Q2 2020 Container Store Group Inc Earnings Call
Those important factors are referred to in the container Source press release issued today and then our annual report on form 10-K filed with the SEC on June 17th, 2020. Am looking statements made today are as of the date of this call and The Container Store does not undertake any obligation to update the forward-looking statements. Finally the speakers May refer to certain age just adore non-gaap Financial measures on this call a Reconciliation schedule of the non-gaap financial measures to the most directly comparable gaap measures is also available in The Container Store is press release issued today a copy of today's press release may be obtained by visiting the investor relations page of the website at w containerstore.com. I will now turn the call over to my boss Melissa.
Thank you Caitlin and welcome everyone to our Q2 earnings release call. We appreciate you joining. I'd like to welcome Jeff to his first artist call as Chief Financial Officer and also mentioned is Jody Taylor is here with us as well today. I will first discuss the highlights of our fiscal Q2 performance. And then as always I'll provide an update on our strategic priorities including are very exciting brand Partnerships that we highlighted in our press release today. Jeff will then review our financial results in detail followed by a Q&A. We are very proud of our second-quarter financial results, which we believe reflects the culmination of our many efforts over the last few years and that is to reinvigorate our business and execute our strategic priorities. We believe that we have done this with excellence and determination positioning us to benefit from the industry Tailwinds created from the stay-at-home environment. We remain in today.
For the quarter we reported Consolidated net sales.
5% driven by sales at The Container Store as our Alfa third-party net sales were flat to the prior year. We continue to see strong growth and our online Channel with online sales off 86.4% versus the same time. Last year. We also delivered adjusted EPS of $0.43 compared to $0.08 in Q2 last year, straighting are solid sales growth gross margin expansion and disciplined sg&a expense management that led to very strong sg&a leverage as we discussed in a call at the end of July. We had reopened our stores with the exception of our downtown San Francisco store, which was operating in a curbside pickup only model at that time during Q 2093 stores were open and operating at close to normalize schedules with limited in-store customer capacity.
Q2 to date through August through fiscal August TCS net sales were slightly down to last year in fiscal. September TCS net sales were up 17.8% to last year bringing the entire quarter up 5.3% The 17.8 increase in September sales does not include the six point five million of online orders taken in fiscal September Federal expected to ship deliver and be recognized in our Q3 Financial results are September performance coincided with the launch of the home edit Netflix show get organized with the home edit which premiered on September 9th. As you may know. We have a wonderful partnership with the home edit and have offered our customers and exclusive home edit product collection since spring of 2019 and we're continuing to add to the offering we're thrilled with the success of this collaboration and are excited to continue to develop our partnership dead.
In a mutually beneficial way we believe that many of the key factors driving our strong performance in Q2 have continued into third quarter of fiscal 2020 the October Trends we have that experience to date have improved from September levels. However, as Jeff will elaborate on later we expect our remaining Q3 sales Trends to moderate as we think it's the holiday season with conservatism and we are having to chase some inventory in certain merchandise categories over the past few years. We have put time effort and investment into optimizing our Mark pivoting to digital channels with our brand marketing campaigns as well as building our Partnerships throughout social media with key household names including a brand ambassador program all life goal of increasing our relevancy broadening our appeal and expanding our awareness along with that work. We have also invested in our supply chain with our second distribution center and Aberdeen, Maryland.
Operational and already Gathering an already generating efficiencies greatly enhancing our ability to fulfill demand and replenish stores and a more timely and cost-efficient manner. We are proud of our excellent execution and believe we are well-positioned to continue capitalizing on are many opportunities.
Also our entire organization remains focused and committed to effectively and efficiently making further progress against each of our strategic initiatives. As you know, our number one strategic initiative is to own custom Club as part of this effort. We continue to build awareness for our custom closets through influential trade programs and social influence or Partnerships. Like what's up, Mom, which is a top parenting Channel on YouTube. We continue to update our custom closet design tools and have expanded our virtual closet design capacity to support the growing demand for virtual engagement with our customers off by Rolling the service out now to all of our stores and as our stores were fully operational throughout the second quarter. We were thrilled to see strong sequential Improvement in custom closets. When compared to the first quarter of this year with sales in this category almost flat for Q2 as compared to last year custom closets turned positive in the month of September and we are seeing wage.
A relative halo effect from the home edit Netflix show launched with custom closets leads increasing and comprised of an even more diverse customer demographic back to Markum first. As a reminder The Container Store is the exclusive product partner for the storage and organization category with the home edit and it's a social partner media with that and we are a social partner media with them since we launched a product partnership in Spring 2019. The Container Store has prominent placement throughout the home edits get organized with the home edit Netflix series, including our branding our products shopping trips and our shopping bags our partnership with the home edit has driven interest in the overall category of homes organization and custom closets and has fueled a nice increase for us in new customer acquisition since the Netflix Show release our pop loyalty program sign-ups increased 39% compared to the same period last year making the month of September 28th.
Our highest month for pop enrollments since 2015 at a hundred and forty two thousand new sign ups with more than nine point two million pop stores at pops off at the end of the quarter are pop program continues to grow Additionally the container store's Instagram page recently suppressed surpassed 1 million followers. I'm just so proud of the progress. We have made with our digital marketing efforts demonstrating our Relentless focus on forging the most impactful and collaborative relationships with great Brands and household names. We are truly delighted to announce today our partnership with Marie. Kondo and the January launch of an exclusive co-branded product offering that will be available at all of our stores and online in January of calendar 2021 this versatile collection features more than 100 sustainably-sourced products and is designed using premium package.
materials including
Bamboo ceramic and Recycled Fiber would this beautiful collection brings to life the one and only Marie? Kondo and her vision and spirit of making space for what matters month is expected to appeal to a variety of consumers seeking Simple Solutions with an elevated aesthetic to maximize space in their homes. We are very excited about all the great opportunities that are in our pipeline for the future. Well, Jeff will review our financial details and more. Well, Jeff will review our financial results in more detail. I'd like to highlight the very strong financial position. We're in as we enter into the second half of our fiscal year. We generated the best second quarter sales earnings and free cash flow in the company's history finishing order with almost $62 billion in cash on our balance sheet and zero balance on a revolving line of credit for Q2 of our Q2, of course did benefit from the time.
And a mixture of an expense management that resulted in higher than normal flow through of sales, and we do expect expense normalization in the second half of the year. As a number of costs returned wage operations fully resumed particularly in payroll and marketing expense.
Like many others in retail retails who are beneficiaries of of the current environment. We are also working hard to maintain the appropriate levels of inventory with increased demand for our products and solutions Thursday. We have experienced out of stocks out of stocks and certain general merchandise categories and like many our supply chain is working hard to keep up with our sales Trends however by and large our cultures have opted for other similar products we offer if we are out of stock on a specific product they want we are focused on becoming much more efficient around our supply chain and working smarter to further reduce the time it takes to get products into our distribution centers and from our distribution centers to our stores and customers. We remain laser focused on constantly improving the customer experience in every aspect from beginning to end as mentioned. We are pleased with our quarter-to-date sales Trends and we are working very hard to keep up the strong demand. We are seeing our second are strong second-quarter performance wage.
Not have happened without are committed incredible employees in our to distribution centres our 93 stores our call center and our office team their dedication perseverance and support has always been a tiring and appreciated but these last six months have shown that we are stronger than we thought were smarter than we thought and we can work and execute as a team better than ever. It is really been rewarding job. I was also so pleased to be able to show a token of our support financially to our front-line employees in our stores distribution centers and call center possibilities to Jeff back in August, and we will be transitioning her and secretary secretary responsibilities in the coming months.
And why she while she will be will still be here and working. I know for the next four months on behalf of our entire company and our board of directors. I want to sincerely thank Jody for her invaluable contributions over the past thirteen years. She has been an incredible partner and friend to me and I know we'll always have a bit of TCS blue with her Jodie has three grandchildren on the way in the coming months. So I'm not too worried about her crazy busy. It promises to be a hectic and fulfilling start to her retired life and we all wish her the very best. So in closing I just want to reiterate that these exceptional results have been years in the making and the credit goes to our entire organization for executing the many initiatives. We have prioritized thereby ensuring our Prime position to capitalize further and leverage even more off the elevated consumer's interest in their homes and in the storage and organization category. Our homes are now more important than ever and storage and organization, whether it be a pantry or a drawer a complete dead.
Closet matters and it's impossible to predict exactly how the coming months will unfold from a macro perspective. But if The Container Store we are on point. We are positive we all know our Direction and how we're moving forward. We are confident and excited about the rest of the year and Beyond and with that I will ask Jeff to discuss our financial results in more detail Jeff.
Thank you, Melissa. Good afternoon everyone. I'm pleased to be here for my first earnings call as CFO and I look forward to meeting many of you in time. I also want to express my well wishes to Jody off the announcement of a retirement in March next year. It is due to Jodi's hard work and many contributions over the years that we have a strong and deep Finance and Accounting organization that I feel very poor choice to leave.
Not turning to our results. What was the sheriff we are very proud of our second quarter which saw a sequential improvement from first quarter as our stores were fully reopened and we benefited from the significant work. We have done a guideline for business these efforts span span merchandising marketing stores and e-commerce with notable strides made developing influence or Partnerships of which the home has been the most significant particularly on the heels of the September launch of their Netflix show for the second quarter Consolidated net sales increased 5% year-over-year 248 point two million, and as we noted on our last call on July 28th at that time for the second quarter, we had preserved approx 90% of our retail sales orders taking a container store compared to the same time for the same time frame last year.
We have now experienced a strong acceleration in sales Trends in the fiscal month of September driven by the successful launch of the home edit Netflix show as Melissa said during the week our online Channel continued its strong performance delivering sales growth 86.4% or online sales represented almost 19% of our TCS Q2 net sales office menu include curbside pickup. Our website generated sales and Q2 were ninety 2.9% representing a total of approximately 30% of TCS net sales compared to 16.1% in Q2 last year.
Five segments sales for The Container Store retail business increased 5.3% to 233 million compared to two hundred twenty one point two million last year other product categories were up 10.1% in Q2 contributing to five hundred fifty basis points at the increase and that sells custom closets sales were almost flat demonstrating a strong improvement from the first quarter results and turning positive in the month of September as a result of the COVID-19 pandemic and resulting store closures during the first quarter. We chose not to provide cops or sales metrics additionally in the second quarter of fiscal 2020. We only have one store that would not be considered for cops or metrics and therefore increase in net sales and cops stores were materially consistent with you not believe the comp store sales will be a meaningful metric to present in fiscal 2020.
We saw strength in categories to working and learning from home such as our office categories as well as categories that are highlighted in the Homedics Netflix show such as kitchen and storage and within custom cause we saw strength and new Alpha products such as our new graphite finish and our new grab-and-go pre-packaged Alpha Solutions speaking of Alpha and Q2 their third party net sales rep at five point two million and excluding the impact of foreign currency translation. Alpha third-party net sales declined 6.6% year-over-year do the economic impact of COVID-19.
From a profitability standpoint are Consolidated gross margin for Q2 was 58.8% compared to 57.9% last year by segment gross. Margin at The Container Store increased fifty basis points driven primarily by less promotional activity and a favorable higher-margin products sales in the second quarter of fiscal 2020 partially offset by increased wage costs as a result of a higher mix of online sales. Alpha gross margin increased 380 basis points primarily due to favorable customer and product sales mix and to a lesser extent and lower direct material costs.
Consolidate sg&a declined 11.2% to one hundred one point two million compared to a 114 million in Q2 last year as a pre-owned sales decreased by 740 basis points versus last year primarily due to reductions and payroll marketing transportation and other expenses combined with a leverage of sg&a expenses on a higher sales during the quarter our current year que tu as TNA Improvement includes an approximate six million dollar reduction in payroll related wage and an approximate five million dollar reduction and marketing expenses from last year.
However with the sales surging in September we Chase Staffing both at our stores and distribution center. We don't expect this level of low spending to continue as we have increased Staffing level miserable sales reinstated salary cuts and have plans to return to more normalized marketing's than including Q4 plans to increase marketing spend associated with the Marie. Kondo project.
Our net interest expense and the second quarter of fiscal 2020 decreased 16.9% to 4.5 million from 5.4 million in the prior year due to lower interest rates combined with the lack of balance on our senior secured term Term Loan facility.
The effective tax rate for the quarter was 31% compared to 26.8% and the second quarter of last year. The increase in the effective tax rate is primarily due to the company's jurisdictional mix of English an additional tax expense related to stock-based compensation.
I didn't come to the quarter on a gaap basis was 20.2 million cents per diluted share which excludes certain costs associated with closing our Alfa France operations and Q2 last half-hour.
Just a table. Nearly doubled to 44.1 million and the second quarter of this year compared to twenty two point four million in Q2 last year.
Turning to our balance sheet. We ended the quarter with 61.8 million in cash $245 billion in borrowings and total equality including availability on our revolving credit facility of approximately 168.5 million. Our current leverage ratio is just under 1.8 * Leverage.
We ended the quarter with consolidate inventory down 11.6% primarily due to higher inventory last year associated with the ram boat ramp up. Our distribution center facility wage in Maryland as Melissa mentioned. We are chasing inventory in certain general merchandise categories such as kitchen office and storage that are in the process of rebuilding stock with merchants in transit as we speak.
We feel good about on hand custom closets inventory levels ahead of our upcoming Alpha sale.
We are very pleased with our with our strong free cash flow performance. We generate 84.3 million and free cash flow in the first half of fiscal 2020 up significantly from last year when we utilized 15.8 million and free-cash-flow, we expect to deliver positive free cash flow and fiscal 2020 and expect our total capex for the fiscal year to the approximately 15 million.
As a reminder, we deferred approximately twelve million of certain cash lease payments and our first quarter of this fiscal year the benefit of which is reflected in our year-to-date adjusted ended up less than half of these amounts are expected to be repaid in the second half of this fiscal year and the remaining amounts are expected to be repaid primarily in fiscal 2021.
We plan to use our excess cash to make additional debt payments and fiscal 2020.
Given the unusual sales Trends in our business. We believe that it's appropriate to provide more color about our go forward to three expectations. There are a few points I would like to make
As we said fiscal 303 is off to a strong start start at the halo effect of the Homedics Netflix show Los launch has continued into October with that said we are not assuage the corner of the elevated level of sales persist the expected moderation of sales throughout Q3 is partly due to our conservative approach and estimating holiday department sales in the light of the Kleins over the past few years and our holiday sales. Therefore, we currently expect your over your sales growth in Q3 to Modern modestly exceed to 5% off. We just reported 4 to 2.
with regards to gross margin for Q3
we expect gross margin to be relatively consistent with or up slightly to last year based on our plan promotional guidance and inclusive of freight surcharge headlands.
And also as Moses said the flow through of our Q2 sales increase was far greater than normal due to the lower sg&a spending and expense cuts into two associated with the pandemic long as we look to Q3 with a sales recovery and restoration of expenses. We would expect our sg&a expenses to be largely in line with the same period last year that concludes my prepared remarks. I will now turn the call over to the operator to open up the lines for questions.
operator
Yes, I'm with you guys. Okay?
Garrett is for a second Almar. Don't do that. No. No, I'm here. I'm here.
Tell me we have the three cute up, right?
I'm sorry. Could you repeat that question? Sorry are the first question will come from Steven Forbes. Could you unmute his line? One moment.
And now Steven Forbes for the question.
Thank you. Good evening. Melissa. How are you doing? Hi, we're great Steven. How are you doing while hanging in there my my daughter stop screaming. So that's a A plus one of the day off. Anyways, is you mentioned right the constant on the back of the home edit launching in early September any sort of talked about right? The two categories kitchen a storage that were the most relevant so curious if you can sort of dig down a little deeper in talk about specifics, you know Trends within those subcategories like how how dramatic open Improvement. Did you see and and how correlated you know was the performance to to the launch of the show? Well, definitely Steven it was the show had a huge impact it premiered September 9th, and we saw a dramatic increase and you know, the the assortment that were offering with the home edit. It's it's a beautiful assortment and it primarily focuses.
On kitchen and bath and storage. And so those have been the three categories that have just really taken off. We've also benefited in some other categories because we're seeing more traffic online. We're seeing we're seeing some traffic in stores. And so it exposes the customer to the rest of our store and and custom closets but it is really been incredible and as we've said in our remarks we are chasing some inventory but we've got it on that. We've got it all coming. We're just like that hamster on the wheel we're trying to catch up but you know, we're doing very well and I'm really pleased with the way our distribution centers have just been heroic and their response to age to get the orders out as quickly as possible for the most part or customers have been patient. And you know, as I said my remarks sometimes Steve they will opt for instead of a home edit product. They will off some you know for a product that's similar or they'll wait patiently until we, you know, get the the product in that maybe we're out of stock on temporarily. Yeah Melissa. I just like to add to that when we look at as a whole.
What we were seeing prior to launching the home edit show sales Trends had improved from our q1 performance seeing that.
Lion, August as we moved through the quarter that were certainly better from to change Hue one and and Melissa mentions, of course the certain acceleration after launch. Yeah, but that's true, but it was strong before the launch, but it really took off after the launch.
Maybe just on that point right of inventory shortages and you mentioned right to demand, first reported, Dynamic then the quarter. Can you can you can you quantify that with the the Gap was between um demand, first reported account in the month of September?
Yeah, we mentioned that we had approximately 6 and 1/2 million dollars of sales that we had sold online that have not shipped yet. So we expect those sales to be shipped and delivered in Q3 off of this fiscal year.
And and maybe last one for me as you think about the returned unit growth over the horizon here. I mean how has this this renewed strength in the business office and just a dramatic growth in the part numbers and you're just the relevance right of the home category and how you guys fit into it. Has it sort of impacted your your plans for you for next year or impacted the real estate initiative and if you can sort of talk to their yeah, it's a really good question Steven, you know everything when coach had obviously we were all on kind of pause and re-evaluating our plans and we've had to be very Nimble and quick on our feet and I think we've done a good job at that and we don't know what the future is going to hold none of us do but we're actively planning and executing our plans for next year long were obviously over the moon about Marie kondo and our partnership there and trying to plan for that in terms of growth and new stores. We're opening one new store this year and we yep,
Are looking for other opportunities for more store store growth? Like we said a thousand times we feel like we have a lot of Runway it will probably and most most definitely I believe be a smaller stores in footprint. But you know, we're taking that kind of one day at a time as we all are but this is certainly you know, we've worked hard for the last four years not to toot our own horn here. But this is the culmination of many people in our organization. If not everyone in our organization working on these Partnerships and trying to be Innovative and creative and making sure that we're relevant in our category is relevant. So we're going to continue to continue to drive it just Full Speed Ahead. And you know, I I have to say that I've never felt before that every aspect every area of our business is just seems to be just so coming to suck even in firing on all cylinders. It's it's really gratifying and rewarding rewarding and I want to organization to take time to celebrate but we can't rest on our Laurels. We have to always look ahead and see what the Dead.
You know five years three years are going to bring and and that's what we're doing.
Thank you both they say you better take care. Thanks, Steve. Thank you. And as a reminder, we are conducting question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad confirmation tone will indicate your line is in the question queue and you may press star to if you'd like to remove your question from the queue our next question comes from Katie McGrath.
Hi, good afternoon. Katelyn Shain from Goldman Sachs. Thanks for taking my question. My question centered around the home edit left. I wondered if there was a way you could compare what you're seeing from the home edit left versus what you saw when there was a last Netflix up with Marie. Kondo. Can you maybe walk us through some of the similarities maybe some of the differences and how should we think about this partnership going for it? Is it something where they're going to be more seasons of The Home edit or it's one season and now it's a social media presence. Could you maybe walk us through how to evolve over time right now and again, I don't want to speak to the home edit, but we oh we're echoing. Sorry Kate.
We're certainly planning on continuing golly continuing our partnership in a very big way with the home edit the last month or condo show, you know, the that was a little bit different than the home edit. This is this is lasting this is more General merch with the home edit and it's it's been you know, it's been going on with the next for the last six months and we anticipate it to continue the Maria condo launch in January. I think she just recently announced that there's going to be a Marie. Kondo another Marie kondo Netflix show. I don't know the time frame yet. So, you know, we're just working very closely with both the home edit and Marie kondo and being good partners and supporting them and they're supporting us and we took like the the market is just right for this obviously with all of us more at home all the young people as well as even older people really focusing on their home. It does matter and so we yep,
We're we're excited and we're just taking it as it comes.
That's helpful. Thank you. I just had to to to follow up questions. When was of the six point five million orders that you Quantified off that was demand, that would be delivered in Q3. Is there any risk or does that account for any cancellations that may have occurred off?
No, I mean normal Cadence of our online ordering and the delays from when orders taken from the time. We actually go to the club.
I mean catering is always a chance for a cancellation, but see if not seen that and I'm so sorry for this Echo coming on your end.
Oh, it sounds okay to me. Okay. Okay. The last question I had was on the custom closets. It's great to hear that that business influx in September. Are you surprised at all you didn't see the business maybe inflect a little bit earlier just with all the movement that we've seen in people migrating out of cities moving to the south suburbs and again the focus on the home that you and others are are talking about. Yeah, that's another great question, you know all three of our custom closets line Alpha a very young age and all three actually exceeded our expectations a little bit as we headed into the quarter and we ended flat to last year. We did see Improvement in sales Trends in customer this quarter-over-quarter over q1 of this year. And you know, I I really wasn't surprised as a good news is that we are definitely in great inventory shape for our upcoming.
For sale as it relates to come.
Closet so we're not chasing that inventory at all. And I I do believe that there's some customers, you know, that maybe weren't entirely comfortable spending lengthy amount of time in our stores, you know, cuz that the the custom closet process is a little more the traditional one is a little more involved and and so they may not have felt super comfortable doing that. But now what is so cool is that I immediately pivoted and started our online custom closet design tools as well as our virtual design consultations. So those we've seen a really nice increase in our virtual complications. The customers are really responding to that. I think they're so comfortable with zoom or teams or Google meets or whatever it is. And so that has really improved and now we've ruled that out to all stores. So I mean we had it a little bit but pre COVID-19.
Thank you.
You bet.
And our next question is coming from Tammy said Korea. Tammy said your question.
Hi, everyone congrats on the great results. Very impressive. I I have to you're welcome. I have two quick ones actually. So Monday regarding your expectation for the third quarter. It seems like you're guiding to just about 5% growth. So so does that mean you expect sales goes to go negative in October November or how are you thinking about the 3 months of the quarter?
Yeah, I mean we're looking at two three overall as modestly increasing from the 5% You know, I think the biggest thing is when we talk about December and holiday sales in our historical experience with that. We are we are we are planning the month of December pretty conservatively and that's really the basis for what kind of our Q3 expectation, you know, Tammy as we as we shared September was, you know, very strong and October is improving for September. So, you know, we came into October until this Saturday. I don't know what November and December are going to bring but and we have planned conservatively holiday because of the past, you know decline that we've had but I have to say I am supercharged about our holiday this year. And the reason I am is because we have 80% new product. We have a new buyer Thursday.
It's just been just fantastic to addition to our team. We also offered our pop customers a special online only for them opportunity to purchase hot dog day. It's live now and I think it goes through just I can't remember. I think it goes through its not very long. But anyway, they they've been purchasing online just for the pop customer name will open it up to to everyone but I think holiday I I hope it could surprise us, but I feel very good in our plan. I don't think we're sandbagging and I don't think we're being too aggressive. I think we're being smart a pretty. Yes. Got it. Got it. That's super helpful. And then just looking back on the second quarter September was about Seventeen percent. Could you talk about July and August?
Yes, ma'am. And like we said before the Sur September was up 17.8% and what we were seeing prior to the launch the Netflix show. We were off the sales improvement from our q1 experience and both July and August and of course early September there was a significant acceleration in sales as a result of the Netflix launched. Yeah, I think August if I recall correctly. Tammy was just down Slightly Single swipe. It was July and August were down low single-digits, but it turned positive before before September. Yep. Got it. So so August was better than July slightly better.
Yeah, that's right. Just low single-digits. Got it. Okay, okay if I can squeeze in one last one. I think you mentioned for the third quarter. You expect sg&a to be in line with last year's. So did you mean that on a rape basis or dollar basis?
Yes. We're looking at it from a dollars perspective, you know during this time. Fairly hard to talk percentages, especially when you're looking at 2 and and everything else going on in Cove. It's so wanted to be specific about that being from a dollar spend. Of course. We'll select a $10 anything else changes, but we you know, just a reminder 50% of our sg&a is fixed and and the other 50 is variable wage.
God that's super helpful. So basically in line with last year's dollar value of sg&a. That's how we should be modeling it.
Got it. Okay. Thank you so much for this is luck. Thank you so much for having me.
Ladies and gentlemen, we have reached the end of the question and answer session, and I'd like to turn the floor back to management for closing remarks. Well, thank you very much again for joining our call today. Thank you for that question. Thank you operator. Thank you Caitlin. We will definitely look forward to talking with you after Q3. So everybody have a great day. Thanks so much.
And this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.