front? Either from orders or conversations with potential customers? And just how are you thinking about the growth trajectory for that business over the next couple of years?

Yes. International target drone business is continuing to ramp. It's going to continue to ramp. However, as I think I mentioned on the previous call or two, the big three target drone users in the world are the United States Navy, the United States Air Force and the United States Army. Obviously, we have all of them. Then there's the UK Ministry of Defense. That's our customer too. And then just looking at defense budgets globally, target drone by country drops off precipitously after that. So we're going to book and we're going to be able to announce a lot of international target drone wins over the next several months and quarters. But the quantities are nice, but they're not the big needle movers like the U.S. stuff. They're just not. The award that I mentioned in my prepared remarks that we've been informed we've won and hopefully it's going to be definitized in the next few weeks. That can be a needle mover in 2024 or 2025. And I can't say much more about it. But that's a good one.

Great. Thanks for taking the questions.

Yes.

We have a question coming from Mike Crawford from B. Riley Securities. Your line is open.

Thank you. Eric, you talked about a new payload and mission integration system customer potentially for Valkyrie. And I know you have a number of customers within the DoD, maybe ministry and defense, but would you be able to supply Valkyrie say to, another prime?

Yes. We would be able to provide the Valkyrie to another U.S. prime. There is no prohibition on us doing something like that if the opportunity arose.

And is that something you would consider to be beneficial given maybe their channels?

Yes, we would definitely consider it. We're going to do what's right for the business and what's right for the shareholder. I, model -- we have multiple models here at Kratos. One of them, it's better to have part of something than all of nothing. And if we could get a big part of something doing something like you're talking about, instead of taking a high risk and going out alone, we'd weigh those factors and we'd make the decision. So, the answer is yes.

Okay. Thank you. And then you talked about a plan and Steve Finley was actually quoted about this and even further to double production of drones from the 150 target and tactical aircraft this year to 300 within 18 months. And I know that you have space to do that given the Oklahoma facility where I think you're on your second Valkyrie production path right now. But what will this require from a human capital standpoint in terms of increased number of employees to execute on that plan?

Right. So, Mike, related to that, and I did not say this in my remarks, we have acquired an additional autoclave specifically for tactical drones. Our team got an incredible financial deal on it and we've got it and it's going in. On the people side, that is something we're always focusing on. Thinking additional for what you'd what you just framed up and what Steve said. And I know what you're talking about. Think another approximate 125 people.

Okay. Thank you. And then I have one final question. So your solid rocket motor partner Aerojet Rocketdyne is now part of L3Harris and what if any concessions or assurances do you have or not have from L3 regarding your ability to continue to get ready access to a merchant supplier of solid rocket motors for some of your vehicles.

Right. So, I'm obviously I can't talk about any direct communications that we may or may not have had with anybody you are talking about. However, L3Harris executive leadership immediately upon the close pledged. This is public. They made a pledge that they're going to invest in the business They're going to be a merchant supplier and someone sent me a letter where they communicated to the Department of Defense that they are not going to play any favorites and they are going to continue to treat us all as equal partners. So, that's what my friends at L3Harris have said publicly. To the other part of your question. We of course are very prudent when we're always looking for second sources or backup plans. And that's across the company and across the business and we'll continue to do that including now in the rocket motor area.

Okay. thank you, Eric. Thanks a lot.

You’re welcome.

Thank you. We also have a question from Ken Herbert with RBC Capital Markets. Your line is open.

Hey, Eric. Good afternoon.

Hey Ken. Good afternoon.

Hey, I wanted to start off, congratulations on the AI Valkyrie flight. Coming out of that fight, the Air Force specifically commented that they see direct transferability or applications of this flight and the technology to the CCA program. Can you provide any more color on how you see Kratos' involvement in the CCA program playing out. Any maybe milestones, incremental milestones, we should be we should be thinking about. And specifically, how you see the technology sort of risk initially as you look to transfer this into or the Air Force looks to transfer this into CCA amongst other areas, in the in the future.

Ken, I apologize. I cannot say anything at all about that program. I'm sorry. I can't do it.

Okay. Fair enough. Can you provide any comments on the test flight and maybe any of lessons learned in particular or how it completed the flight relative to initial expectations?

From my perspective, from our perspective, the Valkyrie absolutely knocked it out of the park over the three hour flight. And our customers continue to applaud the Valkyrie, they applaud the aircraft. Ken I mention the video, the Air Force Research Lab Video. If you may have had a chance to take a look at it. For those of you that haven't, I encourage you again to please go take a look at it. It will address and answer a lot of the questions it's by the government, by the air force that Ken is asking that I'm not just not comfortable talking about publicly. Ken, we continue to make incredible progress in the tactical drone area. As I said about a year ago, I thought everything was going to become more classified and I was going to not be able to talk much anymore and that's where we are. Which is why I'm now wherever I can pointing to or identifying what the government is saying. They're not endorsing, but what they're saying to try to keep the investors as up to date as possible. So we're with the U.S. Marine Corps, we're doing great. I know it's out there. I saw a public thing out there now. We're involved with the Office of the Secretary of Defense. That's moving forward. Obviously, with the Air Force and multiple areas, we feel the government moves on their own timeline. We will not get ahead of ourselves, but we have a whole family of airplanes flying today. And I mentioned the cost points. I mentioned new stuff. We're ahead of everybody. And our plan is to stay ahead of everybody. A very important person said to me in the past couple of weeks, you need to have strategic patients. For those of you who know me, you know that's very difficult, but I'm happy to have strategic patients. And we will win.

Okay. Perfect. Appreciate that. And if I could maybe just one for Deanna. In the second quarter, it looks like working capital, specifically accounts receivable, was a really nice source of cash. The guidance implies nice inflection in the second half of the year in terms of cash generation. Are there -- was there anything sort of one-time in the quarter you call out around working capital that was a nice tailwind and how do we think about maybe the upside for the full-year expectations from a cash standpoint.

Sure. There were some favorable milestones in the second quarter that did accelerate some receipt that we had originally anticipated in the third quarter. So that was favorable in the second quarter. In my prepared remarks, I highlighted Q4 where we expect to, working capital to be beneficial as well in the fourth quarter as based on scheduled milestone payments as well as our expected conversion of some of the inventory builds that we've been building throughout 2022 and thus far through 2023.

Perfect. Thank you very much.

Thank you.

You’re welcome.

Thank you. We have a question coming from Seth Seifman with JPMorgan. Your line is open.

Thanks very much. Good afternoon. And congratulations, again, on the latest Valkyrie flight, at the risk of asking a question about something that's difficult to talk about. Just following up on that, maybe hopefully this is high level enough that is something you can talk about. When we think about the path forward, with Valkyrie and things that need to be developed in order to see demand really ramp up I assume that some of it is the artificial intelligence capability, being developed kind of outside the company. When you think about the pace of that and how that happens and how that development path relates to the demand profile for Valkyrie. How do those two things kind of link together and where are we in that now?

Right. So, Seth, right now, the Valkyrie as a minimal as a low cost affordable minimal viable product is ready to go. It's ready to go in four certain missions, which is why on the last few calls, including today, I continue to call out. Payloads are being integrated, flights are happening, tactically operationally relevant flights are happening, etcetera. That minimal viable product and minimal is very substantive. I'm sure it's better than anything than any of our adversaries have. It's ready to go and I’m noodling on the artificial intelligence with a very robust and proven augmented autonomy system. If you remember, we first flew manned unmanned teaming in 2015. And that that video, you can see a man, harrier, man's fighters sending Makos out, deploying things, coming back, etcetera, etcetera. So we've been evolving a robust augmented autonomy system for a number of years. What the Air Force has announced here, what we're doing with SHIELD, etcetera, this is much more sophisticated. This is the artificial intelligence piece. So, with those two data points out there, I believe and this is my opinion, we are ready to go with virtually every one of our tactical drones except the newest one. With augmented autonomy systems, we've deployed payloads. We've deployed weapons. We've deployed tactical drones, etcetera. Things are evolving very, very quickly. And I don't -- I will not speak for any of our customers, but by the announcement the Air Force put out yesterday, some other things that are going to be coming out soon, artificial intelligence is moving ahead rapidly. I'm not sure where the customer will step in and say good enough ready to go, could be tomorrow, could be in a month, could be in a year. I don't know, but that's the evolving game field we're in. Does that help?

Yes, absolutely. Thanks. And then, obviously, another key milestone, we saw it in the quarter. Was the, the Zeus, the static test flight. It seems, I guess, can you take us through kind of where things go from here and how you see the hypersonics opportunities playing out? I mean, it seems like if we think back several years ago in terms of where hypersonics was supposed to be big picture for DoD. It seems like, maybe some of that hasn't panned out and maybe some of that because costs are high. And so, this is something that's moving in a different direction. But when you think about gaining further acceptance of this with the customer and what future milestones are? Kind of how do you think about that?

So, as I mentioned, I obviously can't get into any detail since our last call, Kratos had a very successful hypersonic launch of a government customer's vehicle, very successful. Things at least relevant to Kratos in the hypersonic area are moving very, very quickly and it's happening right now. And I believe it's because of our affordability, our low cost, which we've demonstrated with low cost ballistic missile targets, which as we all know, ballistic missiles go hypersonic speeds when they re-enter. It's the maneuverability, which we've done before. I think low cost is going to win because the customer community wants to test fail, test fail, test to get it right. Instead of do a test, wait three years to figure out what happened and then test again. You can't do that philosophy if they're real expensive. The test fail, test fail, we're very low cost, which is one of the reasons why, Seth, I believe we were successful with our partner on winning the MACH-TB program, the MACH-TB Test Bed program. It's a hypersonic Test Bed program. I can't get into many details. But I anticipate this starting next year is going to be one of our biggest growth drivers. And Zeus I and Zeus II in my opinion are primary reasons why we won in addition to Erinyes, Erinyes don't quote me on this, but it's orders of magnitude. It's like one eighth of the cost of what anybody else has. And we're going to fly first and Dark Fury is coming after it. And Dark Fury is incredibly capable. And so we're taking the approach here very similar to what we did with the tactical drones. We took proven existing technology the target rooms and we modified it, adapted it and converted it to tactical. So,…

Great. Thanks very much.

Thank you.

Thank you. We have a question from Sheila Kahyaoglu with Jefferies. Your line is open.

Thank you. Good afternoon, Eric and Deanna. Eric, first off, Happy birthday.

Thank you.

So I have a few questions for you. So, on the budget, you mentioned a few things you're looking for on the unmanned side. What would be two things we should look for in the fiscal 2024 budget when it comes to Kratos?

I want to name some things that I think you can see. You want to definitely take a look at target drones target drum. So, look at PEO 208 Program Executive Office 208 on the United States Navy on their target drones. And so this is unmanned, unmanned aerial systems in strike where target drones are. They're also going to be doing some other things in there. We are heavily involved than that line. Take a look at the target drone line of the United States Air Force. You heard me mention in my prepared remarks that a lot's going on in the world. And so a lot more target drones are going to be needed. So I would take a look at the target drone areas. That, you'll be able to see and you'll be up, I think in the narrative under the program element lines, you'll be able to see narrative that’s specifically related to Kratos. I think you'll be able to see under the United States Marine Corps, I think, it'll be narrative that'll call out attritable aircraft, attritable unmanned aircraft, expeditionary aircraft, that's one to look for too relative to what we're doing with the United States Marine Corp.

Thank you for that. And then my second question for you is on KGS great quarter, grew 17% organically. You called out basically every business area. And you even mentioned, like, if you had the labor there, you'd be hires. So, obviously, the budget is not growing 17%. Are you taking share? What are some of the key areas where contributed to that growth?

Yes. So let me handle the programmatic part and then Deanna will handle the numbers. We absolutely are taking share. And there are there are two guys in particular we're taking it from. And that's been our plan where they -- traditional people and legacy people are very hesitant to do anything innovative and come out with any new products because they don't want to cannibalize what they have existing. They don't want to cannibalize it. So they're disincentivized to come up with virtualized software command and control telemetry, tracking and control, modems, etcetera, for space communications. They're just not incentivized to do it, because they cannibalize. Well, it takes a disruption like, software defined satellites, high definition satellites, high throughput satellites, etcetera that needs a whole new generation of ground equipment to give a guy like us an opportunity And so we are definitely taking share and we intend on continuing to do that.

Okay. And maybe one last one, unless Diana's going to comment on the numbers. Five years from now, how do you think about the fighter programs, whether it's [indiscernible]?

Shiela, right after you went through the different platforms. You went -- the phone went silent and then you came back on. So if you could crisply again, I'm sorry, just what was the question?

Sorry about that. No, just five years from now, how you think about like the biggest fighter program contribution to Kratos? I know you couldn't answer Ken's question, so I'm asking it slightly differently.

I'm going to be very aloof on that and I'm going to answer it this way. We are seeing in the Ukraine that quantities matter, especially when it comes to drones. Hundreds if not thousands of drones are going to be used. Now people are saying, all those are propeller planes. And yes, I get that because it's a land war. But in the Pacific, take a look at the recent Rand report that came out last week. In the Rand report, specifically laid out that to deter and defend Taiwan against somebody, the best way to do it is to use hundred if not thousands of high performance jet drones to give the bad guy a hell of a targeting problem. They have to respect them all and they're an incredible threat. So, you flip the cost curve on them where they have to fire something more expensive at you than the drone. I also encourage people three star General [Heino] (ph) just retired three weeks ago. Go take a look at his most recent interviews regarding what he sees the drones are going to be needed in the next three to five years for the Pacific. And so with that as the backdrop, Sheila, I believe that the most important from an aircraft standpoint for Kratos is going to be our tactical jet drones. Specifically, in the expendable and the attritable areas. And we intend to be one of the leaders there.

Great. Thank you.

And it looks like our last question comes from Jan-Frans Engelbrecht with Baird. Your line is open.

Good afternoon, Eric, Deanna and Marie. Congrats on a good quarter. I'm on for Peter today. Just like to talk. Good afternoon. So you mentioned in the release, your bid and proposal pipeline of $10 billion. Can you just talk more about the potential for new space awards and maybe a little bit of information about the adoption of OpenSpace that's going with customers.

Right. If you could see me, first time I'm smiling. Our OpenSpace team is incredible. The technical team, the sales team, the business development team, it's really incredible. And we have put a tool in their toolbox or an arrow in their quiver with this first to market, software, command and control, TT&C modem system, etcetera, that is the exact right answer at the exact right time for the type of satellites that are going up today. We are in my opinion, we are three or four years ahead of the competition for some of the reasons I said before. We have extreme high expectations that are being proven out for our satellite and space business. It's our biggest business and it's going to be our -- I believe it's going to be our fastest growing with incredible margin expansion that we're starting to see. It's going to really take off next year than in 2025 as the software license model under OpenSpace kicks in. And the vendor lock comment that I made in my prepared remarks, the satellite operators do not want to be vendor locked to the guys that are building the satellites anymore where they're tied into the ground equipment forever. They don't want that. And so we are the independent merchant supplier of the ground equipment that can interface with the LEOs, MEOs and GEOs. And it's -- we might have a tiger by the tail here. And I encourage you all if you haven't, go to Intelsat's website. They've actually put a video on their website, of what Kratos' OpenSpace is, what it's doing for them, how it's differentiating for them. And that'll give you an idea of why you hear a giddy up in my step relevant to this. So, we're feeling very good and a big part of that pipeline an important an important part of that pipeline is space and satellite communications with OpenSpace content.

Perfect. Thank you. Thanks for the detail. And if I could just have a quick follow-up sir. So there's been some questions about, in Valkyrie and the ability to scale production. But if we could just return to your comments on the doubling of production and I know we have to assume funding comes in if you want to move from 150 to 300 jet rounds, but can you just touch sort of an Air Wolf maker and Valkyrie, sort of the lead times that you would experience to sort of ramp production, are they -- the difference between that?

Yes. On the Valkyrie right now, it's 12 to 15 months and it's because of the engine. And I'm working on fixing that. And I'm not going to get into too many details on that, but that's the big lead time on the Valkyrie. The engine is the long lead time on all of them, but the longest one is the Valkyrie. The other one I'm going to say are within six months. But that is the long pole in the tent. It's the engine, which obviously ties right into Kratos' engine strategy and why we have engine businesses and why I'm so optimistic about how good our engine businesses are going to do over the next few years because there has been -- we were fighting terrorists for 20 or 25 years and range and power. And when I say power, it's not thrust. It's electrical power to work all the systems on the drones of the power [diminishes] (ph) wasn't important. Now it’s range is important. Power is important. New engines are important and those engines are going to go in the drones. That's the plan.

Thank you. I appreciate it. I’ll jump back in the queue.

Thank you. And I'm showing no other questions at this time. I'd like to turn the call back to Eric DeMarco for closing comments.

Great. Thank you everyone for joining us. If you have any follow ups other than what we went through, please don't hesitate to shoot Deanna or I a note. And we'll plan on chatting with you when we report Q3.

This concludes today's conference call. Thank you for participating. You may now disconnect.