Sonic Automotive, Inc. (SAH) Q1 2023 Earnings Call Transcript

Sonic Automotive, Inc. (NYSE:SAH) Q1 2023 Earnings Conference Call April 27, 2023 11:00 AM ET

Company Participants

David Smith - Chairman & CEO

Jeff Dyke - President

Heath Byrd - CFO

Tim Keen - Chief Operating Officer, EchoPark

Steve Wittman - Chief Digital Retail Officer

Danny Wieland - VP of IR

Conference Call Participants

Daniel Imbro - Stephens

John Murphy - Bank of America

Ajay Gupta - JPMorgan

Operator

Good morning, and welcome to the Sonic Automotive First Quarter 2023 Earnings Conference Call. This conference call is being recorded today, Thursday, April 27, 2023.

Presentation materials, which accompany management's discussion on the conference call can be accessed at the company's website at ir.sonicautomotive.com. At this time, I would like to refer to the safe harbor statement under the Private Securities and Litigation Reform Act of 1995.

During this conference call, management may discuss financial projections, information or expectations about the company's products or market or otherwise make statements about the future. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission. In addition, management may discuss certain non-GAAP financial measures as defined by the Securities and Exchange Commission.

Please refer to the non-GAAP reconciliation tables in the company's current report on Form 8-K filed with the Securities and Exchange Commission earlier today.

I would now like to introduce Mr. David Smith, Chief Executive Officer of Sonic Automotive. Mr. Smith, you may begin your conference.

David Smith

Thanks very much, and good morning, everyone. Welcome to Sonic Automotive's first quarter 2023 earnings call. As he said, I'm David Smith, the company's Chairman and CEO. Joining me on the call today is our President, Jeff Dyke; our CFO, Heath Byrd, our EchoPark Chief Operating Officer, Tim Keen; our Chief Digital Retail Officer; Steve Wittman; and our VP of Investor Relations, Danny Weiland.

Earlier this morning, reported first quarter financial results, including record first quarter total revenues of $3.5 billion and record first quarter EchoPark segment revenues of $651 million. First quarter GAAP EPS was $1.29 per share, and adjusted EPS was $1.33 per share. I'm very proud of our team's performance in the first quarter, and we're excited to build on last year's success as we move forward in 2023.

Despite ongoing challenges in the automotive retail industry, including rising interest rates and vehicle affordability concerns, we remain focused on delivering an exceptional guest experience and executing our long-term strategic plan. Our strong relationships with our teammates, our manufacturer and lending partners and our guests [ph] are key to our long-term success, and I'd like to sincerely thank them for their continued support.

Turning now to the first quarter. The industry continued to see improvements in new vehicle production and inventory levels, which resulted in lower new vehicle GPU sequentially and year-over-year as we expected. This decline in new vehicle GPUs should continue as we progress through 2023, but we believe that the new normal level of new vehicle GPU will remain structurally higher than it was pre-pandemic.

In the used vehicle business, wholesale auction prices for 3-year-old vehicles unexpectedly rose over 6% since the beginning of the year as nearly new inventory continued to face elevated demand from rental car companies and dealers at auction. Conversely, used vehicle retail average selling prices declined approximately 1% year-to-date, reflecting continued affordability challenges for consumers affecting retail demand.

This, combined with the lower level of lease turn-ins at our franchise dealerships limited our used vehicle volume potential during the first quarter, but we were able to maintain higher GPUs than expected to somewhat offset the lower volume. Used vehicle retail price levels continue to drive monthly payment affordability concerns for the average buyer at current interest rates and despite the uptick in wholesale prices in the first quarter. We expect used vehicle prices to resume their decline as we progress through 2023.

Despite an elevated interest rate environment that has reduced our finance contract penetration rate, F&I performance continues to be a strength and we want to reiterate our guidance for full year 2023 F&I per unit at or above $2,400 per unit. Our parts and service or fixed operations business remained strong with an all-time record quarterly fixed operations gross profit at our franchise dealerships up 12% year-over-year. We are very proud of the success our team has had in this area and believe there are remaining opportunities for growth in our fixed ops business as we progress through 2023.

As we said on our fourth quarter call back in February, we believe ongoing macroeconomic uncertainty and concerns around the effects of rising interest rates on the average consumer could drive volatility in consumer demand and vehicle margins through at least the first half of 2023.

This, coupled with our luxury weighted franchise business contributed to our decline in earnings from the fourth quarter to the first quarter, which is consistent with the historical seasonality of our business. However, we continue to believe that our diversified automotive retail model positions us favorably to adapt our business to changes in market conditions as we progress through 2023.

As new vehicle inventory supply grows, we expect it to take pressure off of used vehicle pricing and rental car company demand at auction, which should benefit both consumer affordability and cost of inventory.

Turning now to EchoPark segment results. We reported record first quarter revenues of $651 million, up 5% from the prior year and gross profit of $39 million, down 9% due in part to the increase in wholesale vehicle pricing I mentioned earlier.

EchoPark segment retail unit sales volume for the quarter was a first quarter record of 19,980 units up 15% from the fourth quarter and up 34% year-over-year. EchoPark segment average used vehicle selling price decreased 3% from the fourth quarter but at $28,650 per unit still remains 10% to 15% above targeted affordability levels.

We continue to focus on optimizing our inventory sourcing mix and expanding our inventory affordability by including 5-plus year old vehicles and EchoPark inventory amidst the ongoing auction demand for nearly new inventory.

For the first quarter, 5-plus-year-old vehicles represented 16% of EchoPark segment retail unit sales volume and our non-auction sourcing mix was 20% of sales in the first quarter. First quarter EchoPark segment adjusted EBITDA was a loss of $36.9 million compared to an adjusted EBITDA loss of $25.4 million in the fourth quarter and $29.5 million in the year ago period.

First quarter 2023 segment results include $12.5 million adjusted EBITDA loss related to other used vehicle businesses within the EchoPark segment, including the Northwest Motorsport business acquired as part of the RFG acquisition.

We are in the process of implementing our standard playbooks and processes at these locations, including inventory management and pricing strategies and expect the losses associated with this transition to improve sequentially in the second quarter.

Excluding these losses, our core EchoPark branded locations generated an adjusted EBITDA loss of $24.4 million, an improvement of $11.8 million from the first quarter of 2022. Our EchoPark first quarter results were in line with our internal projections and we maintain our guidance for breakeven adjusted EBITDA for the EchoPark segment by the first quarter of 2024.

Furthermore, we believe in any industry-driven margin headwinds and we may face in the franchise business should be a tailwind to EchoPark segment revenue growth and profitability, minimizing the earnings downside to consolidated Sonic results over time.

As we announced in February, we are very excited about our newly created Powersports operating segment, which further diversifies Sonic's retail portfolio. The integration of Black Hills Harley-Davidson into the Sonic family is off to a great start, and the team is currently gearing up to make this year's Sturgis Motorcycle Rally better than ever.

We believe there are operational synergies with our growing power sports network, leveraging the team Mancuso and Hornet Harley-Davidson teams to maximize the financial benefits of this event. As we continue to develop our relationships with the Powersports OEM, we are increasingly optimistic about the future growth opportunities in this adjacent retail sector.

Finally, turning on to our balance sheet and capital allocation. We ended the fourth quarter with $893 million and available liquidity, including $432 million in combined cash and floor plan deposits on hand. As an update on our share repurchase activity. During the first quarter, we repurchased approximately 1.6 million shares of the company's stock for $91 million, representing approximately 5% of shares outstanding at the end of 2022.

As of today, we have a total of $374 million in remaining share repurchase authorization, representing approximately 20% of Sonic's current market cap. Additionally, I'm pleased to report today that our Board of Directors approved a 3.6% increase to our quarterly cash dividend to $0.29 per share payable on July 14, 2023, to all stockholders of record on June 15, 2023.

In closing, our team is prepared to continue to execute at a high level while remaining adaptable to changes in the automotive retail environment and macroeconomic backdrop.

Further, we continue to operate our business with a long-term view and remain committed to a disciplined return-based balanced capital allocation strategy to maximize long-term stockholder returns.

This concludes our opening remarks, and we look forward to answering any questions you may have. Thanks very much.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Daniel Imbro with Stephens. Please proceed with your question.

Daniel Imbro

Thanks, good morning, everybody and thanks for taking the question. I wanted to start on the EchoPark side. You provided some color there on what drove up the losses here, but maybe just focusing on SG&A. SG&A sequentially stepped up maybe more than we anticipated. And can you just talk to what drove that given the in-store labor is largely fixed, that's where the leverage comes from Medical Park.

So what's driving the continued increase as units picked up here because with units selling almost 20,000 this quarter, that should have been towards your old breakeven kind of quantity needed. So can you maybe help us talk to what's changed in the cost side that's keeping us from getting closer to that breakeven number?

Jeff Dyke

Yes, Daniel, this is Jeff Dyke. It's really not cost generated other than we are investing in building the brand in Houston. So there's some incremental ad spend going on there. It's more along the lines, and I would sort of direct you to Page 23 of the investor deck. It's more along the lines of $12.5 million in gross coming out in the other non-EchoPark operating stores, in particular, Northwest Motorsport, where - that's in the northwest part of the country, and they're known there is truck, truck, truck.

We sell lots and lots of trucks or we're selling lots and amounts of trucks there. That product has become excruciatingly hard to buy, and it's put a big weight on that brand for the quarter. I expect that to be about 50% better. In other words, we'll cut our losses in half there.

But more importantly here is the gain in EBITDA that we saw year-over-year. We hit our numbers for EchoPark for the first time here in a while, and we're very excited about that. If you look at the EchoPark stores only, our volume was up about 47% year-over-year for that brand. And our EBITDA pickup was about $11.8 million.

So we're in line and still maintain, as David said in his opening remarks, being profitable or EBITDA profitable in the first quarter of 2024. So really look at it as a gross reduction and a profit reduction is driving the SG&A up. And we expect that to really improve, like I said, by 50% or better as we move into the second quarter. As we get in the back half of the year, we'll have North West Motorsports on playbook and, of course, availability for trucks and SUVs, which is what 90% of our business there that we sell, and we were selling as we did the RFG acquisition.

That's going to improve as we move to the back half of the year. So that's how you got to look at that. It's really a profit and gross generating incremental expense that we're spending EchoPark.

Daniel Imbro

Can you talk about what - you mentioned a few things there, and thank you for that. But do you expect the supply to get better in Northwest around trucks and SUVs. I guess why would the supply of used trucks start to get better if we're still in a pretty tight environment and we're going to start lapping over the decline in new car sales a few years ago, so I would think you're young - the number of young leases coming off lease should go down in the next few months. So can you walk through kind of what the expectation is for why that supply gets better?

Jeff Dyke

Yes, sure. New car inventory is building. If you take a look, it's not just us, but you look across the board. If you look at new car inventory, it's gone from, call it, a 20-day supply to a 30-day supply on average across the board. We expect that to continue to grow. We're seeing a lot more no sales in the auction lanes. That's gone from, call it, 30% January, February up to over 40% now, which means dealers are starting to hold on to the inventory. That's exactly what happened sort of the middle of the fourth quarter, end of December and January and February. We were buying cars in the auction lanes in January and February, the $24,000 price mark.

In two weeks in March, that went from $24,000 back up to $27,000 or $28,000 where we were having to buy cars at 96% of the market instead of 90% of market. We're now flattening that back out. We're buying cars in the 91%, 92% of market. That means supply is growing, supply is going to continue to grow. It's going to be slow, but we expect pricing to start dropping as we move towards the end of the second quarter, and it will continue to drop, which means supply is going to grow. That will give us access to more inventory. And we think the back half of the year is just going to be stronger. That's what all the indicators are showing to us now.

Daniel Imbro

Got it. Got it. Maybe one more on used prices then EchoPark, and then I have a follow-up. But if used prices were to fall, I mean, 10%, 15%, maybe it's not a fair question, but how much are you guys baking in because externally, we look at the data on used car pricing as I think of proxy for what's going on the sourcing.

So how much would you guys need to see some of those indices fall or your sourcing pricing fall and supply get better to hit the projections you've given at EchoPark? If prices are only down 10%, can you hit the goals you've given again to breakeven in early '24?

Jeff Dyke

Yes. The best way to look at it is we need the monthly payment for a consumer to get under $500 a car. That's going to be in the $24,000 price range. If you saw our volume in January and February, EchoPark was just really spiking up. And it spiked up the first 10 days of March. We were on pace to do about 7,000 cars in March and then we had just a huge increase in wholesale pricing.

I believe that we're going to get sub-25,000 as we move towards the end of the second quarter and into the '24 and possibly 23,000 range as we move towards the end of the year. That does it for EchoPark. We get to that kind of pricing at wholesale then we're going to see 21,000 to 25,000 car quarters, and we're off to the races. And so that's why we put this page 23 together for you, so you can begin to really look at the -- within EchoPark.

What the EchoPark stores are doing from an EBITDA and a volume perspective. And you'll be able to see the improvement that we're making at Northwest Motorsports over the next couple of quarters here.

Heath Byrd

This is just to add, as David mentioned in his opening comments, that 10% to 15% is we see this -- it's still about 10% to 15% higher from when we can get to that $500 price per month.

Daniel Imbro

Got it. Got it, Heath. And maybe one on cap allocation. Given your confidence in this and the dislocation in the stock, you guys have been expanding into Powersport M&A, looking at other uses. I guess where does buyback fall in terms of your priorities here? Or when you look at returns on the investment, given what's happening in the stock.

Heath Byrd

Yes, -- we bought back 1.7 million shares in Q1. And so that's obviously returning capital to shareholders is a big priority. We mentioned before that we're going to slow walk the power sports segment. So we don't plan on looking for big acquisitions there. We want to learn the business and do it right. We think it's a huge opportunity, but we don't have any large acquisitions on the radar. So share repurchase, as we indicated in Q1, is a valuable part of our capital allocation.

We increased the dividend 3.5%. So that is another way to return capital to shareholders. We're also allocating a significant amount of capital to our IT enhancements as well as some facility enhancements. And we're balancing all that with ensuring we have enough dry powder for any kind of economic conditions that may be coming down the road.

Daniel Imbro

Thanks for answering all the questions. Good luck, guys.

Heath Byrd

Thank you.

Operator

Our next question comes from the line of John Murphy with Bank of America. Please proceed with your questions.

John Murphy

Hi. Good morning, guys. Just a first question. As you have consumers walking into showrooms, affordability is an issue, whether you have a lot of money or not, right? Pricing and the month payments are fairly high at the moment. who is actually walking out of your dealership saying affordability is just too big issue for me. And I'm going to hold off. Are you able to close the folks or the ups that you get either online or in store that are real?

Tim Keen

Yes. This is Tim Keen. We're doing just fine with the people that are coming into the store, but we are surveying customers that have gone online shown interest in cars. And 60% of those people are still in the market waiting for prices to come down. So that's what we're seeing. And as the cost of sale goes down, those people come back into the market.

John Murphy

And then just a follow-up. I mean, is there any success in transforming those folks into nearly new used car buyers? I mean, have you had any success there? Or are they actually really just on hold?

Jeff Dyke

No. I mean, kind of both. We do transform them, John. One of the problem on the franchise side we have is we just don't have any off-lease cars. And with BMW being as big as potential mix as we have, those off-lease cars are just not there. And they're not going to be there for a couple of years. So if we had the inventory, no problem. The demand is there. We saw it in EchoPark in particular in the first quarter of the first 8 weeks of the quarter. We were just going gangbusters until the average retail wholesale price went up, and a lot of that is just being driven by the rental car companies, in particular, Hertz buying cars in the lane.

And they're paying $3,000, $4,000 more car than we can afford to pay and -- or the industry can afford to pay. And that's really a problem. We need our manufacturer partners to work with them to allow them to buy some more inventory because right now, typically, they're selling cars in the lanes, not buying cars in the lanes. So that's creating a problem for all of us.

And then the off-lease cars are certainly an issue because that's that 1 to 3-year-old nearly new car that really represents about a third of our volume. The franchise stores, we're buying no cars in the auction lanes, zero. We're either trading for it or buying the cars off the street, which is becoming - which is replacing what we were buying in the lanes and getting cars coming off lease for CPO. And that's why you're seeing the drops in those areas. And that's going to be an ongoing problem until leasing starts with the lease returns start coming back.

David Smith

This is David. Something to mention about demand is we're -- recently with the RF acquisition, we have some Silanis [ph] stores, right, also known Chrysler Dose stores, right? And we were off by $17 million in profit due to the truck situation, the supply of trucks on stock hold and like there's, what, 20-some thousand trucks in Mexico, for example, that are stuck there. And so the demand is there. We have hundreds of deposits for those trucks as soon as they come in, we believe we're going to pick that profit back up later in the year.

John Murphy

That's incredibly helpful. And then just thinking about one layer down, if you're not able to sell them a new car, you're not transforming to a used car, how much of your parts and service benefiting from those folks holding on to that car longer? I mean -- and I don't know if you have a gauge or understanding of how much parts of the service is benefiting from folks just waiting until they can get another new vehicle how strong this parts and service tailwind is going to be and if there's still even a backlog on the part of service tailwind.

Jeff Dyke

Yes, our parts and service business is just fantastic. And about 1/3 of our growth is just coming from incremental new ROs, and we expect that to continue to grow. We've really focused on bringing in more techs. We've got the space. We've got the capacity, and our team is just doing a fabulous job from a parts and service perspective, and you can see that in the numbers.

John Murphy

And Jeff, there's no expectation that if new vehicle inventory becomes much more available, you're selling a lot more new vehicles becomes -- supply comes back, that you're going to have any sort of air pocket on parts and services. This seems like this is more structural and you're getting more of your fair share in your markets. Is that a fair statement?

Jeff Dyke

Yes. That's a real fair statement. We are executing internally at a much higher level than we ever have before from a parts and service perspective. We have really focused on taking market share by op code. And that's been a big, big push for us the last 12 months, and it's a huge number one focus item for us this year in parts and service is just to understand which op codes we don't have share in and to go out and get that share. And we're doing that, and it's making a big difference in our overall performance.

David Smith

Anecdotally, we just opened our second Audi dealership in Nashville, for example, and the fixed ops department has already won about 2 weeks out on service. So it's -- the demand is very high.

John Murphy

Thank you very much, guys.

David Smith

Thank you.

Operator

Our next question comes from the line of Ajay Gupta with JPMorgan. Please proceed with your questions.

Ajay Gupta

Hi, good morning. Thanks for taking the questions. I had a follow-up on the SG&A question earlier but more on the franchise side, a pretty big pickup in the SG&A to gross for the fourth quarter. I know there is always an element of seasonality from 4Q to 1Q, but curious like was the pickup all attributed to that? Or are there any one-offs? Or any timing of investments and advertising that's coming through that impacted the number? And I have a follow-up. And if you could also comment like the trajectory on SG&A to gross for the rest of the year would be helpful. Yes.

Heath Byrd

Sure. This is Heath. As you know, our SG&A as a percent of gross can literally increase 500 to 750 basis points from fourth to Q1. So you're accurate there. And that has to do with the seasonality and the kind of business we have in Q1. We still -- if you look at that SG&A, there is $11 million of the $23 million in total increase are really investments in IT and facility. That and you couple them the Stellantis [ph] impact that David mentioned, we're back down into the high 60%.

And so we believe those are onetime events that actually drove it up a little bit higher. We still are reiterating that we're going to believe that the franchise will be in the mid-60s for the full year. And total enterprise will be in the high 60% for the full year. Clarify.

Danny Wieland

To clarify -- and add one more point to that. This is Danny. The Stellantis impact is about 300 basis points of deleverage on the franchise side. So again, that's of the 650 increase we saw from the fourth quarter, a big piece of that is related to the lack of heavy-duty RAM trucks that we can sell through and the loss gross related to those.

Jeff Dyke

And we just -- we can't get the product are all on stop sale. We get little trickles, but hopefully, when that leases up, then our big stores like Dave Smith in the Northwest, just -- it has a huge impact from an SG&A perspective, gross and a profit perspective. So that will all come back to us at some point in time this year.

Danny Wieland

Yes. If you exclude the non-Eco Park branded locations within that EchoPark segment that Jeff was talking about before and still at this it's a 500 basis points impact.

Ajay Gupta

That's great color. And then just on GPOs, you mentioned that you would expect like a continued decline through the course of the year, still settling above pre-pandemic. Any way to -- any visibility you have on the value code of that pace of decline going forward? And then relatedly, combining that with your EchoPark comments, in the past, you've sometimes given us some indication on just first quarter EPS seasonality where it's typically land is like around 15% to 20% of full year EPS, I mean, is that still the case this year as well, given whatever visibility you have on like new car GP trajectory and then the EchoPark ramp-up?

Danny Wieland\

Yes. Yes, this is Danny. On the EPS cadence, typically, we see that kind of 40% to 50% fall off from fourth quarter to first quarter, which is right in line. We had some unexpected headwinds with Stellantis [ph] that we just talked about for the first quarter of this year. But yes, we still expect despite the normalization of new GPUs as we go through the year and the impact of that on the franchise business, the upside and opportunity as we go through and improve the losses at EchoPark are going to lead to back half weighted EPS as we traditionally see.

And with the improvement -- and Jeff, maybe you can add color here that we expect in the luxury lease penetration as we go through the year. That's another piece that should help benefit our luxury weighting and the seasonal nature of that into the fourth quarter.

Jeff Dyke

Certainly, it's going to improve. New car margins right in line with what we thought would happen in the first quarter. And I would expect a little further degradation as we move into the second quarter. We're seeing that in April. But we think full year, it's going to land in the mid-4s, somewhere in that ballpark. And I think ongoing it's going to be in that range. It's certainly not going to go back to pre-pandemic levels. The manufacturers are going to do a good job of not growing over growing supply, but they're certainly not going to stick with supply in the 25 to 30-day range.

It's going to move up hopefully closer to 40. At that level, used car prices really began to drop, and that fixes the backroom for EchoPark and our franchise used car business. So internally, we had -- we beat our objectives for the first quarter. We're on target to beat our objectives again in the second quarter. And for whatever reason, we always seem to be a little light weighted in terms of what happens with what -- the Street comes out with in the first quarter that's been predictable over the last 5, 6, 7, 8 years.

And the Street is always short of where we think we're going to be in the fourth quarter, but we reiterate -- we're hitting our targets coming out of the first quarter and intend and hit or beat our targets for the year.

Heath Byrd

And the cadence that we talked about before, it's going to be relatively the same kind of thing where the first quarter is typically the lightest and the 2 middle are relatively the same, and then the bigger one is in the fourth quarter.

Ajay Gupta

Understood. That's really helpful color and that's all I had. And good luck.

Heath Byrd

Thank you.

Operator

[Operator Instructions] Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question.

Q – Unidentified Analyst

Hey, guys. This is Patrick Buckley on for Bret Jordan. Thanks for taking our questions. Have you guys seen any signs of increasing new vehicle incentives as we had in the second quarter? It sounds like it's been pretty brand specific to start the year, but still fairly below historical levels.

Jeff Dyke

This is Jeff. It's way below historical levels. A little bit in certain pockets of the country for leasing, probably more so weighted towards electric vehicles than combustion but just a little bit, but well below historical levels.

Q – Unidentified Analyst

Got it. That's helpful. And then taking a look at the Powersports segment, where are we in the cycle there in terms of profitability? Should we expect a similar cadence there as we were expecting in new and used vehicles or -- is it a bit of a different part of the cycle?

David Smith

Yes, there is a big seasonality in that business, as you can imagine, in the snow wheat weather. For example, we mentioned the upcoming Sturgis rally the biggest part by far of the year is during that Sturgis rally in August, for example, the lion's share of the profit comes out of that, and it's extremely strong. It's amazing what they do and they're about a 2-week period during that time.

Jeff Dyke

Yes. I would look at the first and second quarters of being about the same and then a big, big spike in the third quarter given the rally and what's going on at Black Hills with the Sturgis event. And then a little bit returned to normal for second quarter for the fourth quarter. But we're still learning that. That's why we're slow walking this. There's a ton of work to be done. We're spending a lot of time with our new partners in this arena, but we see tons of upside. There's just a ton of upside from a technology perspective and providing those businesses with our technology and processes and playbooks. And they're very excited to be a part of all that. So we don't have any more major acquisitions on the horizon here. We'll spend the next 12 months or so, really focused on executing our playbooks and honing our experience within this segment, and we'll see how it goes.

But I would tell you first quarter and second quarter sort of looked the same huge spike in the third quarter due to the rally and then kind of return to levels for second quarter in the fourth quarter.

Q – Unidentified Analyst

That's helpful. Thanks, guys.

Jeff Dyke

Thank you.

Operator

Are no further questions in the queue. I'd like to hand the call back to David Smith for closing remarks.

David Smith

Great. Thank you, everyone. We appreciate you being on the call, and have a great day. Thank you.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.