Welcome to the O'Reilly Automotive, Inc. Second Quarter 2024 Earnings Call. My name is Holly, and I'll be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] I will now turn the call over to Jeremy Fletcher. Mr. Fletcher, you may begin.

Thank you, Holly. Good morning, everyone, and thank you for joining us. During today's conference call, we will discuss our second quarter 2024 results and our outlook for the remainder of the year. After our prepared comments, we will host a question-and-answer period. Before we begin this morning, I would like to remind everyone that our comments today contain forward-looking statements, and we intend to be covered by and we claim the protection under the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as estimate, may, could, will, believe, expect, would, consider, should, anticipate, project, plan, intend, guidance, target or similar words. The Company's actual results could differ materially from any forward-looking statements due to several important factors described in the Company's latest annual report on Form 10-K for the year ended December 31, 2023, and other recent SEC filings. The Company assumes no obligation to update any forward-looking statements made during this call. At this time, I would like to introduce Brad Beckham.

Thanks, Jeremy. Good morning, everyone, and welcome to the O'Reilly Auto Parts second quarter conference call. Participating on the call with me this morning are Brent Kirby, our President; and Jeremy Fletcher, our Chief Financial Officer; Greg Henslee, our Executive Chairman; and David O'Reilly, our Executive Vice Chairman, are also present on the call. I'd like to begin my comments today by thanking our team of over 91,000 hard-working professional parts people across North America for their continued dedication to our customers during a challenging second quarter. As we will discuss during our call today, our second quarter results were below our expectations as we faced broader headwinds to demand in our industry. However, we are pleased with the job our teams did to uphold our commitment to providing top-notch customer service to our customers on both sides of our business. Despite a sales performance that fell short of what we have come to expect, we continue to outperform the industry. This is the direct result of our team maintaining a high level of attention to detail and doubling down on their efforts to provide even better service to our customers. We finished the second quarter with a 2.3% comparable store sales increase on top of a 9% in the prior year. The pressure to topline sales also negatively impacted our operating profit and earnings per share results and we have revised our full-year outlook for these metrics as outlined in our press release last night. Though our results were below our expectations for the quarter, we were still able to generate increased operating profit and EPS on top of several years of robust growth. We now expect our full-year EPS to come in within a range of $40.75 to $41.25 with the adjustments reflecting our results in the second…

Thanks, Brad. I would also like to join Brad in thanking Team O'Reilly for their continued dedication to our company's success and their steadfast commitment to excellent customer service. Our team's ability to gain market share in a challenging industry environment is a testament to their professionalism and dedication to our customers. Today, I would like to begin my comments by discussing our second quarter gross margin results. For the quarter, our gross margin of 50.7% was down 53 basis points from the second quarter of 2023 with approximately 35 basis points of the decrease driven by the acquisition of our Canadian business. As a reminder, the acquired Vast-Auto business operates a higher mix of distribution sales to independent parts stores at substantially lower gross margins. As we have worked to align their financial reporting, we now expect the headwind to gross margin from the addition of their results to be slightly higher than our original expectations with 30 basis points to 35 basis points of dilution anticipated for the remainder of 2024. However, our outlook for the net impact of the acquired business is unchanged, and we still expect only a 15 basis point headwind to operating profit in 2024. Excluding the impact of the Canadian business in the second quarter, our gross margin results came in below our expectations, driven by a few different factors. First, the category composition of our sales that Brad outlined earlier, resulted in a product mix margin headwind as some of the solid results we saw in maintenance products carry a lower margin than the pressured undercar categories. We also saw some pressure to distribution costs in our gross margin from the deleverage of fixed cost on the below planned second quarter sales. Finally, our second quarter results include a slightly larger-than-anticipated headwind…

Thanks, Brent. I would also like to add my thanks to all of Team O'Reilly for their continued dedication to our company's long-term success. Now we will cover some additional details on our second quarter results and outlook for the remainder of 2024. For the quarter, sales increased $203 million, driven by a 2.3% increase in comparable store sales and a $70 million non-comp contribution from stores opened in 2023 and 2024 that have not yet entered the comp base. For 2024, we now expect our total revenues to be between $16.6 billion and $16.9 billion. Our second quarter effective tax rate was 23.3% of pretax income, comprised of a base rate of 23.9% reduced by a 0.6% benefit for share-based compensation. This compares to the second quarter of 2023 rate of 22.5% of pretax income, which was comprised of a base tax rate of 24.3% reduced by a 1.8% benefit for share-based compensation. For the full-year of 2024, we continue to expect an effective tax rate of 22.4% comprised of a base rate of 23.2%, reduced by a benefit of 0.8% for share-based compensation. We expect the fourth quarter rate to be lower than the other three quarters due to the totaling of certain tax periods and variations in the tax benefit from share-based compensation can create fluctuations in our quarterly tax rate. Now we will move on to free cash flow and the components that drove our results. Free cash flow for the six months of 2024 was $1.2 billion, in line with the first half of 2023, with growth in income offset by a lower benefit from a reduction in net inventory this year versus 2023. For 2024, our expected free cash flow guidance remains unchanged at a range of $1.8 billion to $2.1 billion. Our AP…

Thank you. We'll now begin the question-and-answer session. [Operator Instructions] Your first question is from Scot Ciccarelli from Truist.

Good morning, guys, Scot Ciccarelli. Two quickies.

Hi, Scot.

Hi. You talked about softness in your discretionary goods. Can you provide more color on what percent of mix you consider discretionary and how negative those sales were down mid-single digits high single digits, low double digits, et cetera? And then secondly, I may have missed it or misunderstood it, but I thought you said you expect Canada to be more dilutive to gross margins than originally expected. But that you're maintaining your full-year gross margin guide. Can you just help reconcile that? Thank you.

Yes, Scott. Thanks. This is Jeremy. I'll jump in on the first part of the question and you guys might be able to help me on the other one. On the discretionary categories, we mentioned in our prepared comments, and it's pretty common. Those even accumulated are a smaller portion of our overall company chain. It's not typically a big driver, and they were down more significantly than the rest of our group. We don't really quantify individual category or comments, but we're pretty substantially pressured versus where we saw the rest of the chain. And because of that, even though it's a small piece, was enough to be, I think, a mover of the overall comp when typically they don't – when they don't have that impact. But overall, it's still I would tell you, a minor part of our overall business. As we think about your second question, from a gross margin perspective, we did see just as we lined out how we would roll Canada's numbers in and got more familiar with their operations to roll in. I do expect that there'll be a little bit more dilutive than what we've normally seen. But had a decent amount of that, obviously, already built into our guidance range. So it becomes one of the puts and takes as we think about what gross margin looks like in the back half of the year. Similarly, some of the things that Brent pointed out in his prepared comments, are also things that we view as more transitory items over a longer period of time, things like mix between our categories and how our teams are able to manage our DC cost to leverage our things that typically we can see level out and don't think we'll create as much pressure. We continue to think for the back half of our year, that being able to be a favored partner for a lot of our suppliers gives us opportunities from a cost perspective. And as we've built that into the plan, we expected that accumulate some benefit over the year. And while we've – while we've seen some amount of that so far in our year, our outlook as we think about that is an offset or that we think will be a contributor in the back half of the year and those kind of all move into how we think broadly about our gross margin outlook being in a position to be relatively stable for how we thought about the full-year with just kind of more short-term items here in the quarter.

Understood. Thank you.

Thanks, Scot.

Thanks, Scot.

The next question is from Greg Melich from Evercore ISI.

Hi, thanks. I wanted to follow up on the July trends. I think you guys said it was – remained solid, but it sounds like it might have been not as good as June. Would that be fair?

Well, hey, good morning, Greg. This is Brad. I think what we want to balance on just kind of the exit rate coming out of June and heading into July, like we mentioned, when we look back at our original guidance and our internal plan kind of week by week as we said it at the beginning of the year, June was the best performer from that aspect in the quarter. And like I mentioned earlier, we feel solid about the trends as they rolled into July. I think what we want to balance that with a little bit, Greg, is just making sure when we say – when I say solid, that's relative to how the year has gone so far as well as how we feel about our guidance, adjusted guidance for the remainder of the year, which we feel really good about. There's been a couple of moving pieces in July that make it a little bit of a tough read. We're a few weeks in, still a lot of quarters to go. And the way that July – or excuse me, the 4th of July holiday layered in that first week. It's always a little bit hard to tell just from a category mix and a business mix. But overall, we feel really good about how we started the quarter.

The other thing to keep in mind there, too, Greg, is that the timing of the weather benefit that we've seen so far this year compared to prior year saw really a shift in the second quarter. We're probably up against some of our more challenging comparisons in all of the back half here as we work through July because that's when – if you remember, in 2023, we saw the hot weather come on and the benefits you got. And it's always a challenge. We're always reluctant to try to draw in too many conclusions and extrapolate off of a two, three year period when that hot weather, it just impacts in a different way over years as it comes in. To Brad's point, we feel confident in what we think the read is just broadly across our business outside of some of these fluctuations, and that's really what's informed how we think about the back half of the year, not just kind of a short look at a week or two.

Got it. That's great. And then my follow-up was you mentioned certain undercar parts for a week. But you're still gaining share there. I guess what do you think is going on? Are people deferring doing some of these larger ticket undercar things? Or is there some trade down going on there?

Yes. Hey, Greg. This is Brad again. Great question. We called that out. When we look at our business really on both sides of the business, but we look at professional, especially these last two or three years, we have really taken a lot of share. When we look at the data we look at from a share perspective and those undercar, underhood, but specifically undercar hard part category lines, we're going up against some unbelievable compares and then you start to think about maybe a little bit of a mild winter in the last couple of years and you look at those categories. I think what we're seeing is, to answer your question directly, is some deferral. So I think there is some deferral with those high ticket service items on both sides of the business, but especially in the repair shops. What we're still not seeing, Greg, and Brent may want to help me here, what we're still not seeing is the trade down that you asked about, a little bit of deferral but not trade down our line design.

Yes. And Greg, just to kind of build on Brad's comments, when we look – and it's something we've obviously watched closely with some of the pressure on the consumer that's been in the news. When we look at our good, better, best progression across our product lines. We still – as we've reported in prior quarters, we still see actually a migration to best and out of good and better, which is interesting given the consumer backdrop. But to Brad's point, I think where we're – part of what's driving some of that is higher-end batteries, AGM requirements. There's some different things in the industry that are driving we feel like some of that migration of the continuum in terms of getting into the better and best categories. Some of it is also, for us, anyway, has been driven by our proprietary brands. When we look at the growth there with SYNTEC, our synthetic oil proprietary brand, the growth there in units and [quartz] as it continues to penetrate. We launched BrakeBest Select Pro import direct brakes continue to grow there in that best category. So we continue to see customers migrate there. They see value and they see quality in the box. Where we have seen a little bit of – we talked about – Jeremy talked about discretionary categories a minute ago, but think about wipers for your car. We did see units were fairly consistent in Q2, but dollars showed some trade down there. People moving more down to the middle, lower level. And if you think about it, your wipers are more of a nuisance than something that's really critical to having your car on the road. But if it's streaking you're going to replace it and we did see some evidence in a category like that where people were looking for maybe an option that was a little bit more in the good or better range. But generally speaking, that's kind of what we're seeing.

And Greg, I may just one more thing, cap that. And just back to the root of your question, on the some pressure we've seen on the undercar categories. We still feel good about our share and our share gains when we look at the data we look at.

That's great. A lot of great color there, guys. Congrats, Mark, on the new role and have a good quarter.

Thanks, Greg.

Your next question for today is from Michael Lasser from UBS.

Good morning. Thank you so much for taking my question. Congratulations, Mark Merz. Do you think another round of either price or expense investment is necessary in order to maintain or perhaps even accelerate your market share gaining from here, especially if the industry goes through a period of protracted softness as we've seen in the last couple of quarters? Thank you.

Yes. Great question, Michael. Thank you so much. The answer – the short answer to the first part of your question there on pricing is no. We feel really good about the decision we made. It's been almost 2.5 years ago now to make the strategic investments into our professional pricing initiative. And as we've said many times, we felt so good about those investments, not because of just the competitiveness of our on the street price compared to the independents. But the way that we, as a company, back that up with our professional parts people our best-in-class delivery service in terms of turning bays and getting cars off the rack for a customer. But all the work our territory sales managers have done in the last many years as we've always done, just to make that price that's always third and fourth down the list to really make those things pay. We had to do the other things that much better from a service relationship and then all the work that our supply chain teams have done to continue to keep us best-in-class in inventory availability. And we feel like all that has paid off greatly. But like we've said many times, we don't feel that, that is necessary to continue our share gains. I think what we're seeing right now is simply some pressure on the consumer. We don't feel like anything has really materially changed from the way we compete. The way that our investments are paying off. Not seeing a lot different. We have tough competitors out there, but we're $16-plus billion company operating in an almost $150 billion industry, and we don't see any other price investments necessary to take us to the next level. When we see times like we're seeing this year where things are a little bit tough we see unique opportunities to take share in other ways. And I just maybe – with the second part of your question, in terms of other investments, we continue to invest. We continue to invest in staffing, though our teams did a phenomenal job managing SG&A this quarter based upon the sales results. We haven't backed off our investments and initiatives. And those initiatives are really centered around taking the friction out for our team members and our customers. And so really we're going to continue to invest in all the strategic initiatives, but I don't feel like there's another round of price initiative necessary.

Okay. My follow-up question is what do you think the catalyst is to accelerate growth across the industry? Is it just getting into the fourth quarter with comparisons to ease and then put the – the calendar to get in the next year? And if this period of softness persists into next year as the industry gives back some of the gains in the last few years. What's the minimum level of growth in SG&A per store that O'Reilly can manage through just so we can probably calibrate our model? Thank you.

Great. A couple of other great questions, Michael. Well, as far as the catalyst for – I'll take the first part, and then I'll let Jeremy help me out on the back part. I think on the first part, Michael, I think we have done such a great job controlling our own destiny in the last many years. And obviously, we've had some amazing share gains. And we're not resting our laurels. I mean, I also don't want to hide from the fact that yes, as we continue to comp the comp and lap all these share gains, the fact of the matter is we've decelerated some in terms of the overall continue to take the same amount of share year after year. But I don't think – I think it's still yet to be seen how others will report for the next quarter or two. But we're seeing nothing that says that we're still not continuing to take share. When we look at category data, when we look at market data, we still feel really good about our share gains. And again, I think time will tell based upon how others report how we're doing on that front. It's always hard – a little bit hard to tell, obviously, with the independents and the OE dealers and things like that. But we see a constant catalyst to continue to build our teams better, give better service and just continue to do what we do. When I think back, Michael, to the toughest years we've had from a macro perspective in my 28-year career with O'Reilly some of our toughest years are the biggest opportunities we had to kind of build our own catalyst going into 2025. There's times that when things get tough, there are certain competitors, not always our public competitors that over react to on the expense front, and they don't do as good a job of staffing their stores, staffing their delivery vehicles. They can overreact on inventory levels and things like that. And so I actually believe the biggest catalyst we have is just being our own worst critic internally, looking ourselves in the mirror in terms of our execution and our team is fully committed to putting the things in place that it's going to take to drive continued share gains.

Yes. Maybe, Mike, just to add a little bit to also what Brad said. If we think about just the broader dynamics in the industry, we've seen periods of time like this in the past before. But we have a lot of conviction around the long-term strength, the core fundamentals that drive our business and having been through many of these cycles, we know that our industry is very much supported by the ability to support a consumer that's economically constrained and give them an option to conserve part of their monthly budget that needs to go into other areas because they can keep their cars on the road. The question around what the right SG&A spend is or where we leverage. It's always a challenging one for us to answer. We don't put a fine point on it because it depends on the markets and the circumstances we're in, what broader level of inflation looks like overall – obviously, we don't – we don't provide that long-term outlook or guide into 2025 versus where we're at today. I think what's more important for us is what – what Brent touched on in his prepared comments and that we've got a team that very effectively manages how we think about the cadence and pace of the business and appropriately dialing in our operations to address the business when it gets a little bit soft, but to do so in a way that does not sacrifice really the value proposition, the relationships, the service that were the needs that the consumer do not change in these type of environments. So we're always going to be able to balance that well while you're making sure that we're investing in the long-term for our business. And feel – and feel confident that whether that we're in a higher inflation environment, lower inflation, whatever that might look like that we can manage well the productivity of our spend to support our results.

Thank you very much and welcome Leslie.

Thanks.

Thanks, Michael.

The next question for today is from Steven Forbes with Guggenheim Securities.

Good morning.

Good morning, Steve.

I wanted to follow up on the – I wanted to ask about the case of store opening this year. I was curious if it's being impacted by any of your initiatives, distribution related or so forth. And then given the expected number of openings in the back half implied any reason for us to think that the number of openings could increase into sort of the out years here, especially given your commentary around growth in Mexico? Thank you.

Yes. No. Thanks, Steven. I'll say a few things and let Brent jump in. But no, nothing has changed on the store front – on the store growth front in the U.S. or Mexico or Canada. We still feel really good about the pace of our new store openings. First half of the year has gone really well. Still feel good about the back half. So nothing out there to slow us down or speed us up necessarily. We really still feel like we have the right number in terms of store openings domestically and internationally and feel good about how we're going to end the year.

Yes. The only thing I would add, Steven, to everything Brad just said is we continue to invest in our distribution infrastructure as well to support that store growth. We've got the three active DC projects out there that we've talked about with relocation of two existing and then one brand new there in the Mid-Atlantic that we're working on. So we're continuing to – that pipeline is going to continue in the foreseeable future at the same pace we're seeing now.

And then maybe just a quick follow-up to Michael's question, maybe asked a different way. We think about how the employee mix has shifted sort of full-time versus part-time over the past few years. And would it help us frame up, right, sort of what that has done to the fixed versus variable cost structure of the business, right, as we potentially may be entering a period of more moderate growth sort of another way of asking Michael's question, but it does appear right that there could be some pressure on expenses. And so any way to sort of frame of how we think about the fixed cost structure versus variable cost structure of the business.

Yes. Thanks, Steven, for that question. It's an interesting one. We still feel like we've got a solid amount of flexibility in how we manage the process to dial in our staffing levels to take care of customers. Right the potential flexibility headwinds that you might talk about because of the higher – full-time mix of our business, we think, really becomes offset by the productivity in the high service levels that those team members provide. And we still have with a large chain in lots of different locations and just the normal turn over our business. It gives us opportunities to dial in those levels as we need to. But over the course of the last few years as we have as we have invested not just in how we think about what the right full-time part-time mix is in our business. But as we've thought about how we compensate our teams and how we manage our managers work schedules as we've invested in benefits and those types of items, the overall quality of our store teams continues to – we believe, operate at a very high level and operate at a high level that's effectively managed by a lot of very seasoned team members and leaders within our company, as Brent pointed out in his comments. And that allows us, on a very distributed basis to know that we're executing the playbook, running our business model in the right way and can manage through these periods of time with a solid amount of flexibility. Clearly, we've talked about this quarter. We've talked about it several times over the course of last year. We're not going to over compensate that we're not going to over adjust and do something that would create a service shortfall at all. We're not – when we talk about softness in our industry from a sales perspective, these are not huge movements in candidly, they don't matter to our customers. If sales are a little bit soft, they still need a high level of service, and we won't sacrifice that. So there are limits to how you manage that broader cost structure. But for sure, we feel comfortable we've got a great leadership team in place to dial that into the right level.

Yes. And maybe, Steven, just to build on what Jeremy said or maybe just to put a point on it is that we feel really good about the work that Jason Tarrant and our store operations leaders have done as we came out of COVID, and we kind of drew a lot in the sand as we increase that full-time mix as well as just made our retention and even higher focus. It's always been a huge focus at O'Reilly. You can't have professional parts people if you have turnover on the counter. It just doesn't work. And so we feel really good about those investments we made in not only full time, but all our initiatives come out of COVID, the slow down that store turnover. And we've made a lot of progress. We feel really good about the progress. We feel like it's paying off in productivity, customer service levels and the stability of our business. Still work to be done. It's an ongoing thing to continue to work on that retention. But really feel good about those investments and the work that the store operations teams have done.

Thank you.

Thanks, Steven.

Your next question is from Christopher Horvers with JPMorgan.

Thanks. Good morning, guys. So my first question is maybe turn the industry growth question around a little bit. Do you think that weather was a net benefit or a net headwind to the category and your growth in the second quarter here? Because I know June got a weather benefit, but you had a pretty late spring in the north. So as you're trying to disaggregate the underlying trend of the business, how do you think about the influence of weather? And then related to that, as you saw about July's solid performance, are you also seeing that on the DIY side of the business being better than what you experienced in the second quarter?

Yes. Chris, on the question around – I would say it's probably a net positive in the second quarter just because the hot weather comes on and oftentimes, that first round of extreme weather gives you a little bit of a boost because it gets the first piece of the failures there. As we look over the balance of the first half of the year, candidly, that's probably informed more how we think through where the overall industry has been because it has been choppy. There's been lots of different puts and takes that you'd attribute to weather. But as we've said multiple times over the course of time, a lot of that stuff evens itself out as you put periods on top of periods. And so we think it's likely to have been more neutral there, although for sure, lots of puts and takes. And we'll see the balance of the back half of the year. As you move further out of summer and you have a little bit less of those impacts, obviously, until you get into – into the winter and our compare is a little bit softer at the end of the fourth quarter as it relates to that. But that's really how we would kind of frame out that broader question.

And then on the DIY into July versus what you experienced in the second quarter?

Yes. We don't want to parse July too much for all the reasons that Brad talked about a lot. I would tell you the composition of the business, really, the thought process between DIY and professional has been pretty consistent as we move through the year. So a lot of those categories that we talk about that are benefited from a hot weather perspective. We saw solid performance on both professional and DIY side.

Got it. And then following up on an earlier gross margin question. So just to clarify, did 2Q benefit from lower product acquisition costs like – and I guess, how – if it didn't, it sounds like you're expecting that to happen in the back half of the year. So is there some sort of accounting like waiting for the inventory turn? Like, was there anything unique in the second quarter on that side that turns that to a benefit as the year progresses?

Yes. I can start on that one, Chris. When we think about product acquisition costs, as we've continued to move past COVID and into a more normalized environment, we've got some suppliers out there that are still facing wage pressure, labor production pressures, raw materials, those kind of things. We've got some that aren't, some that are getting more efficient, getting better. So I would tell you, it's been what I would say back to a normal version of some puts and takes with acquisition cost navigating through all the typical things that are out there in that environment. As we think about how we planned the year, we planned the back half of the year to be probably even more normal than the first half of the year when you think about how we built the plan. So we anticipate that to continue to play out the way we see it now. So that's what I would tell you there on the acquisition cost side. I would tell you it's not – and we're not in a point where we're seeing a bunch of deflation there, but we are seeing a normalization there.

Yes. And Chris, there's nothing unique from an accounting perspective. There was a net benefit in the second quarter. We just think incrementally to Brent's point, we can add to that as we move through the back half of the year.

Got it. So year-on-year gross margin should be pretty similar in the back half of the year?

Yes. I mean, we feel comfortable with where our guide is at and obviously, what that implies for the back half of the year.

Understood. Thanks, guys.

Thank you, Chris.

Your next question is from Brian Nagel from Oppenheimer.

Hi. Thanks for slipping me in here. So some shorter-term question, so I apologize, but maybe just a follow-up in on Chris' question as well. But can you help us understand better? You talked about the business solidifying or strengthening in June. How much stronger June was than the prior two months in the quarter? And then my second question, with the moderation of the guidance, because that reflects primarily the weakness in the first half of the year? Or you're actually also moderating expectations for the second half of the year?

Yes. No, thanks for the questions, Brian. I'll take maybe the second one first. It reflects both. Just as it works out, our back half will be pretty similar within our implied guidance to our first half of that just based upon – if you think about it from a midpoint perspective. So it's not just the flow-through of our results so far, but how those have been formed what we think our outlook for the remainder of the year is along with, obviously, what we see in the business and how we perceive that to be. As we think about the cadence of the quarter, I think Brent said it well in his prepared comments, April and May were both softer, they were both our expectations as the heat came on June. June performed better and more in line with what we would have looked for as we entered into the quarter, certainly not a situation where we significantly outperformed our kind of longer-term expectations for the year. In the quarter, it was a little bit more of just a normalization back towards what our expectations would have been. But that's sort of the right way to think about the cadence of the impact month-to-month.

Okay. That's helpful. I appreciate it. Thank you.

Thank you, Brian.

Thanks, Brian.

We have reached our allotted time for questions. I will now turn the call back over to Mr. Brad Beckham for closing remarks.

Thank you, Holly. We would like to conclude our call today by thanking the entire O'Reilly team for your continued hard work and dedication to our customers in the second quarter. I would like to thank everyone for joining our call today, and we look forward to reporting our third quarter results in October. Thank you.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.