Greetings, and welcome to the Titan Machinery Inc. Second Quarter Fiscal 2024 Earnings Call. At this time all participants’ are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jeff Sonnek of ICR. Thank you. Please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to Titan Machinery second quarter fiscal 2024 earnings conference call. On the call today from the company are David Meyer, Chairman and Chief Executive Officer; Bo Larsen, Chief Financial Officer; and Bryan Knutson, President and Chief Operating Officer. By now, everyone should have access to the earnings release for the fiscal second quarter ended July 31, 2023, which went out this morning at approximately 6:45 a.m. Eastern Time. If you've not received the release, it's available on our Investor Relations page on Titan's website at ir.titanmachinery.com. This call is being webcast, and a replay will be available on the company's website as well. In addition, we're providing a presentation to accompany today's prepared remarks. You may access this presentation now by going to Titan's website again at ir.titanmachinery.com. The presentation is available directly below the webcast information in the middle of the page. We'd like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These forward-looking statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of Titan's most recently filed annual report on Form 10-K as updated in subsequently filed quarterly reports on Form 10-Q. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as may be required by applicable law, Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call. At the conclusion of our prepared remarks, we will open the call to take your questions. And with that, I'd now like to introduce the company's Chairman and CEO, Mr. David Meyer. David, please go ahead.

Thank you, Jeff. Good morning, everyone. Welcome to our second quarter fiscal 2024 earnings conference call. On today's call, I'll provide a summary of our results, then Bryan Knutson, our President and Chief Operating Officer, will give an overview for each of our business segments. Bo Larson, our CFO, will then review financial results for the second quarter of fiscal 2024 and conclude with some commentary around fiscal 2024 full year expectations. We will also follow-up on the O'Connors acquisition that was announced yesterday with a high-level overview. We carried a strong momentum into the second quarter with revenue increasing 29.4% to $642.6 million. This performance reflects double-digit same-store revenue growth across all three of our operating segments combined $86 million contribution from the Heartland and Pioneer acquisitions. Our organic revenue growth was also balanced across equipment, parts and service, each of which performed well and also delivered healthy gross margins. Taken together, we generated a consolidated pretax margin of 6.5% and diluted earnings per share of $1.38, which is more than a 25% increase over last year's second quarter earnings performance which once again demonstrates the strength of our organization and the efficiency which we are operating in the business. Next, I'd like to provide an update on our equipment inventory. Consistent with our prior expectations, we are seeing some improvement in equipment availability of several equipment categories, but do not anticipate receiving shipments of high horsepower tractors, self-propelled sprayers or wheel orders in excess of customer retail units. We continue to see demand for these products sustained at high levels and expect that to continue into next year. With our suppliers’ production capacities being limited, we do not anticipate replenishment towards targeted minimum stocking levels for these equipment categories until at least the second-half of calendar year 2024.…

Thank you, David. And good morning, everyone. Today, I will provide a recap of our fiscal second quarter segment drivers and then review some of our high-level expectations for the balance of fiscal year 2024 across our respective segments. I will begin with our domestic agriculture segment, which produced strong organic growth with same-store sales that increased 10%. As you heard from David, we continue to be acquisitive and the O'Connors transaction is particularly exciting. Our organic growth in the ag segment was further bolstered by revenue contributions from our recent acquisitions in our domestic market. We are also particularly pleased with our ability to maintain our strong pre-tax margin execution, which remained consistent with the prior year period at 7%. Although spring planting got off to a late start this year in some of our Northern markets, crop progress across our footprint is largely back on track following some timely precipitation. Although this precipitation was inconsistent across the Upper Midwest, yield potential has improved from earlier this summer, which is encouraging and is helping improve farmer sentiment. Additionally, with the planting delay, we realized some additional parts and service activity that moved from Q1 into Q2, which is also reflected in the strong growth that we reported today. As David touched on in his commentary, we are still experiencing tight supply in several of our highest selling equipment categories. Our dedicated inventory procurement team continues to work tirelessly to obtain as many of those units as we can from our OEM partners, other dealers, lease returns and through the used market. Most other categories of equipment have returned to more normalized levels, and this same inventory procurement team has been monitoring inventory trends and have made the appropriate adjustments to purchasing volumes to optimize inventory levels and will continue…

Thanks, Brian. And good morning, everyone. Starting with our consolidated results for the fiscal 2024 second quarter, total revenue was $642.6 million, an increase of 29.4%, compared to the prior year period. Our equipment revenue increased 28% versus the prior year period, led by incremental revenue from our recent acquisitions, as well as double-digit same-store sales growth across all three of our reporting segments, which combined for a 12.1% increase on a same-store basis. This growth was also visible across our other revenue streams as well, with our parts revenue increasing 39.7% service up 27.3% and rental and other revenue, up 11.6% versus the prior year period. Gross profit for the second quarter increased 29.9% to $133 million. Gross profit margin increased by 10 basis points to 20.8%, driven primarily by a slight mix shift to higher-margin parts sales relative to equipment sales. Operating expenses were $88.8 million for the second quarter of fiscal 2024, compared to $68.8 million in the prior year. The year-over-year increase of 28.9% was primarily additional operating expenses due to acquisitions that have taken place in the past year, as well as an increase in variable expenses associated with the increased sales. That said, we are pleased to achieve some modest operating leverage of 10 basis points versus the prior year as a percentage of sales. Floor plan and other interest expense was $3.7 million as compared to $1.6 million for the second quarter of fiscal 2023, primarily due to higher interest-bearing floor plan borrowings driven by higher inventory levels. Net income for the second quarter of fiscal 2024 was $31.3 million or $1.38 per diluted share and compares to last year's second quarter net income of $25 million or $1.10 per diluted share. Now turning to our segment results for the second quarter. In…

Thank you. At this time we’ll conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Ben Klieve with Lake Street Capital Markets. Please proceed with your question.

Hi, thanks for taking my questions and congratulations on a great quarter and it looks like a great acquisition as well. I'd like to start with the acquisition. I'm curious kind of the genesis of this acquisition. Was this a function of you guys actively looking to move into Australia and considering a lot of options? Or was O'Connors kind of a kind of unique opportunity that you decided to act on?

Yes. This is Dave. So I actually got to wind a little bit. I think it's one of these classic situations where you had the two family owners, two brothers had both retired. They've been out of the business. I know Dennis O'Connor, I think has been off for 10-years. And put a professional management team in and really didn't have that family succession. So I knew a couple of new years ago that they were probably going to be looking for -- so some of it, they could sell their shares of stock to. And I think as you recall, we just -- last year, we were -- had some Heartland in systems is a pretty important and strategic acquisition. And we didn't -- I didn't really want to come with those two together. But once we got that completed, we got that integrated, I reach out Dennis O'Connor earlier this year and tried to understand the business a little bit, but when you get into that, when you -- definitely, if you look at the case size business in Australia, O'Connor was hands down the market leader in high horsepower equipment. Every year, all the Australian and New Zealand dealers, they get together for an annual meeting, and they have a top dealer award well, O'Connor have won that for the last five years in a row. So you couple that with operating down in the Southeastern of the country and the grain belt and arguably the best farmland in Australia. And I think most important is that proven in the experienced professional management team has been in place for over five years now. Add all of this together, really an old brainer. So we met with the team. Brian went down there and turn the dealership. And it's just on Candy their metrics or financial metrics or cultures or people, the products, everything just almost identical to ours and English language, English base law, low in the corruption scale. I mean just -- it was just really made a lot of sense for us.

Yes, it sounds like that's very helpful color. Thank you. Follow-up unrelated to O'Connors but just kind of general kind of sentiment farmer sentiment. I appreciate your comment on kind of the state of the state in your backyard and understand the inventory dynamics that you guys are facing. But I'm wondering if farmer sentiment and buying patterns are being impacted right now at all by the interest rate environment. If you can elaborate on how interest rates over the last, especially six months are impacting their buying patterns, that would be helpful.

Yes. This is Brian. We're still actually having historically higher amount of cash transactions right now and then on a lot of these larger ticket items, we do have manufacturer-supported programs as well and especially as you get into some of the lower horsepower or the more rural lifestyle products. And so definitely, it's an impact and something our farmers are -- producers are watching. It is cutting into their net farm income a little bit. It's one of the contributing factors, along with just a lot of other things which have the price up. But urea and fertilizer being down is helping, and we're still on pace for a really good year. Maybe a lot of different estimates out there around between 15% and 20% below last year's record depending on where yields come in but still on pace for a really good year. They did push a lot of income into this year from last year. And there's a lot of tax incentives still in place, and we're anticipating that farmers are even going to be pushing income from this year into next year. And there was a lot of forward contracting. So still pretty robust, still a fair amount of cash out there, but yes, interest rates are on people's minds, and we do have a lot of different financing tools to help with that.

Yes. The only thing I'd add to that -- the only thing I'd add to that, too, and I think some of the OEMs maybe earlier this year broken down pretty nicely. Interest expense is a fairly small portion of the cost when you're talking about the equation for farm income. So while it has increased, it's -- there's other factors that are much more at play here.

Yes, yes. No doubt about that. Very good. Well, that's all very helpful. Congratulations again on a great quarter, and I'll get back in queue.

Thanks, Ben.

Thank you, Ben.

Thank you. Our next question comes from the line of Alex Rygiel with B. Riley Securities. Please proceed with your question.

Thank you and good morning gentlemen and congratulations on the O'Connor transaction.

Good morning, Alex.

Questions here. You talked a lot about inventory and that was all very, very helpful. But taking a quick step back, why do you think being at a target inventory level that's comparable to historical levels is appropriate in this higher rate environment that we're in right now?

I would start with saying that the levels we're talking about aren't comparable to historical so if you want to take it back to a prior peak, which I think some people are naturally doing and comparing our total inventory level. I think you have to factor in the cost per unit, right? So we're talking about a significantly smaller number of units per location than we were a decade ago. If you simply ran the math on a 3% increase over a decade, you'd be talking about a like-for-like equipment being 35% higher. And we know with the pricing that we've seen over the past couple of years has been much larger than that. So even on a very conservative basis, you're talking about one-third less number of units out at the locations. And then from there, as we talk about targeted levels, right, we're really focused on our main categories, and it's making sure, again, that we have one or two that are available for demonstration, loaner or display units. And that's just what you need in order to drive the high volume of sales, right? And so that's really what we're talking about. We're missing out on sales opportunities because we don't have those high horsepower items on our lots. And if we did, our sales would be even higher than they are today. So taking a step back, I think it's important to keep all of that in perspective. So we continue to improve our business model, and we want to be as efficient as possible, and we certainly want to focus on presale activities and all of that is good business practices that we'll continue to do going forward.

That's very helpful. And then back in January, you had some delivery delays. I know it's kind of hard to quantify those, but do you think you're all caught up in those delivery delays?

No, not yet, Alex. In fact, Bo spoke to his prepared comments, our backlog is actually up a little bit sequentially. So no, we anticipate likely at least another couple of quarters before we can get caught up on that. Just our shops are really busy, which is a good thing and we're selling a lot of iron, which is a good thing. And it will just take a little time up. But Bo, anything to add on your end?

No. Yes. I think that that's right. We talked about our mix and available-for-sale inventory and wanting to normalize that backlog, and we continue to see opportunity to focus on that at the back half of the year.

Thank you very much.

And one more comment I had to, with some of the supply side issues and some of the conditions, some of the equipment when it's coming out of the factories, too, it's taken us substantially longer per unit to get them through our shops right now. And we're seeing that it started to improve a little bit, and we do think that's going to be probably back to normal towards the end of the year, too. So that will help a lot.

Thank you.

Thank you. Our next question comes from the line of Ted Jackson with Northland Securities. Please proceed with your question.

Thank you and good morning. So I'm going to throw my two questions back as it relates to the O'Connor acquisition. And the first one is just maybe a little more color on the Case IH Australia dealer network. Can you give us some sense in terms of how many locations there are across Australia like kind of maybe the average locations per dealer kind of like who's the next largest dealer, now that you have the largest kind of who's number two, just some metrics to kind of give us a sense with regards to how it compares to the domestic dealer network for Case International Harvester.

So in our discussions with the management team there, they had a pretty well-defined future growth strategy through acquisitions like identified locations. They've been in conversations with different owners. But I'd say it's much different in the United States. You've got -- you don't have a lot of really big dealer groups, at least on the case side, maybe more so on some of the competition. So a lot of family business, smaller businesses. And what I say, I think it's a much more robust consolidation story than what we've even experienced here in the United States. And a lot of smaller groups, family owned. And I think that's just right for consolidation as you continue to adjacent from where they are now. And I think there's really good relationships between our team and some of the existing owners and some good camaraderie. And so -- we just want to do that on a timely and managed approach. But no, I think we -- that's one of the positives about the story is future M&A opportunities.

Yes. And Ted, I would just add on to David. I think you asked what's the next largest. And so O'Connor's footprint in the grain belt there would be there's a CNH dealership with six rooftops. And then you asked what the average is. And so the average is more around two to three locations per.

Okay. And do you have any kind of sense in terms of just, I don't know, like the number of locations that are in Australia, just bit of curiosity, just the kind of the whole size of that market, at least from like a location standpoint?

Yes. We know the number definitely in the grain belt and in O'Connor's footprint where we're where our interest level is. There's just -- as David mentioned, I'll just go back to there will likely be a fair amount of consolidation in that area over time here. And we're seeing that with the Deere side as well. RDO equipment that is headquartered out of Fargo here as well. That's a very large John Deere dealer, has 25 locations in Australia has for a long time. You know what, I remember way back when they entered the Australian market, and they continue to add locations and continue to build their presence every year in Australia. And then service equipment, large John Deere dealer just North of us here in Canada has 15 locations, so they're now on basically either side of us. So there is a fair amount of North American presence there now between us and RDO in service.

My second question just is in terms of O'Connor's revenue mix. When you look at it from sort of equipment parts, services, rental, et cetera, I mean would you -- is it a mix that's similar to your domestic business here in ag? Or is it more like the international business? I mean, not that they're that much different, but you have a bit more of a skew towards equipment relative to some of the higher-margin stuff internationally than you do domestically. And so I'm just kind of curious if you could give some color on kind of the mix of O'Connor's business and then I'll get in queue again. Thanks.

Yes. It's pretty similar to our domestic ag business. The supplemental deck that we posted on our website breaks that down pretty nicely. So looking at a three-year historical average there, equipment sales mix was 82% versus on the U.S. side, ours is more like 77%, 78%. So a couple of percentage points different, but very similar. And that's just one of the many similarities that their business profile and metrics have to our domestic ag business.

Okay. Congrats on the quarter and the acquisition.

Our next question comes from the line of Daniel Imbro with Stephens Inc. Please proceed with your question.

Hey, guys. This is Reid on for Daniel. Just a couple of questions on margins here. As you noted, we're seeing a lot lower inventory, which should translate to a better gross margin and that should benefit your SG&A to gross margin ratio. Is this a sustainable ratio going forward, assuming inventory stays low? Or how should we be thinking about that?

I mean, in talking about back half of the year and our expectations, we touched on fact that we do expect some moderation in the gross margin perspective. But from an operating expense perspective, we expect to remain in line or below prior year as a percentage of sales. And for the full-year, that same story would be true at this point is to be in line or probably a little bit below last year's percentage of sales from those operating expenses.

Okay, thank you. And on the O'Connors acquisition, it looks like last fiscal year today, finished with gross margin slightly a bit low. Do you all expect to see some synergies uplift that gross margin? Or can you touch on maybe some margin synergies? Just a little more color there would be great.

Yes. So in the financials that we provided in the supplemental deck, they had gross margin of 18.7%. I think that's what you're referencing, slightly below ours and then actually had a pretax margin of 7.2%. So the profitability of their business is one of the many things that really attracted us to the management team and their operating model. That margin, if you factor in the fact that they are a little bit more skewed to equipment sales makes a lot of sense and is pretty similar to us. In terms of synergies, I mean, what we're really looking at is focused on a consolidated executive leadership team looking at the business from a global perspective. We want to continue to support that senior management team to execute on the growth strategy that they had in front of them. And then there are some unique opportunities from a service model perspective and being able to provide customers 24/7 type support as we look at the different time zones that we're now operating in as well.

Right. Thank you all for the color.

Thank you. Our next question comes from the line of Mig Dobre with Baird. Please proceed with your question.

Good morning. And thank you for the question here.

Hi, Mig.

I want to go back to the inventory discussion. And I'm sort of curious as to how you think inventories will progress for you for the remainder of the year. It sounds like you'd like more inventory, if available. So as the supply chain is getting better for the OEM, are you sort of inferring here that you're going to continue to build inventories through year-end. So I guess that's part number one. And then related to this, given that so much of your business is now presell, can you comment at all about your presale activity on model year '24 equipment in North America? And then I have some follow-ups. Thanks you.

Yes, I'll maybe start with the inventory question, and then Brian might touch on the presales. So from an inventory perspective, we would expect the inventories probably will increase sequentially in the third quarter and then come down a little bit from there in the fourth quarter. We typically see that to be the case. We did mention that largely speaking, from a high horsepower perspective that most of everything that we're going to receive is retail to customers, Of course, we need to turn that around with predelivery inspection. So again, we'll see what we're able to do with normalizing that backlog. And those are really the factors that are at play from a bigger picture perspective in terms of the increase that we've seen year-to-date versus what we would expect in the back half of the year, the back half would -- should be a lot less than what we saw in the first-half. And again, the first-half was kind of -- very welcome to get us replenished levels on some of these other categories, back half, a smaller modest increase, and again, focusing on normalizing that backlog.

Yes. Mig, this is Bryan. I would just add we're definitely trying to be really clear that we are short in certain key product categories, and those are the areas that we're looking to get more in. But as you know, there are other product categories where we're finally feeling pretty good about where we're at. We've been running low for quite a while now. And then there are a couple of other product categories that we talked about last call that we have a little bit excess of smaller tractors in some of those. And so I think you see it implied in our guidance is us being proactive about just in the second-half here, cleaning up that mix a little bit. So we're positioned really well for next year and hope that some of these key product categories will open up. And so we're proactively addressing these few smaller categories where we're a little long, and that's what you see in the anticipated margins that we've got reflected most dealers, I know they wouldn't do that. They wouldn't be feeling the pressure yet that stuff isn't aged. And so we really just want to -- are cognizant of our healthy mix and are being proactive there. And to your presale question, as you know, the OEMs are keeping the order books really tight here. They're not out very far -- these key product categories are on allocation. And so as Bo said, we're we just finally are out into '24 now. And with our first tranche of early orders there, we've got names on all those key product category units.

But again, do you get a sense that volumetrically demand for model year '24 is up relative to 23. And I ask the question because it matters within the context of inventories building on your balance sheet and in the industry more broadly.

No, I would say demand is still very similar to how it's been in those key product categories. But importantly, demand has been outpacing supply now for a long time on those. And then normalized in the other product categories. So yes, I don't see demand increasing here as we've got a little bit lower net farm incomes and likewise on the construction side, but demand is still strong. And again, as I mentioned, our order boards in those key product categories, we're still selling everything we can get for the allocation we have so far.

David, I'll just reiterate my comment. I don't see us getting sold sprayers, all wheel orders or forward-drive tractors, in any quantities of stock until at the earliest second-half of 2024, that's how tight it is.

Thank you. Our next question comes from the line of Larry De Maria with William Blair. Please proceed with your question.

Yes, thanks. Good morning. First question, let's just pick up where we left off there. On the early order programs in presales -- and what is the message that you're -- we're sort of seeing on calendar 2024. I mean I understand that obviously, there's orders and there's short supply. So first of all, are there any cancellations out there that we're seeing? And to BJ's question point about demand not getting stronger, are we seeing I don't know talking about a flat calendar 2024 at this point. What's the specific messaging on what the order programs are telling you about next year?

Yes, I think so, Larry, so to answer your first question, no cancellation still and yes, '24 is a long ways out at this point but that's flattish is kind of our anticipation at this point for demand perspective. But again, then you got to work in the fact that we need production availability to increase in these key product categories, and we haven't been able to keep up there with demand and that fleet continues to get older in those certain product categories.

Maybe what you're asking a little bit, I'd say farmer sentiment might be tempered a little bit, like you say, there's a lot of noise out there. There's interest rates, things like that. But it said so much demand before and the production levels were so much below previous peaks that the demand is still good. But maybe farmer settlement might be off a little bit, but I have a deal with farmers for over 40 years. They're always pretty negative. But there is some noise out there in that, but still the demand is still outpacing supply and high horsepower.

Yes, good point, Dave.

Okay. Thank you. And then can you give us some color on the second-half? Obviously, a good quarter. Construction looking stronger and you're actually a little lower. It seems like the core guide, ex-O'Connor should be going up, not staying flat for the year, which would imply maybe a lower second-half than the expectations in the consensus numbers? So can you talk about expectation in the second-half? Or is there a deceleration? Or is it just really about not getting production or not having confidence in the production and then a fiscal 3Q versus 4Q sales split? Thanks.

Yes, a couple pieces of commentary on that, right? I'd say -- from a top line perspective, if you look at same-store sales growth on our domestic ag business, it's been about 7% in the first-half of the year. We expect something similar in the second-half of the year. Then you layer on any growth expected from a Heartland perspective, which given some of the commentary about sprayer production, we'd expect their growth to be north of those levels. Mathematically speaking, from a margin perspective, we've been touching on it, right? But that's where some of the math comes into play to get to the results. So the top line is very much what we've been discussing and reiterated the guidance. And gross margin moderation is something we've been talking about since the beginning of the year. So year-over-year in Q3 and Q4 we would expect margins to be lower than they were in the prior year. And that would be for a number of reasons, including what Bryan was touching on a little bit earlier. And then from a split perspective, we would expect Q3 to be our highest quarter and Q4 to be a little less than that, but more than what we just saw in the second quarter. So that's also consistent with the expectations that we had put out there previously. The other thing just to help you out and doing your math and getting to where we come out to from an expectation perspective is you did see other interest expense higher in the second quarter, and we would expect that in the third and fourth quarter as well, certainly, as you're comparing to the prior year period. So put all that together and take a step back, what we're really doing is reiterating a guidance midpoint of $4.80, which is outside of the O'Connors acquisition, which is on top of last year's record results. And if you really zoom out and talk about where we're at today, with our earnings power versus where we were in the prior peak, we were talking about $2 per share looking good. So again, we've spoken this year about higher confidence in achieving average pretax margins north of 5% through the cycle. The reasons why we have confidence in getting there, focusing on our organic growth through market share gains and continuing to execute on our pipeline. So for us, and I hope you hear it, we're nothing but excited about how the rest of the year shapes up and how we're going to be well positioned to continue to execute next year.

Thank you. Our final question this morning comes from the line of Steve Dyer with Craig-Hallum Capital Group. Please proceed with your question.

Good morning, Brian, Bo. Ryan on for Steve. Just want to follow up on that last time. And I guess when you say Q3 highest, is that the core business, excluding the acquisition just made of O'Connors or is that all in Q3 will be the highest revenue?

Yes. No, that's a great point, and thanks for allowing me the opportunity to clarify that. That was our expectation, excluding the O'Connors acquisition. So then we layer the O'Connor's acquisition on top of that. So I appreciate that.

Good. And then just a quick follow-up. Could you realize any manufacturing incentives in Q2? And then what are your assumptions within guidance for the back half of the year regarding incentives?

Yes. Another opportunity for me to clarify there. So last year, we started to accrue for manufacturer incentives in the second quarter to the tune of $2.6 million. This year, we haven't yet done that, just aligning again with the cadence of production that we're expecting and for that to continue to increase in the back half of the year, and we just talked about our expectations in the second-half from a volume perspective, i.e., the second-half being larger than the first-half. So we definitely expect to recognize similar levels. Overall for the year, it will just fall in the back half of the year as opposed to starting incrementally last year to recognize that $2.6 million a year in the quarter.

Great. Thanks, Bo. Good luck guys.

Thank you.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Meyer for any final comments.

All right. Thanks, everybody, for your participation and your interest in Titan Machinery, and we look forward to updating you on our progress on our next call. So have a great day.

Thank you. This concludes our conference today. You may disconnect your lines at this time. Thank you for your participation.