Q3 2022 Safeguard Scientifics Inc Earnings Call
Selling a particular control as a result of these and other factors our past financial performance cannot be relied on as an indication of future performance. During the course of todays call words, such as expect anticipate believe intend will be used in our discussion of goals or events in the future management cannot provide any assurance that future results will be as described in our forward looking statements. We encourage you to read safeguards filings.
With the SEC, including our Form 10-Q, which describe in detail the risks and uncertainties associated with managing our business. The company does not assume any obligation to update any forward looking statements made today with that I would now like to introduce Eric.
Thanks, Matt.
Thanks for joining us on our third quarter 2022 earnings call.
This afternoon, we'd like to cover the following topics.
I will provide an overview of the state of the portfolio and the broader market environment provide an.
Updating on M&A activities capital raising efforts and follow on deployments in the portfolio.
Sure the latest public market peer multiples that we use among other tools to value of the portfolio provide some recent highlights on each company and lastly, we will provide an update on the houlihan lokey process.
After my remarks, I will hand, the call over to Mark Herndon, our CFO to walk you through the financials for the quarter we.
We will then open up the call for questions.
I'll start with the state of the portfolio.
As you know we are focused on maximizing the value of our companies.
Monetizing our positions and returning value to shareholders, while at the same time, reducing ongoing operating expenses.
When I joined safeguard in Q2 2020, we had 17 portfolio companies as of Q3 2022, we had eight companies left and three of them are currently pursuing sales processes.
Over the past two and a half years, we have generated $74 million in proceeds and returned $43 million in capital to safeguard shareholders.
While we recognize the progress progress we've made over the past two and a half years. We're also cognizant of the volatile economic and capital markets environment in which we operate.
These conditions impact, how we manage the portfolio and influence our expectations of the value and timing of exits.
Many of our comments today will be directed towards how we operate in the current market environment and how this environment affects our companies and strategy.
Over the past quarter the economy, the business environment in the capital markets have deteriorated.
This impacts our portfolio in several ways.
First for a few of our companies the sales cycle for their products and services has lengthened, making it more difficult to meet revenue targets and determined future demand and revenue growth.
We attribute this meter demand pressure on corporate budgets disruptions and delays caused by reductions in head count occurring at many of our companies customers.
And in otherwise more cautious stance towards making financial commitments.
Interestingly, we have yet to see this impact on our companies that sell to health care pharma customers, which constitutes the majority of our portfolio.
But we are seeing some slowdown among fortune 500 companies and small and medium sized businesses.
Second raising equity or debt has become more challenging over the past few months. There has been a pullback in the pace of investing and lending by venture capitalists and debt providers.
This has no impact on our companies, which have recently secured capital Moxie and <unk> for example, but does impact those companies, which are currently raising debt or equity.
Third the M&A environment has slowed considerably for both strategic as well as financial buyers.
While deals are still getting done for example for example, the luminous a sale.
The bar for acquiring a company has gone up the <unk>.
Cost of capital has increased and determining asset values has become more difficult.
This could negatively impact the three safeguard companies that are currently pursuing sales processes.
Regardless of the business and market environment, we are working very closely with our companies pushing management teams and boards to take tough decisions that are necessary for the long term health of each business.
Fourth.
Nearly all of our companies have venture debt, which is typical for late stage tech companies.
Leverage introduces risks to each company and can also can also reduce the degrees of freedom that accompany has to operate.
Senior loans generally have financial covenants tied to the company's budgets in situations, where a company is out of compliance with its covenants, where the debt is amortizing addressing the needs of the lender becomes one of the factors that the company must take into consideration.
This could be done through providing additional capital to the company.
Restructuring or or refinancing the loans and are pursuing a more rapid exit.
We are working closely with our companies to address situations, where this could come into play and our goal is to maintain as much operating and strategic flexibility as possible.
Fifth relates to revenue growth.
Each quarter, we report the aggregate revenue growth for the portfolio to provide some insight to our investors on the state of our companies. We do this on an aggregate basis to avoid sharing any one company specific revenue our revenue growth, which could impact its competitive positioning.
For Q3, which is reported on a one quarter lag basis.
The aggregate trailing 12 month revenue growth was 11%.
Note that not all of our companies are growing at this average rate some are growing at substantially higher rates, some lower and a couple are not growing while they implement changes to their business model.
For some of our companies bookings growth is a better leading indicator of future performance than revenue because what is booked in the current quarter is recognized as revenue in future periods.
Where possible, we try to share bookings information and the company specific highlights.
In summary, while we are operating in a difficult economy and facing uncertain capital markets. There is a lot to be excited about in the portfolio.
One strategy in particular that we've begun to explore is to use safeguards resources, it's cash and management oversight to take a more aggressive role with one or two of our companies.
In essence, we would play offense.
With one or two of our portfolio companies that have sound business models, but are victims of the difficult current capital markets.
This could come in the form of making more concentrated deployment and one or two names setting the deal terms and leading key strategic and operational initiatives at the company.
All with the goal of generating substantially enhanced returns for safeguard.
This is still early but we have direct experience and a track record taking advantage of dislocations in markets to deploy capital in down cycles to generate outsized returns. We will update you on progress with this approach on our Q4 call.
M&A.
As described in our press release last month <unk> was acquired by solves advisors.
Safeguard received $5 3 million in proceeds with additional proceeds to be released from escrow is over the next 12 plus months.
To connect the dots from our comments on the Q2 call. Loomis. This was the company that we said received inbound interest from a strategic buyer and the parties had made significant progress towards a transaction.
As mentioned at the outset of this call. We currently have three companies pursuing M&A processes.
This includes the two that we mentioned on our Q2 call as you recall, one had hired Piper and the other RBC as their bankers and each was was preparing to launch its process after labor day.
Those two processes are in flight.
A third company hired a banker also Piper and is kicking off a process. This month.
While each of these companies offers both financial and strategic value to several potential buyers. This is a tough time to be selling companies. So it is difficult to predict the outcome.
And while parties are actively engaged with each opportunity is unclear how the broader slowdown in M&A will impact these situations.
I will now provide an update on capital raises.
At a macro level deal activity across all stages of venture capital is showing signs of weakness in fact, theres been three consecutively consecutive quarterly declines in the number of completed deals.
Fewer potential investors seeking to deploy capital combined with a shift in investment criteria towards more profitability of development that we highlighted on our Q2 call can impact the capital raise processes of our companies.
With that said four of our companies are currently seeking to raise capital.
<unk> mentioned on our Q2 call, where we stated that two companies. We're exploring capital raises ahead of launching M&A processes.
Also on the Q2 call we mentioned a third company that was launching a process to raise growth capital.
Those three companies continue to have conversations with financing parties, but no Lois have been signed.
In addition, a fourth company has had recent conversations with parties about raising capital, but those efforts are at an early stage.
In parallel we are working with each of these companies on alternative plans should capital not be available or not be available on terms that are satisfactory.
Against that backdrop, we were pleased with the <unk> announcement in July of their $35 million raise which came from novartis capital with a concurrent investment by existing investors safety.
Safeguard deployed $1 6 million in the inside convertible note as part of that round.
Update on follow on deployments.
While our follow on deployments in the portfolio have declined over the past two years, the current business environment could impact the capital we set aside to support each company going forward.
The outcome of the four companies that are raising money raising money could also impact how much capital we expect to require for the portfolio.
Also pursuing a more concentrated strategy that I highlighted earlier in my remarks could have an impact on the quantum on follow on capital required.
In every case, we have set a high bar for deploying more deploying more capital in the portfolio. So the returns and rationale need to be extremely compelling and we discuss these criteria on our Q2 call.
With that in mind, we have decided to maintain the maximum cash threshold at $18 million.
To remind investors. This is the amount above which we would look to return cash to shareholders.
In addition to the $1 6 million, we deployed <unk> subsequent to the quarter safeguard funded 500000 to Macwell librium as part of an inside convertible note round together with other equilibrium investors and we also made a $375000 subordinated debt commitment to trace alongside.
Other <unk> investors.
Public market peer multiples.
As we do each quarter, we provide the EV enterprise value to revenue multiples and consensus revenue growth rates of our public peers to help investors triangulate around potential valuations.
Please keep in mind that this is only one of several valuation methodologies used and should not be relied upon exclusively differences and company size growth rates margins net debt capital structures and liquidity discounts.
All come into play.
Note that the following data is as of October 26.
For our tech enabled health care companies.
The EV to 2022 revenue multiples for our publicly traded peers were 334 times down from three eight times on our Q2 earnings call consensus.
Consensus revenue growth for 2022 for Tech enabled health care companies is 10%.
Given we're in the last quarter of 2022. It is appropriate that we also consider 2023 EV to revenue multiples and expected revenue growth rates.
Our tech enabled health care multiples were three two times 2023 consensus revenue estimates with 12%, 12% expected revenue growth for 2023.
For clutch are single marketing technology position.
EV to 2022 revenue multiples for the peer group were two seven times down from three three times on our last call consensus revenue growth for 2022 was 16%.
2023, EV multiples and revenue growth for the Mar Tech peers were two four times 2023 consensus with 2023 revenue growth pegged at 14%.
Please remember that from the implied enterprise values that are calculated using revenue multiples, we subtract out net debt for each of our portfolio companies and then run the remaining proceeds through a waterfall for each company that reflects its specific capital stack options management carve.
Outs, if any deal fees et cetera to arrive at what safeguard stake could be worth companies with more net debt will by definition have less available proceeds for the equity holders and companies with more complicated preferred capital preferred capital structures can also impact safeguards proceeds depends.
On where we sit in the capital stack.
From an equity perspective, while the month of October posted gains.
Since our Q2 call markets have sold off with the S&P down 8%, the Russell 2000 down, 6%, our healthcare peers down, 14% and our Martech peers down 35%.
Year to date S&P <unk>.
And Russell 2000 are both down around 20% healthcare peers are down 25% in market Tech peers are down 62%.
I will now go through the name by name highlights for the portfolio.
Note that these are selected highlights for the quarter and do not reflect the risks inherent in each company.
<unk> products product bookings through Q3 of this year.
The company added new logos, including Novo Nordisk and Nestle.
It reduced roughly $10 million in annual operating expenses and expect to achieve operating cash flow in 2023.
For <unk>, we mentioned there are $35 million financing led by Novartis capital earlier.
Also also of note our key collaboration and partnership announcements with Science 37, Genesis and Merck.
Prognose completed its business transition to a marketplace model. This should position the company for rapid growth with both data providers and customers.
Sex, Pepsico Marriott, Florida, Blue Ford Motor Company, and XL energy were all honored for their achievements in supporting employee resilience a.
A strong endorsement of equilibrium as value proposition by these hallmark companies.
Moxie implemented 56, new connections in Q3, and each quarter of 2022 has seen a record number of connections.
Company has 24 new providers in its network as of Q3 in the fourth quarter provider sales pipeline is strong.
For clutch September was the company was the company's highest recurring revenue month in its history, achieving over 20% growth for the nine months through September . It also had its strongest sales quarter in company history, adding over $1 million in <unk>.
<unk> in Q3 2022.
I will now provide an update on our strategic process with Houlihan lokey.
Let me start by reminding investors that our base case plan is to run off the portfolio in the ordinary course and return capital to shareholders.
We retained houlihan lokey in Q1 2021 to see if we could enhance shareholder value over and above this base case plan.
This enhanced value could come from among other things monetizing our net operating losses or Nols.
The public shell or other aspects of of safeguards infrastructure and operating footprint.
Anything we consider on this front must be superior to the risk adjusted returns of the base case runoff plan.
Having said that we are in discussions with a number of parties and wanted to provide you with an update.
First based on the feedback <unk> received from parties, we do not anticipate selling the portfolio in bulk or in packages put simply this portfolio does not fit well as a secondary sale and that approach would not be in the shareholders' best interests.
And approach that we have been exploring is to design a structure.
That ring fences, our portfolio interests and allows the exits to occur in the ordinary course similar to our base case plan with proceeds returned to safeguards current shareholders.
We would then use the public shell that would have the Nols and some cash left behind and with this shell we would acquire another entity assets for our company.
Thereby preserving the Nols and building an additional potential source of value to safeguard shareholders.
In this way shareholders would receive the vast majority of the proceeds from the legacy portfolio as it run off while maintaining an ownership interest and the upside and a new go forward business.
There are a variety of regulatory and economic complexities to finding a structure that meets our objectives, but we've worked with outside tax and legal advisors and have come up with an approach that we believe achieves these goals.
The next requirement is finding a target that we believe would create meaningful value as a public company and enhanced returns to safeguard shareholders.
Working with Houlihan Lokey, we've examined a number of potential targets, including operating companies' portfolios of assets and asset managers to name a few each of whom could be viable as a public company.
We've also considered whether any of our existing portfolio companies would be an appealing merger partner if it made sense for that company to effectively go public through safe Guard.
We continue to spend time on this are and are in discussions with several parties Theres no assurance that we'll be able to settle on a specific structure and refine a specific target that meets our objectives.
We will keep you updated on the progress with these efforts.
At this time I would like to hand, the call over to our CFO Mark Herndon.
Thanks, Eric.
Yes.
Yes.
We were in private.
Net loss for the quarter ended September 32020 was $3 2 million or 19 per share as compared to net income for 2021 third quarter of $18 3 million or <unk> 88 per share.
The quarter's results were primarily impacted by $4 $7 million, resulting from limited.
The remaining results were fairly typical with respect to general and administrative expenses and other aspects of equity income or loss.
As a reminder, the prior year quarter net income was driven primarily by the $32 million gain on the sale of flash platform.
We have continued with our open market stock repurchases, resulting in the repurchase of approximately 84000 shares during the quarter for zero point $3 million at an average price of $4 per share.
And subsequent to the quarter approximately 37000 additional shares have been acquired.
Accumulated during our low volume trading environment for approximately $2 1 million or $3 60 per share.
This brings our total repurchases this year to over 491000 shares for approximately $2 $2 million or $4 47 per share.
We have approximately.
800000, or $1 8 million of authorization for open market purchases remaining pursuant to their planned program.
Thanks, Claire and ended the quarter with $21 million of cash cash equivalents marketable securities and restricted cash and we continue to have no debt obligations.
Our general and administrative expenses were $1 4 million from the third quarter of 2020.
Which was 13% lower than the $1 6 million recorded in the comparable quarter of 'twenty one.
This decline was principally attributable to the absence of <unk> that did not recur in 2022.
Corporate expenses for the quarter, which represented general and administrative expenses, excluding stock based compensation and severance expenses and nonrecurring and other items, such as Elchlepp accruals and transaction expenses.
$4 8 million as compared to <unk> $9 million in the comparable quarter of 2021, a 13% decline.
On a sequential basis this quarter corporate expenses were slightly down from last quarter about $57000 lower or 7%.
We continue to expect our quarter quarterly level of corporate expenses have stabilized at this approximate level.
Corporate expenses continued to benefit from director fees being paid in equity and a significant portion of management's compensation being paid in equity.
Additionally, you may have noticed that we knew the SME listing to the NASDAQ recently.
This change should not have any impact to you in terms of trading as we continue to use the ticker.
What we gained from this shift was slightly lower base fee structure for 2023, and a greater level of flexibility in the future.
License and continued listing standards and as we as we become smaller and lower fees, if we issue new or additional securities in the future.
Okay.
With respect to the ownership interests, we have an aggregate carrying value at September 30th.
Of $19 3 million as compared to $26 5 million at December 31, 2021.
This year to date activity included increases for the funding of convertible loans, our progress in crush that aggregated $3 4 million.
The decrease in the Brighthouse stock value and the dilution gain of $5 $3 million related to marketing.
These increases were largely offset by decreases due to the application of the equity method apparel.
Okay.
As we mentioned earlier, our equity loss benefited from the $4 $7 million gain on the exit of looser, while our share of the losses of our equity.
Method ownership interest for the three months ended September 32022 was higher at $6.
<unk> 1 million as compared to $3 1 million for the comparable period in 2021.
There were no impairments during the quarter.
We did benefit.
Zero point $4 million related to the collection of escrow and the resolution of contingencies related to a variety of prior transactions.
The quarter's increase in equity method loss as a result of a higher level of losses at several companies due to a variety of efforts, including various accounting charges at those companies, we completed financing transactions.
And I would like to also remind everyone that we report our share of the losses from the equity method companies on a one quarter lag. So this quarter share of losses reflects the second quarter of 2022.
Also with respect to our ownership interest the third party debt at this group of eight companies with approximately $206 million versus.
First one is the $161 million at June 30 of 2022.
This increase was primarily related to the $35 million.
Financing transaction disclosed previously.
Cash at the same group of eight companies has increased so that $90 million from the $70 million last quarter.
This increase was also primarily related to the equity raise of <unk> <unk>.
<unk>.
Offset by the quarterly burn at <unk> as well as all the other companies.
In terms of revenue performance, we reported at 10, 7% increase in our group of eight companies with a trailing 12 month period ended June 32022, which reflects the one quarter lag we continue to see our fastest organic growth from an equilibrium and moxie.
At this time, we would like to turn it over to the Q&A segment of the call. So operator I'll ask.
I ask you to open the phones up for few questions.
Sure. Thank you the lines are now open for questions.
Do have a question. Please press star one on your telephone keypad at this time.
Question will be taken in the order that is received it for you.
<unk> has been answered you could remove yourself from the queue by pressing one.
Again, ladies and gentlemen, Thats Star one please hold while we poll for questions.
And our first question comes from Matt.
Mr. From he is a private investor go ahead, Matt.
Alright, Thanks, and the last earnings call you laid out a timeframe for the M&A process is four to six months and suggested that the houlihan Lokey strategic alternatives review process should be a comparable timeframe considering the strategic review process started in March 2022, why is this plan not finalized yet.
Thanks for the question as it relates to the Houlihan Lokey process as we try to provide a fair amount of.
Detail on today's call. We went out we have a base case plan and as we described.
The question, we have is given the other assets that safeguard has Nols shell et cetera is there a way to enhance the value beyond just our base case runoff plan that is not a regular way M&A transaction, where you hire a banker you put a book together and you sell out.
Would your manufacturer service provider. This is is this involves both tax and legal structuring.
And it also involves us feeling highly.
Confident that a counterparty or target would be value accretive value enhancing to the safeguard shareholders. So we are taking our time through this process.
We don't have a set time by which we have to do anything because we have our base case plan. So I would just compare.
The approach in the timeline and the complexity or complexion of our strategic process with safeguard.
Differently then.
Normal lift call it regular way M&A process, if that's if that's helpful.
Yes.
Honestly the.
The.
Shell company idea and all the other strategic alternatives I'm a little skeptical.
Okay.
Strong fan of selling the portfolio as a lump sum.
And our concern I have with the current Houlihan lokey process.
On the last call you say to the objective of not selling assets below natural exit values I think thats too stringent to me. It sounds like we're trying to squeeze every last drop out of the London, but it often ends up and getting some seed instead is there some flexibility that can be built into the strategic review to sell the whole portfolio.
Hey, Ed.
75% to 90% of natural exit value to get a deal done instead of dragging out the overall portfolio monetization process.
It's a good it's a good question and we appreciate that perspective.
As we indicated this portfolio does not lend itself to a secondary sale.
Which means a secondary sale happens at <unk>.
To estimate at some reasonable discount to fair market value, whether it's a 25% discount or a 10% discount given the numbers you gave 75% or 90% of if you will kind of regular exit value of fair market value.
This portfolio does not fall into that bucket, so to do a lock stopped lock stock sale of the portfolio.
Would result in.
Severe impairment of what we believe the natural exits would be and we have cases in point.
For instance, not to get too much into detail.
The luminous transaction, where we were.
Received $5 $3 million and have additional proceeds that will be released from escrow to put it in perspective.
Dairy interest for that position was.
Surely less than what we ultimately got in a strategic sale and Thats just one example.
I will say, though in companies, which we've done since I've joined where we don't believe in the company's long term prospects or we don't want to put additional capital in we have sold in secondary transactions. So there have been a number of situations, where we either have decided we're not going to fund more capital.
Or are we went out and we've identified secondary buyers of those positions and transacted at what we thought were reasonable discounts to fair market value.
So I hope that provides some context, but we are 100% open to selling this portfolio in a secondary transaction at a reasonable price.
Okay.
We spent a lot of time doing that and just on the houlihan lokey process, we could.
We could spend a few more months on houlihan lokey and conclude that there's nothing superior.
It doesn't really change what we're doing which is exiting companies and returning capital to shareholders. So we view that parallel effort as a parallel effort, but thanks for the question.
Yes, I just would appreciate.
Get a plan together I would appreciate clarity as what the future looks like at safeguard as an investor I need clarity and next steps.
Honestly this has been dragging on and I just need some clarity. So when is when can we have clarity as investors or the plan do you have a timeline when we could expect a final decision.
So.
The current final decision in the current decision today is we have eight companies.
And we're selling those companies.
As and when we can.
So as we indicated on our call there are.
There are three companies that are in our that are in processes and we're going to we have exits we will sell those companies and will return the capital to shareholders. So eight companies.
Three are in sale processes, if those sales processes succeed will have proceeds returned to shareholders. If they do not succeed meeting there are no buyers or the or the buyers have indicated values, which are not within the range that we are our other shareholders want to transact at.
We will not be forced to sell nor will we.
Just sell for the sake of monetizing if we believe in the portfolio. In these eight companies are what were building the exit value off of so.
That is the plan that is our current base case plan selling in the ordinary course.
We've gone from 17 down to eight.
Flea. These three processes will be successful very tough time in the capital markets to be selling companies, but we're doing everything we can to transact and help these companies sell themselves.
And that's that's the plan.
And then let me just reiterate one point.
For you as soon as well as that.
We're what investor several in all the circumstances and we have.
I think we would say we have alignment with other investors in the company make sure that if they're not already in our sales process to prepare to be in a sales process.
But it's not as if we can just go hit a button and say.
A telco company, that's not a control position that allows us to do that.
But we are.
Doing everything we can to.
Pushed the company's towards.
Finding their exit exit process.
Thank you.
Okay, ladies and gentlemen to ask a question Thats Star One our next question comes from Neal Goldman from Goldman Capital go ahead.
And your carrying value.
$155 million, what's the 19, 8% of all others.
In terms of acquiring value.
Yes, I think.
In the table that Youre looking at in the press release. There is there is two different column, there and I think the number that youre referencing is actually the cost for our total cash and for each of those.
Investments the carrying value is $19 million.
Carrying that or the cost basis is roughly 150.
Thank you were making reference to the.
Yes.
The other <unk>.
Item.
That's great.
Yes.
Wes last quarter on the quarter before that.
You may recall that re medium act with their recapitalization. So that's the basis for them floated down there and thats about $15 million of that 19.
Okay. So.
The value was five 4 million, maybe incremental yes, yes, yes.
From a fair value perspective, I would not look for <unk>.
Some of it's coming out of the other category.
Okay.
Sure.
Okay.
That's it.
Okay. Thank you.
Again, ladies and gentlemen, Thats star one.
We there.
We did get a question through the web sorry cat.
<unk>.
Which is can you elaborate on what a potential transaction with Houlihan Lokey would look like would this require using cash on our balance sheet to finance.
So just again.
Maybe provide a little bit more.
Detail and try to answer this question so.
It is.
It would involve monetizing the portfolio and what we're calling the regular way of the ordinary course.
And leaving in the shell.
The Nols.
And some cash.
So that shell company could operate.
And then a another company would reverse merged effectively into the shell.
While preserving the Nols and having access to some of that cash.
Quantum of cash that we would leave behind is something thats very very it's a very very.
Important topic for us because any dollar that we leave behind is a dollar that were not returning to shareholders. So as I indicated in the remarks.
The opportunity has to be very very compelling.
And as of yet we continue to have conversations, but we do not have anything that would.
Meet the criteria that we would go and go to the board with and try to and trying to take to the next to the next step I would say, though to put it in perspective the run off.
Plan itself.
Also has.
Costs, because part of the benefit of doing this reverse merger with another company is the public company costs going forward would be shared with the investors of that company that we just acquired so one of the calculations that we do.
When we analyze this is what our what are our standalone operating costs and what will be from now until runoff in the base case.
And compare that to what the.
Operating costs at our shareholders would have to be.
On the hook for if you will if we were to do.
This reverse merger structure. So we would be comparing the cash used in one alternative one case versus the cash used in in another case, but it is something we're very focused on as we know shareholders and.
For the large shareholder we're looking to return value to the shareholders.
And on Cat are there any other questions in the queue.
There are no phone questions.
Ladies and gentlemen, Thats star one.
Okay. It does not appear that we have any other.
<unk> questions.
So.
Alan just for closing remarks.
Thank you for joining us on the call today and for your continued interest and support of safeguard.
But before I sign off I must add one thing so while I am a mets fan not affiliates fan safeguard has long term philly routes.
And on behalf of management and the board want to wish the Phillies best of luck in the remaining games of the series.
Please feel free to contact us if you have any additional questions and go Phillies.
Okay.
Thank you. This does conclude today's conference. We thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
[music].