Q4 2021 Cardlytics Inc Earnings Call
[music].
Good day, and thank you for standing by welcome.
To the cosmetics fourth quarter 2021 earnings conference call.
At this time, all participants are in listen only mode.
After the presentation, there will be a question and answer session.
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I'd now like to hand, the conference over to your host today, Kirk Somers, Chief legal and privacy Officer. Please go ahead.
Good evening and welcome to card Lytic fourth quarter and full year 2021 financial results call before we begin let me remind everyone that today's discussion will contain forward looking statements based on our current assumptions expect.
Patients and beliefs, including expectations about future financial performance of results, our financial guidance for the first quarter, our ability to achieve key long term priorities and increase in M. A user monthly active users connected to our AD server, our new user experience the increase in ARPA or average revenue per user.
Our cash position the impact of COVID-19 on our business and the economy as a whole.
Sufficiency of our capital structure economic recovery across verticals by the end of 2022 including the improvement within the travel vertical in 2022.
Maintaining 30% annual growth rates, achieving positive cash flow by the end of 2023 planes for entertainment and their content adding.
Adding new F EIS or financial institutions and open banking partners.
Bridge.
Margin profile continued momentum in 2022, and the anticipated benefits of our acquisitions of Dosh Bridge and entertainment.
For a discussion of the specific risk factors that could cause our actual results to differ materially from today's discussion. Please refer to the risk factors section of the company's 10-K for the year ended December 31, 2021 filed with the SEC.
Also during this call we will discuss non-GAAP measures of our performance GAAP financial reconciliations and supplemental information are provided in the press release issued today and the 8-K that has been filed with the SEC.
Today's call is available via webcast and a replay will be available for one week you can find the information I've. Just described on the Investor Relations section of <unk> website. Please note that a supplemental presentation of our fourth quarter results has also been posted to our Investor Relations website.
Joining us on the call today are a card lytic CEO and co founder Lynne lobby and CFO Andy Christiansen following their prepared remarks, we'll open the call to your questions with that let me turn the call over to Lynn.
Thanks, Kirk and thank you to everyone for joining us on our fourth quarter and full year 2021 earnings Conference call. We are pleased with our Q4 results, which exceeded the high end of guidance for billings revenue and adjusted contribution.
<unk> performance comments as we continue to make progress across our strategic priorities, which include increasing the number of marketers working with us, bringing our solution to new advertising verticals, including agencies evolving Mccard Linux platform with the new AD server and ads manager as well as the integration of bridge in Dash and being strategic in our work with our bank partners.
I am proud of the card lytic team for finishing the year strong and continuing to execute our multi year strategy now, let's turn to some highlights from the fourth quarter.
Billings increased 42, 6% year over year to 134 million.
Revenue increased 34, 2% year over year to $90 million and adjusted contribution increased 48, 5% year over year to $44 million.
Our Q4 results reflect year over year growth across all of our advertising verticals.
And growth over 2019 in every vertical X that travel.
All sales verticals contributed to card lytic, achieving its highest billing quarter ever in Q4 and growing the number of advertisers with over $1 million in AD budgets by 46% year over year, Let me share some specific examples of what we accomplished.
Our direct to consumer team had another strong quarter DTC has become a significant part of our business that has grown to represent nearly 30% of our AD budget.
Traditional card latex verticals like restaurants are also realizing synergies as we expand our platform.
For example, a top client in the quarter was the result of a cross team effort between our restaurant in agency vertical which also shows that our agency strategy is bearing fruit in more ways than one.
Speaking of the agency and our self service initiatives, we secured our largest annual agency agreement to date in Q4. This multimillion dollar contract Springs, 90, plus potential advertisers to the table for <unk> and is indicative.
But the broader trend, we're seeing agencies are increasingly turning to the <unk> platform due to the performance based outcomes. We can provide for their clients and the self service capabilities. We're building in Q4 agencies more than doubled their AD budgets with us year over year throughout 2021, we added over 30 advertisers through more than 10, New agency relationships.
We expect these headwinds to continue at that agency's focus their strategy on achievable measurable outcomes.
Our AD budgets from travel and entertainment are still down almost 45% compared to 2019, but we continue to see positive signs today are travel client base is much more diversified when compared to 2019.
First time every hotel and airline co brand up our major bank partners, including <unk> in their 2022 budget.
We expect this trend combined with the continued recovery in consumer spending to help improve the travel travel vertical throughout 2022.
Our strategic focus on local expansion is also contributing to our success. During Q4, we had 505 logos on the <unk> platform compared to 339 in Q4 of 2020. This logo expansion is having a positive impact on our customer concentration revenue concentration from our top five customers decreased from 30% in Q4 of 2020.
To 22% in Q4 of 2021, and we saw similar trend with our top 20 customers.
Concentration has always looked in Q4 due to AD budget seasonality, but Q4 2021 marked our lowest level of concentration ever as a company.
While our main focus over the past two years has been on building a strong foundation with National advertisers were now beginning to lead into the mid and small business markets to expand and diversify our demand. We're pleased to announce that we acquired a company named entertainment in January for $15 million in cash and stock with the transaction multiple of less than two times revenue. This acquisition enables us to can.
Expanding our current offer content entertainment has relationships with tens of thousands of local advertisers across the U S and her team with years of experience focused solely on the mid and small business market.
The results have been significantly impacted by Covid.
But with our scale, we see an opportunity to materially grow this business. Our plan is to use entertainment content on the cartilage platform with our bank partners launched a new AD server and roll out the new user experience.
Additionally, we think this content will help us penetrate other banks, who are hesitant to share their data, but still want local content.
As we announced last quarter nearly 100% of our energy use in the U S are connected to the new AD manager. So we have shifted our focus to optimizing campaign built on the new AD manager and the adoption of our AD server and our bank partners with less than 5% of any use connected to our AD server today. Our aggressive goal is to have 50% of them. They use connected by the end of the year.
We and our bank partners continue to be excited about the capabilities that will be unlocked by our AD server.
Our experience our bank partners need a lot of time to plan and launched technology updates, but difficult to give a more precise estimates at this time.
The benefits of our product initiatives are starting to become clear each quarter. As you know one bank is currently running in the new AD server and launched a pilot of product level offers in Q4, while the sample size is small the early results are impressive we saw lift in trips of 13, 5% and a lift in basket spend of nine 4%.
I'd like to point out that seeing basket left as a meaningful win win situations.
We can go after budgets for manufacturers, while also improving the stores were increasing their overall sales. In addition, we saw average activation rates similar to our restaurant vertical which has the highest activation rates on the platform.
More updates throughout the year as we continue to gain more data and launch our AD server to additional things.
We used the bridge PFS data for a portion of this pilot and we continue to see amazing potential with this acquisition.
The acquisition and integration process did affect the timing of prospect conversion bridge pipeline remains extremely strong and includes three late stage opportunities in CPG and grocery overall bridge <unk> grew 20% sequentially from Q3 to Q4, which is much faster than the prior two quarters and more in line with our expectations.
We expect this momentum to continue into 2022 and like we mentioned last quarter bridges entering the entertainment sector with its product we signed a large movie theater chain. This quarter. This makes us the only performance based channel in this industry.
With that we now have 13 publishers live with the program and 19 publishers under contract and scheduled to launch later this year. Additionally, despite the delay the marquee partner, we mentioned last year is scheduled to launch the program in Q2, while these new partners represent only a small portion of our Mou base today, they represent long term growth opportunity and enable us to.
Further diversify our base that may use.
Our UK business posted 67% year over year billings growth in Q4, However, U K billings are still below 2019 levels as the economy was hit particularly hard by the effects of Covid the year over year growth in the U K was aided by our open banking solution. The Nektar connect program now has nearly half a million members, making it one of the largest open banking initiatives in Europe .
Due to the success of this program we've seen strong interest from other large UK brands and we're on track to launch a second open banking initiative in Q2, we won't be running a pilot with top cashback one of the largest traditional affiliate publishers in Europe with over 15 million U K members.
And finally, our bank relationships continue to be strong we had over 51 million unique meus activate over 597 million offers in 2021, creating engagement and value for all of our banks.
And of course engagement grows as we increase AD budgets and add new advertisers to the platform.
Our bofa contract renewals going well and both parties are confident that our mutually beneficial relationship will continue for years to come both parties are working hard to get this done so that we can launch the new AD server and the experience it enables.
Get in January of 2020 was the last four months before the pandemic, we thought investors would find it interesting to see how spend in January of 2022 compared to January of 2020, a full two years after they started.
Everyday spending categories like gas grocery convenience and retail.
Our exceeding 2020 spend levels retail in particular was up 19% the highest of any category we track.
And while all broader categories are improving many subcategories and travel and restaurant are still negative or lagging versus 2020 Airlines and cruise lines are still being hit, particularly hard with each being down 30% and 58% respectively. Additionally.
Additionally, while restaurant spend is up compared to 2020. We believe this is driven largely by inflation as overall trips to restaurant categories or still down 13% when compared to 2020.
Outside of this comparison another interesting categories gas the average fuel purchases up 25% year over year. This will be a category to monitor in regards to consumer behavior, particularly presents in Russia, and the Ukraine drive oil prices higher.
So while there are clearly been improvement in consumer spending our advertisers are still feeling the effects from the pandemic, specifically labor and supply chain shortages as well as new impacts such as inflation.
There's also new risk due to the evolving situation in Ukraine, which could impact both our advertising partners many of which are multinational organizations and consumer spending were cautiously optimistic that we may see a full recovery across all verticals by the end of 2022 and I want to reiterate that we believe this business will maintain annual growth rates of 30% for many years.
But I do want to declare that the global environment presents several risks to growth in the short term.
With that I'll turn it over to Andy to talk more about the quarter and our thoughts around guidance.
Thank you Lynn we're excited to welcome the team from entertainment.
Similar to Dos and bridge, we believe this acquisition creates many opportunities to increase the variety and quality of our offers on our platform, bringing value to both our bank partners and their customers.
In less than two times revenue the entertainment acquisition aligns with our strategy to diversify our content and given our Mou scale, there's a clear opportunity to unlock the value in this business.
We use a small amount of cash for the acquisition and our balance sheet liquidity remains strong.
Cash and cash equivalents at the end of the year totaled $233 million compared to 237 million at the end of Q3.
Our $15 million loan facility also remains undrawn at this time.
And why we're always evaluating our capital structure, you've seen no immediate need to raise additional funds. We believe we have sufficient liquidity to carry out our strategy and expect to reach cash flow positive by the end of 2023.
As Lynn mentioned, we were quite pleased with our fourth quarter results, which provide a glimpse of the scale and power of our platform and a more favorable operating environment and why we're confident that we have a long runway for continued growth. We also believe our clients are better adapting to a unique environment, where labor and supply disruptions continue to persist.
Before I dive into guidance I'll share a few more financial highlights.
Billings revenue and adjusted contribution in Q4, all exceeded the high end of our expectations on.
On a year over year basis, billings increased 42, 6% to $134 million.
Revenue increased 34, 2% to $90 million and adjusted contribution increased 48, 5% to $44 million adjust.
Adjusted contribution as a percentage of billings was 31, 3% for the Carload X platform, which is back in line with our historical levels.
It remains possible that we see some margin fluctuation in the near term as we continue to automate and streamline processes, but I see no fundamental changes in our margin profile.
We have not encountered noticeable margin pressure from our agency clients, thus far although that could change over time as we gain greater exposure to that channel.
Geographically U S revenue from the carloads platform grew 27, 1% year over year, and 29, 5% compared to 2019.
UK revenues from the cartilage platform grew 58, 7% year over year, but was still down nine 3% compared to 2019.
Our U K results are a positive sign that our business and the overall market is beginning to somewhat normalize.
Adjusted EBITDA was a gain of $2 $6 million in Q4 of 2021 compared to a gain of $4 $5 million in Q4 of 2020.
As we've discussed the strategic investments, we are making to support our long term growth, including our recent acquisitions may cause fluctuations in our quarterly EBITDA.
We also continue to invest our most valuable resource our people.
In 2022, we will continue expanding our Midmarket and agency sales teams attracting top engineering talent.
Another important initiative. This year is our cloud migration and we expect to incur cost in the high single digits, including some transitional costs later this year.
We will provide updates on these initiatives once it is underway.
As we expected and mentioned last quarter, our stock based compensation expense decreased $4 million sequentially from Q3 to Q4 due to nonrecurring charges related to our recent acquisitions and a few senior new hires.
We expect stock compensation of Q1 of 'twenty two to remain fairly consistent with Q4.
A large portion of our stock rewards are performance based which leads to higher expense volatility, we're targeting stock based compensation expense of between 15 and 20% of revenue in 2022.
And they use grew seven 2% year over year to over $175 million in Q4, which reflects both organic growth from our existing bank partners as well as the launch of new partners, including U S Bank.
That growth rate was in the mid single digits, which was in line with our expectations and what we expect going forward.
<unk> during the fourth quarter was 49 cents up 19, 5% year over year.
For the full year of 2021 and May use increased nine 7% year over year in ARPA increased 25, 9%.
We expect <unk> to continue to increase on a year over year basis, as our revenue growth outpaces Mou growth.
We had $33 5 million shares outstanding at the end of the year.
Paired with $33 2 million at the end of Q3.
Weighted average shares outstanding during the quarter was 33 4 million compared to 27 7 million during Q4 of 2020 with.
Which reflects both our 3.9 billion share equity offering and the issuance of 916000 shares for the <unk> acquisition in Q1 2021.
Now turning to guidance.
Throughout most of 2021, we saw abnormal month to month volatility as well as an unbalanced recovery in consumer spending across our verticals and geographies.
Our Q4 results reflect our expectations of performance and fairly strong market conditions, we believe conditions should continue to stabilize throughout 2022.
However, this optimism is clouded by the residual impacts of the pandemic and the rapidly evolving conflict in Ukraine.
The supply shortages have been mitigated to some extent by product substitution, but a few of our clients specifically noted challenges on the labor front.
This could lead to some lingering volatility AD budgets in the near term.
As it relates to Ukraine, many of our largest clients are large multinational organizations there'll be affected to varying degrees by this additional disruption and we don't know how this might change to our financial outlook for 2022 or their spending plans. Additionally.
Additionally, we see the potential for installation risks there were originally driven by the pandemic increasing even further as a result of the conflict in eastern Europe .
Persistent high inflation would likely have a negative effect on discretionary spending throughout the year.
With that said, we have line of sight to 20% year over year growth for Q1 of 'twenty tell me too.
I believe there could be some upside to this number but I wanted to be clear that the previously mentioned rich could restrain that potential upside.
I also want to remind everyone of the seasonal decline from Q4 to Q1 due to the heightened consumer spending AD budgets that normally exist during the fourth quarter.
Furthermore, our growth rates during Q1 are typically lower than other quarters from 2019 to 2021, our year over year core paralytics fueling growth rates.
Less than 20% during Q1.
Compared to our full year growth rates of 44% in 2019 and over 35% in 2021.
For the year, our expectation is that a consistent broad recovery across all verticals will enable us to exceed our long term growth rate target of 30%.
Our past results have underscored the sensitivity we have some macroeconomic forces, but our efforts to diversify our content will help provide some insulation.
In the meantime, it's not unlikely that we will have 40% year over year growth in some quarters and 20% in others.
We are confident that we have a solid business model one that is capable of sustaining growth rates of 30% for many years, we believe that the steps, we're taking to expand our range of offerings and addressable markets will prove highly beneficial to us our bank partners and their customers.
Overall, we couldn't be more excited about the strategic progress were making and as always we remain very focused on growing shareholder value.
And the relationships with our partners.
Now I'll hand, it back over to Lynn.
Thanks, Andy this is a solid quarter, we're cautiously optimistic that we will achieve our goals. Despite the risk president of the global economy, We're happy to open up the call for your questions.
If you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone to withdraw.
All your question press the pound key.
Our first question comes from Doug Anmuth with J P. Morgan.
Great.
On for Doug. Thanks for taking the question last two so first one for MB.
You talked about your expectation of exceeding 30% for this year.
And I guess.
Visibility that you have so far in <unk>.
What do you think is the biggest risk to achieving that number.
Ongoing.
Recovery from biomass.
Our supply chain or if you kind of qualify that a little bit more that would be helpful. And then secondly firm than you.
You did talk about the percent of let me use being connected to the new house will reverse by year end. So let me talk to you.
So just talk about what's needed to get some benefit just bank of America or do you have to have another bank.
We connect to us too.
To achieve that number.
Hey, Thanks This is Andy.
Look I think like I mentioned, we saw some.
Some volatility month to month right across our different verticals geographies and I think the 30% growth rate that we quoted I think.
The environment will continue to stabilize I think if we see some consistency there.
Recovery I think we've got confidence that we're going to be over 30% and a good favorable environment I think to your point right. There are a lot of uncertainties I think when we look out and see the building inflation.
You may not have as much of an immediate impact, but persistent high inflation overtime will certainly have an impact on discretionary spending.
I think there are some other things as well, we do see labor and supply challenges still lingering.
And so we're trying to navigate that environment, but I think as long as we're seeing.
Consistent improvement throughout the year and Theres No reason why we can't achieve our target growth rates of 30% not just this year, but I think for several years.
And then on the end of your question there is actually multiple paths to get to 50%, which we're working all of them simultaneously. So any one of our larger banks with you in a couple of our smaller.
Regional banks with you and so we're working multiple paths.
Just trying <unk>.
Not only is that number but actually hopefully beat it.
But at the same time is one of the big ones. It doesn't go in 2022, it'd be really hard essentially to make it so.
When I sort of hedging our bets here and working all paths at the same time.
Got it and then if I can ask a follow up question.
So assuming you hit that 30% growth rate for this year, how should we think about the cadence.
I wanted to.
The Kimball presentation, you talked about getting to cash flow breakeven in 2023, but when could we potentially see that this year.
Well I think we've spoken about our goals for positive cash flow being at the end of 2023, I think we see a path to that as we continued to gain scale and get good momentum with with all the things that we've talked about.
Regarding our strategy right. There are a lot of great opportunities ahead for us.
And as we start to realize some of those new things in market. We certainly would have some some tailwind I think as it relates to 2022 specifically.
We're planning for some investments in our sales and technology teams.
And we also have some additional costs that we're going to be incurring related to the cloud migration I think the timing goes out is a bit uncertain, we'll certainly update people as we kind of go through that that journey, there, but those additional costs along with.
Inflationary pressures that we and many others are dealing with.
I think that it's likely we're going to see.
Are going to see an EBITDA loss, it's going to be larger than what we experienced this year I think the degree of that is going to depend somewhat on the timing of some of the investments, we're making but that's kind of a good way to kind of think about our EBIT and our cost structure.
Thanks for the color.
Our next question comes from Jason <unk> with Craig Hallum.
Yes.
Great. Thank you nice results this quarter I'm wondering if you can maybe just dissect the Q4 performance a little bit more if you could highlight just some areas of outperformance I don't know if that is best done on like a vertical basis or another way, but any more color would be great.
Yeah, I mean honestly because this is Lynn we outperformed in just about every vertical and every every.
Turning sector. So what do you think about a vertical like a restaurant or when do you think about our performance of agency MBS.
Just a really solid quarter, we hit on every kind of dimension that you can hit on them. So I'm not sure how much more color I can give there because like I said pretty much every vertical was up except for travel, which we discussed and we're feeling really optimistic about travel volumes next year given the momentum we have a co brand partner so.
This is the fourth quarter across the board.
Nothing was that's fine as I can.
Broad based outperformance is a good thing so that's okay, but wanted to follow up to one of the last question. Just you had talked about multiple different routes to hitting that 50% objective curious when you talked to banks, whether it be large or small what are the pushback that you are hearing for onboarding and how do you own.
From that.
Yes.
The banks the major pushback is that really a perspective, just the technology project, we got to get in the queue.
So that just takes time.
That's especially issue for most of the banks. They are still one or two banks that are really evaluating the move to the cloud because that's an important part of the overall technology stack.
I think we're going to get them all there.
Before but some are still in the process of just getting comfortable with the cloud. Most are just figuring out when and how they are going to stick this into their roadmap.
Okay, and then Lynne can you just go over a little bit on entertainment. Once again I know you touched on that in your prepared remarks, but maybe just a little bit more on what they do and what that looks like when you get that integrated.
Yep Yep. So for those of you who are a little bit maturing age like myself you may remember when you were younger you have these giant coupon books.
That has just a bunch of local content.
I had to sell them our sports teams are being on dropdowns or things like that I know, we weren't allowed to go anywhere unless we had an entertainment coupons to use.
At least in my family, but that's what it is it's just all digital now so they've got sort of two components to their business they've got a direct to consumer app that you can log in as a customer and download the entertainment App and get all of that is really rich coupons digitally and then they also work with publishers. Most of your publishers are not as high today.
But they work with publishers to provide that content to them to enhance loyalty programs and things like that.
So obviously, taking that digital content and putting it on RMA you scale with our banks is.
A pretty compelling proposition.
We got them for a very very good price.
And I think we can dramatically increase the value that they can create brands the multiples et cetera.
Even how impact and they were kind of it. So it's a very small acquisition, but we're actually pretty excited about it and one last point I'll make I know I've said this in the script, but I do think it's an interesting way for us to penetrate banks that are not quite yet comfortable giving us their data, but lets give you some of our content, but give you some of our technology and then slowly work.
Our way into getting your data I think could be an interesting Trojan horse for us as well.
Alright, I appreciate all that color. Thank you.
Thank you.
As a reminder, if you'd like to ask a question at this time that is star then one.
Our next question comes from Kyle Peterson with Needham.
Hey, good afternoon, guys nice.
Nice quarter, great to see the results just wanted to touch a little bit on the potential for SKU level offers and Uli integration of bridge. It seems like the the air or Enbridge is progressing really nicely. Thank you you talked about some.
Potential SKU level offers kind of a U S bank or other banks on the new AD server previously.
Want to see if you could provide any color on how that's coming along.
And what potential impact from the biller side of the funnel.
Being from potential like CPG companies and such.
Yeah Yeah.
So at the product level test first of all product level offers do require the new AD server, so youre not going to see a ton of additional momentum until we get more banks on the new AD server.
U S Bank pilot was just that it was a pilot it didn't have a ton of scale because you would think.
Yes.
A little bit on the smaller side.
But the results were off the charts in terms of you know we saw not only lift in overall spend but we saw a lift in basket and left interest. So we're really excited about the results, but I think until we get another bank connected to add forever, we're not going to have much more to update on but let's talk about just the bridge as a standalone sort of <unk>.
Entity, if you will meanwhile, they're going out and we're getting as much scale as we can so that when we do have another bank or more on the new AD server, we can actually start to sell these things kind of in mass at scale.
And so the bridge is pipeline is super exciting to us in terms of how much momentum they have.
That is just the momentum there is huge for us right now.
And I think you saw it in the IRR. So while we're waiting for banks to adopt the AD server. We're out there scaling bridge so that when both of those happen. We can go fast at the same time.
Uh huh.
That's really helpful. And then maybe if I could just get a follow up in on kind of thoughts on capital allocation through 2022. It seems you guys.
Quite a few on the the organic growth front, you should have the entertainment acquisition.
Do you think there's potential for more whether it's tuck in M&A or how do you guys kind of think about balancing some of these near term initiatives and integrating the.
Bridge Dosh Entertainment.
With some of your other strategic priorities over the next few quarters.
So I'll start and then you feel free to chime in I think we don't have any immediate plans.
Large acquisitions.
Of course, we stay optimistic all the time I think if there were to be anything in the near term.
Within the next probably 12 months I think that the likelihood of being a tuck in is much much greater than us doing anything.
Consequently, we didn't use a fairly small amount of cash for the for the entertainment acquisition.
Actual.
Integration.
Dodge is nearly complete there are a few little things here and there, but those things are largely behind us at this point.
The entertainment.
Integration should be fairly file we shouldn't see a significant uptick there and any type of integration work or cost.
I don't think there's anything of substance.
Near term horizon.
Yeah, I mean, I would agree I you know entertainment, we can maintain a standalone and simply put their content into our name as members. So theres not a lot of work to be down there. The answer was built with that in mind.
<unk> is basically fully integrated and bridge is really a data integration, which we've already done to some degree we havent done it.
At scale, yet, but we've already integrated birthday with card lytic data for several of our clients. So I would say the integrations are largely behind us.
Great. That's really helpful. Thanks, guys nice quarter.
That concludes today's question and answer session I'd like to turn the call back to Linda Ob for closing remarks.
Well. Thank you everyone. We did we had a solid quarter, we feel really good about it we feel good about going into 2022 and the momentum that we have yes. There are some short term uncertainties out there we all know that but I do think we're going to see continued recovery, we feel really good about the momentum even if we don't see continued recovery in our future.
A few categories like gas for example.
We can overcome some short term headwinds so we're feeling great. We appreciate everyone listening.
This concludes today's conference call. Thank you for participating you may now disconnect.
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