Manhattan Associates, Inc. (MANH) Q3 2023 Earnings Call Transcript

Manhattan Associates, Inc. (NASDAQ:MANH) Q3 2023 Earnings Conference Call October 24, 2023 4:30 PM ET

Company Participants

Michael Bauer - Head, Investor Relations

Eddie Capel - President and CEO

Dennis Story - EVP and CFO

Conference Call Participants

Terry Tillman - Truist Securities

Brian Peterson - Raymond James

Joe Vruwink - Baird

Mark Schappel - Loop Capital Markets

Operator

Good afternoon. My name is Robert and I’ll be your conference facilitator today. At this time, I’d like to welcome everyone to the Manhattan Associates’ Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there’ll be a question-and-answer period. [Operator Instructions] As a reminder, ladies and gentlemen, this call is being recorded today, October 24th, 2023.

I would now like to introduce your host, Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer, you may begin your conference.

Michael Bauer

Thank you, Robert. Good afternoon, everyone. Welcome to Manhattan Associates’ 2023 third quarter earnings call. I will review our cautionary language and then turn the call over to Eddie Capel, our CEO.

During this call, including the Q&A session, we may make forward-looking statements regarding future events, or the future financial performance of Manhattan Associates. You will caution that these forward-looking statements involve risks and uncertainties, are not guarantees of future performance, and that actual results may differ materially from the projections contained in our forward-looking statements.

I refer you to the reports Manhattan Associates files with the SEC for important factors that could cause our actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal year 2022, and the risk factor discussion in that report, as well as any risk factor updates we provide in our subsequent Form 10-Qs.

We note, the turbulent global macro environment could impact our performance and cause the actual results to differ materially from our projections. We are under no obligation to update these statements. In addition, our comments include certain non-GAAP financial measures to provide additional information to investors. We have reconciled all non-GAAP measures to relate to GAAP measures in accordance with SEC rules. You’ll find a reconciliation scheduled in the Form 8-K we submitted to the SEC earlier today and on our website at manh.com.

Now, I’ll turn the call over to Eddie.

Eddie Capel

Great. Thanks, Mike. Well, good afternoon, everybody and thank you for joining us as we review our third quarter results and discuss our increased full year 2023 outlook. In a little later in the call, we’ll provide some preliminary color anyway on our 2024 guidance. Q3 and year-to-date results set all-time records, on both top and bottom lines.

For the quarter, total revenue increased 20% to $238 million and adjusted earnings per share increased 59% to $1.05. Both of these metrics were above our expectations. Q3 was our 10th consecutive all-time record revenue quarter. Driving top line outperformance was 44% growth in Cloud revenue and 24% growth in Services revenue. This encompasses double-digit top line growth across all our geographies because that global teams continue to execute very well for our customers.

While the global macro environment certainly remains volatile, Manhattan’s business fundamentals are solid, demand for our solutions is robust, customer satisfaction is high, and as Dennis is going to elaborate later on in the call as strong balance sheet and cash flow provides us with plenty of capacity to steadily invest across our growing supply chain execution, omnichannel and retail point-of-sale end markets.

Now, RPO, the leading indicator of our growth, increased 37% to just over $1.3 billion. Demand for our mission-critical Cloud solutions remained strong and resilient across our entire product portfolio. From a vertical perspective, retail, manufacturing and wholesale continue to – drive more than 80% of our bookings in the quarter. And across our solutions, where the sub verticals are pretty diverse.

For example, in the quarter, Cloud deals won include an omnichannel multi-brand retailer, a grocery distributor, and national e-commerce company, an aerospace parts distributor, a multi-channel apparel retailer, and a multinational food manufacturer and distributor, as well as several others. For the quarter, competitive win rates were solid at about 75% and we experienced strength from our new customers, with approximately 50% of new Cloud bookings being generated from net new logos.

In addition to the healthy new logo activity, we also experienced a good mix of conversions, upsells and cross-sells. And certainly while the timing of large deals and the mix of bookings will vary on a quarterly basis, we believe the year-to-date, variety and breadth of deals across sales categories and products exemplifies the value that we deliver and our multiple opportunities for sustainable growth.

As Solution pipeline remains robust, with potential new customers representing about 35% of that demand. Our ability to deliver industry-leading solutions and service to our customers are key drivers for our steady demand. In fact, during Q3, Google recognized Manhattan for this core competency as a Google Cloud Partner of the Year.

Our best of breed cloud-native platform and solutions provide unmatched access to innovation, and a uniquely capable of unifying mission-critical commerce and supply chain functions. And this is differentiating, and helps our clients improve customer service and loyalty, drive more revenue and improve efficiency.

As I mentioned earlier, our business fundamentals are solid, and we continue to invest for growth. This includes strategic investments in industry-leading innovation, further enablement of our customer success and expanding our addressable market.

From a hiring standpoint, we’ve added over 400 new team members year-to-date, this represents about a 10% increase, and its’ terrific progress towards their goal of achieving – of adding 450 new hires in 2023. With our R&D investment at record levels and growing, but let’s move to a quick update or two on our industry-leading solutions.

I’m happy to tell you that while small, our point-of-sale business continues to slowly build momentum. We’re seeing success on both new sales and implementation fronts, with stores being activated at a record pace. It’s now I think beyond dispute, the store network will remain an essential part of the overall consumer retail experience. And the vast majority of retailers are in need of a store technology refresh in order to maximize their store fleets’ potential.

Only with an omnichannel native point-of-sale system can retailers maximize revenue and margin, while simultaneously delivering that seamless shopping experience that today’s consumer demands. This quarter saw the fastest pace of point-of-sale activations in our history, with customers working quickly and efficiently to get that new technology in place before the holidays. And we look forward to seeing a record number of stores this holiday period driving incremental sales there, endless aisle capabilities and providing seamless in-store fulfillment execution for pickup, shipping, curbside, same-day delivery and beyond.

And speaking of best-in-class customer service, our Manhattan Active customer engagement solution is also having an encouraging 2023. With a number of customers now live and several more activating before the end of the year, we’re having success expanding our operational footprint to the contact center as well.

Now as a reminder, our customer engagement solution enables agents in the contact center to go far beyond just that basic order management. We enable call center agents to manage cases, manage interactions across our half a dozen inbound communication channels and provide differentiated service capabilities like triggering refunds upon carrier scans and dynamic order fulfillment strategies. With some exciting go-lives imminent and several recent wins for customer engagement, we’re looking forward to the continued growth of this offering within the broader Manhattan Active omni suite.

And finally, on the omnichannel front this quarter, we launched an exciting new capability called Fulfillment Insights. It’s a first of a kind in the industry. Fulfillment Insights provides our customers with live omnichannel fulfillment performance benchmark data, allowing them to compare their performance against anonymized data from their peers and their competitors.

Now our customers can track live performance versus the industry on important KPIs such as click-to-ship times, click-to-deliver times, store order rejection rates, BOPUS pickup rates and a host of others. Here service and experience continue to play a critical role defining the brand’s image, Fulfillment Insights provides our Manhattan Active customers with a quantitative way to ensure that they’re meeting or exceeding customer expectations.

At the platform level, we continue to work closely with Google to bring Generative AI solutions to life within our Manhattan Active Solutions. And we’re hard at work – embedding a variety of Google’s Vertex AI models within the Manhattan Active platform to achieve a number of key benefits, including configuration management and automation, extension code development, guided intelligence for operations and consumer-facing chatbots. And we’ll have a lot more to say about Generative AI at the NeRF Show in New York in January.

And closing out my commentary on our products, I’ll make a brief mention of the Manhattan Active supply chain solutions. We continue to see strong demand and win rates for our Manhattan Active Warehouse Management solution. This quarter, we’ll set a record for the number of Manhattan Active WM go-lives.

And like our point-of-sale, one of the real advantages of our cloud-native technology is its rapid pace of rollout. Once global design has been completed, many of our customers have been very successful using our platform technology tools to get new sites ready for fast activation.

So looking to next year and beyond, Manhattan is going to continue our aggressive investments in organic innovation that not only benefit our growing customer base, but also help us continue to expand our addressable market. So that concludes my business update. Dennis will provide you with an update on our financial performance and our outlook, and then I’ll close our prepared remarks with a brief summary before we move to Q&A.

So, Dennis?

Dennis Story

Thanks, Eddie. So our Manhattan global teams continue to execute well in a challenging macro environment. For the quarter, we delivered a strong balanced financial performance across top and bottom lines. This includes posting record results across RPO, revenue, operating income and earnings per share. This resulted in our Q3 and year-to-date results slightly exceeding the Rule of 50 and if our revenue growth is normalized for our Cloud transition, which excludes license and maintenance revenue, both results approached the Rule of 60.

FX had a minor impact in the quarter and was an approximate 1-point tailwind to revenue growth, a 2-point tailwind to year-over-year RPO growth and a 1-point headwind to sequential RPO growth.

Now turning to our Q3 results. Our growth rates are reported on a year-over-year basis, unless otherwise stated. Total revenue was $238 million, up 20%. Excluding license and maintenance revenue, which removes the compression driven by our Cloud transition, our total revenue was up 28%. Cloud revenue totaled $65 million, up 44%. And as Eddie highlighted, we ended the quarter with RPO of $1.3 billion, up 37% compared to the prior year and up 7% sequentially.

Our RPO performance was driven by a healthy mix of sales across our sales categories with notable strength from new logos. Also in the quarter, we had solid results from across our Manhattan Active suite of products. Our global services teams are knocking it out of the park, delivering record revenue, totaling $128 million, up 24% as Cloud sales continue to fuel Services revenue growth globally.

Adjusted operating profit was $72 million with adjusted operating margin of 30.4%. This is up 450 basis points year-over-year. Our performance was driven by strong Cloud and Services revenue growth, combined with operating leverage as our Cloud business scales. Importantly, as Eddie discussed, we continue to invest for sustainable long-term growth.

This resulted in Q3 adjusted earnings per share of $1.05, up 59% and GAAP EPS of $0.79, up 68%. How about that? Included in our earnings per share is a $0.12 benefit predominantly from the US Treasury, temporary delay of foreign tax credit regulations. Removing this tax benefit, adjusted earnings per share was up 41% and GAAP earnings per share up 43%.

Turning to cash. Q3 operating cash flow increased 47% to a solid $59 million. Year-to-date operating cash flow increased 27% to $158 million, which includes the payment of about $50 million in cash taxes, resulting in free cash flow margin of 24% for the quarter and 22% year-to-date.

Turning to the balance sheet. Deferred revenue increased 26% to $215 million. We ended the quarter with $182 million in cash and zero debt, which includes $25 million in share repurchases in the quarter and $166 million year-to-date. Also, our Board has approved the replenishing of our $75 million share repurchase authority.

On to our updated 2023 guidance. As consistently mentioned, our financial objective is to deliver sustainable double-digit top line growth and top quartile operating margins, benchmarked against enterprise SaaS comps. This includes a balanced investment approach to growth and profitability.

With our strong year-to-date performance and increasing visibility, we are raising our 2023 RPO revenue, operating margin and earnings per share guidance. All guidance references made on today’s call will be at the midpoint of their respective ranges. As noted on prior earnings calls, our objective is to update our RPO outlook on an annual basis. And lastly, on RPO, as previously noted, our bookings performance is impacted by the number and relative value of large deals we close in any quarter which can potentially cause lumpiness or non-linear bookings throughout the year.

So for the full year 2023, we expect RPO to exceed the high end of our $1.3 billion to $1.4 billion range by approximately $5 million to $10 million. We expect full year total revenue to increase 19% to $914 million. This is up $24 million or about 3% higher versus our prior midpoint of $890 million. Excluding license and maintenance attrition, this represents 27% overall growth.

For operating margin, we are increasing our midpoint to 29%, which is up 150 basis points from our prior midpoint of 27.5%. As Eddie highlighted, given the combination of our demand and size of our opportunity, we continue to invest in our business for growth.

Our full year adjusted earnings per share outlook is increasing by $0.43 to $3.52, up 14% from our prior midpoint of $3.09 and up 28% from 2022. For GAAP earnings per share, our midpoint increases by $0.40 to $2.60, up 18% from our prior midpoint of $2.20 and up 28% from 2022.

So in a nutshell, our 2023 guidance implies Q4 total revenue of $223 million, targeting Cloud revenue of $67.5 million, Services revenue of $115 million and Maintenance revenue of $33 million. Operating margin is targeted to be 27%, resulting in adjusted earnings per share of $0.80. As previously mentioned on prior calls, our Q4 services revenue and operating margin accounts for retail peak seasonality, which traditionally is down sequentially as customers idle implementations to focus on their busy season.

So that covers our Q4 guidance. Now I’ll turn to addressing our 2024 preliminary parameters. We are currently in our early stages of our 2024 budget cycle and will firm up this outlook on our Q4 call. With that said, our preliminary total revenue is expected to increase 10% to $1 billion to $1.01 billion, representing 16% growth, excluding license and maintenance attrition. This includes our Cloud revenue target of $328 million, representing 31% year-over-year growth.

To help you with comparisons, our target would be at our prior guidepost high end of $345 million if FX rates remained unchanged from October 2021 levels, which is when we provided our initial 2024 guidepost and normalized for the bankruptcies that we highlighted on our prior Q2 call.

For RPO, we are targeting a range of $1.7 billion to $1.8 billion. The $1.75 billion midpoint compares favorably to our prior guidepost midpoint of $1.7 billion, and represents approximately 25% growth.

For Services, our demand continues to be driven by Cloud, resulting in solid visibility. In 2024, we are targeting Services revenue of $530 million, which represents 10% year-over-year growth.

On license and maintenance attrition to Cloud, we are targeting Maintenance revenue to be about $119 million, which represents a 15% decline and for License revenue to be about $4 million which is below 1% of total revenue.

We anticipate operating margin to be about 28.25%. In 2024, we expect our license and maintenance revenue attrition to Cloud will result in an approximate 175 basis point headwind to operating margin. Normalized for this transition, our 2024 operating margin would expand 100 basis points year-over-year.

Like prior years, in 2024, we will continue to opportunistically invest in our business and hire leading supply chain talent. We expect our 2024 tax rate to be 21.5% and diluted share count to be approximately 63 million shares, which assumes no buyback activity.

In summary, our preliminary 2024 parameters on an as-reported basis are: total revenue ex license and maintenance attrition to increase 16%; Cloud revenue to increase 31%; Services revenue to increase 10%; RPO to increase 25%; and for operating margin to exceed 28%. In summary, fantastic execution by the Manhattan team, and let’s finish the year strong.

Thank you, and back to Eddie.

Eddie Capel

Terrific. Thank you, Dennis. Well, clearly we’re very pleased with our outstanding Q3 and year-to-date results. And while we remain appropriately cautious on the volatile macro conditions, and that’s reflected in what we consider to be responsible growth targets for 2024, our business momentum and fundamentals remain very solid. Now thank you for everybody for joining the call, and thank you to our global team for all the exceptional work that they’re doing for our customers.

Robert, that concludes our prepared remarks and we’ll be happy to take any questions at this point.

Question-and-Answer Session

Operator

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] First question comes from Terry Tillman with Truist Securities. Please proceed with your question.

Terry Tillman

Hey, good afternoon, Eddie, Dennis and Mike. First and foremost, congrats on the quarter, a strong quarter. Also, Dennis, thanks for all the color on ‘24, that was helpful. My two questions, I guess, the first question, I’m going to start with, unless I got this wrong, and I get plenty of things wrong. The new logo activity in terms of bookings composition was 50%. Is that right? Did I get that right? Because I was going to ask about that.

Eddie Capel

Yep, 50% for the quarter, Terry.

Terry Tillman

Yeah. And you’re a 30-year-old company and you have that kind of new logo activity is pretty impressive. What do you think is driving it? Is it more of this kind of like because you have the Cloud products, you can kind of dip more into that mid-market with these fast-growing D2C brands? Or is it you’re seeing more shots on go with like less traditional kind of end markets. I’m just trying to understand that because that’s pretty striking. And then the second part of that question is, going forward, I mean I’m not saying it needs to be in that ZIP code, but do you expect still ongoing vibrancy in terms of the new logo stuff? And then I was going to ask Dennis a question.

Eddie Capel

Yeah. That’s a lot packed in there. Good question. So, we still continue to be focused on what we categorizes Tier 1 and Tier 2. So certainly making some progress moving the end market, but that is not where the new logos is really coming from. It’s not a dip down into SMB or anything. It’s really a function, I think of our innovative solutions that we’re bringing to market, number one; and number two, the breadth of the portfolio that we’re bringing to the market.

I do expect – I don’t know that we’re going to maintain a 50% new logo territory every quarter. We certainly like to. We’ve seen it be 50% before. And as you know, we’ve seen it be as low as, I think 27% or something like that. We generally, again, as you know, think about overall, one-third roughly of our net new software bookings coming from new logos. That generally is how it normalized. It’s been a bit higher than that for the last couple of years, but I think that’s the way to – that’s kind of the way to think about it.

Terry Tillman

Got it. And I’ll have less packed in this next question, I promise. And I’ll try to ask this for Dennis, but maybe Eddie, you want to chime in. But it is good to see because people want to know kind of the RPO and how it looks a year out. It looks like the midpoint is moving higher to $1.75 billion. So that’s positive. But what I’m curious about is 90 days since the last update call, and that $1.75 billion midpoint for RPO, do you all assume a similar kind of consumer and IT spending environment? Or is it a little bit choppier? Or does it improve? What’s baked into that increased midpoint? Thank you.

Eddie Capel

Yes. Look, the phrase I used, Terry, was we think we’ve set responsible targets. Given the various turbulent conditions around the world, what we think we’ve done is build a responsible set of growth targets, of course, including RPO. So, we are very optimistic about our market leadership position. We’re very optimistic about the breadth of products, the technology, their geographic reach and so forth. But I think it would be dangerous to assume that there wasn’t going to be a little bit of chop in the water, and that’s what we’ve assumed.

Terry Tillman

All right, great. Thanks.

Eddie Capel

Thank you, Terry.

Operator

Our next question comes from Brian Peterson with Raymond James. Please proceed with your question.

Brian Peterson

Hi, gentlemen. Thanks for taking the question. So maybe just a follow-up to Terry, I’d love to understand, Eddie, what you’ve seen from a linearity perspective so far this year. I know it’s been kind of a choppy macro. But how has that net new business kind of come in over the course of the year up relative to your expectations?

Eddie Capel

Honestly, I think it’s been a bad spot on, Brian. Again, kind of back to – we generally think about net new being about a third of our business. Again, we benched around a little bit between the high 20s, up to 50 now, pipeline continues to be strong. If you think about and look at net new opportunities in the pipeline, again, it’s about a third or a little higher. So I think – honestly, I think we’re going to see a profile or the same profile going forward. We’ll see a little bit of bouncing around quarter-by-quarter. I think it will normalize on an annualized basis that somewhere around about a third net new logos.

Brian Peterson

Got it. And maybe a follow-up, and I appreciate that you guys have given ‘24 way before some other folks. But I’d love to understand what sort of service hiring assumptions you guys have in the 2024 targets that you guys did? Thank you.

Eddie Capel

Yeah. We haven’t got all the way there yet, Brian, and we’ll certainly provide some of that specific commentary in the Q4 call in January. But I think we probably see a little less aggressive hiring than this year but still certainly quite solid. In the 100s, let’s put it that way.

Brian Peterson

I see.

Operator

Our next question comes from Joe Vruwink with Baird. Please proceed with your question.

Joe Vruwink

Great. Hi, everyone. I maybe wanted to start with the Fulfillment Insights’ product – and just wondering, does that typically be the full suite of active products in order to generate its most value. I’m just wondering if that’s maybe one incremental reason customers would pursue cross-sells across the platform. And then that kind of relates to my ultimate question of whether you are seeing more cross-selling interest given the nature of just all the applications being on the same platform, but also maybe some of the go-to-market changes you’ve made.

Eddie Capel

Yeah. So let’s see I’ll maybe take it a little bit in reverse order. We saw some very nice cross-sell in the quarter, and we have done for the year, frankly. Cross-sell has been running, I think, in the 25% to 27% range. So we still like to see it there. In terms of the Insights’ capability, it’s not a product, it’s frankly just a feature today of Manhattan Active omni. And it’s very focused on commerce performance for our customers.

So benchmarking, again, things like click-to-ship, click-to-deliver, BOPUS pickup rate percentage, the store order rejection, all of those kinds of things that are right on the front end. And look, at the end of the day, it’s the ability to be able to aggregate all that data inside of our native cloud solutions that gives us the ability to offer this really very valuable real-time or almost real-time benchmark data to our customers. We have begun the journey of providing Insights just within Manhattan Active omni for the moment, Joe, and we’ll be looking to expand that across the portfolio as it makes sense.

Joe Vruwink

Okay, that’s great. And then, Eddie a few comments in your prepared remarks, new stores activating at a record pace, warehouse management record go-lives. That – Cloud is certainly more efficient. I’m just wondering like for instance, this quarter, there was a really strong RPO billings quarter. Does kind of the relationship between what’s going in the cloud RPO in the current period and the timeline for when you see it in Services and ultimately see it in Cloud, is that all coming in sooner so that’s within a 12 – you typically talk about a next 24-month RPO contribution. But are you seeing more go-live than kind of that 12-month timeframe has a virtue of just more being on Cloud?

Eddie Capel

No. I think the initial implementation of whether it be Warehouse Management, point-of-sale or order management really hasn’t changed very much from an on-prem world to a Cloud world. Because, frankly, the design work that you do, the configuration work, the testing work isn’t – you don’t see a lot of positive impact by moving to the Cloud. A little, because you don’t have to deploy infrastructure and so forth, but not a ton.

But where it really kicks in is when you start rolling out across either multiple distribution centers or multiple stores because, of course, you’ve got a single version of the software that’s in the Cloud, and you can roll out much faster. So you don’t really see a faster move from RPO to revenue. That’s remained pretty consistent. But then, as I say, the activation, once you get into the flywheel gets moving, tends to move a little faster.

Joe Vruwink

Okay. Thank you very much.

Eddie Capel

Well, thanks.

Operator

Our next question comes from Mark Schappel with Loop Capital Markets. Please proceed with your question.

Mark Schappel

Hi. Thank you for taking my question. And guys, nice job on the quarter, especially around the new logo business. And on the new logo front, just kind of building on an earlier question there. Eddie, could you just talk whether you’re seeing your new logo business concentrated around certain solutions more than others, like whether it’s WM – WMS or like the Active omni solution?

Eddie Capel

Yeah. No, I can comment on that, Mark, and it’s really – there is no concentration particularly. It’s pretty well balanced. We know that roughly, and it bounces by quarter, but 50% of our revenue comes from WMS and 25% or 30% from omni, 30% from our solution and so forth. And it’s pretty balanced across those parameters. As we always say, bounces quarter-by-quarter a little bit. But generally, it’s across the portfolio and across geographies as well. So it’s – there’s no real point of concentration for the new logos and of course, we love it that way.

Mark Schappel

Great, thanks. And then I appreciate your comments around the new customer engagement solution and particularly expanding your operational footprint into the contact center. I was wondering if you could just talk a little bit more about – or maybe give an example or two of how your solutions are actually interacting with contact center agents?

Eddie Capel

Well, you tend to think about traditional call center agents just taking a query, right? Taking a call, where is my order, kind of like maybe a change of shipment destination, maybe a change the color of a product, goodness to bid, maybe even canceling an order. And of course, we take care of all of those capabilities.

But now you can think about a broader set of engagement from that call center agent, all within the Active omni solution. So any type of case management, exception case management, you call in and need to have something found in – discovered and found in a shipping hub. You need it moved from one location to another. You need to add some kind of service capability, all of that case management can now be handled inside of our call center application as well as all of the other engagement actions, sophisticated returns, sophisticated exchanges. And – anything that you might take a real lot of manual effort.

And possibly, as I think most of us had experienced, having the banks from department to department, right? Nothing more frustrating and let me put you on hold and transfer to you to that department or that department or that department. We can handle all of that customer engagement in one single solution. And that’s really, as you know, where a lot of the power of our capability comes from.

Mark Schappel

Great. That’s helpful. Thanks.

Eddie Capel

Thank you, Mark.

Operator

[Operator Instructions] There are no further questions. At this time, I’d like to turn the call back over to Eddie Capel for closing comments.

Eddie Capel

Okay. Very good, Robert. Thank you very much. And thank you all for your time today, for your support of Manhattan Associates. It’s a little early to say this, of course. But since I won’t speak to you before, everybody, have a happy holiday season, and we’ll look forward to speaking to you again in January. Bye-bye.

Operator

This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.