Q3 2023 Avnet Inc. Earnings Call

Speaker 1: could differ materially from those contained in such statements. Subwoof Actors that could cause or contribute to such differences are described in detail and have net's most recent form 10Q and 10K in subsequent filings with the SEC. These forward-looking statements speak only as of the date of this presentation and the company undertakes no obligation to publicly undertake, update any forward-looking statements or supply new information regarding the circumstances after the date of this presentation. Today's call would be led by Phil Gallagher, Abnits CEO and Ken Jacobson, Abnits CFO . With that, let me turn the call over to Phil Gallagher. Phil? Thank you, Joe, and thank you everyone for joining us on our third quarter fiscal year 2023 earnings conference call. I am pleased to share that we delivered another quarter of solid financial results, which exceeded the top end of our sales and earnings guidance. More importantly, we achieved these results despite the market uncertainty and macroheadland defecting certain areas of our business.

Speaker 1: In the quarter of the new sales 3% year of a year in constant currency, and we delivered adjusted earnings per share of $2, which is our fifth consecutive quarter of adjusted earnings per share of $2 or greater.

Speaker 1: We continue to manage our operations with a sharp focus on efficiency. That coupled with a stronger than expect performance in Europe and the Americas enabled us to achieve a 5% operating margin in our electronic components business and a 4.8% operating margin for AdNet overall.

Speaker 1: During the quarter, we saw sales growth in the Americas and in the Middle Regions all set by sales decline in Asia. The decline in Asia was due to the expected seasonal impact from the Lunar New Year holiday and from an overall slowdown in demand in certain Asian markets.

Speaker 1: From an overall demand perspective in the quarter, we saw continued strength in key vertical segments, most notably industrial, transportation, and defense aerospace, while demand at other segments like consumer and communications remained weak.

Speaker 1: Demand signals continue realigned globally resulting in lead times training down on several component categories. However, we continue to see constraints and shortages on other products such as high and M.C.U.'s power and MOSFETs. Lead times for these constraint categories have improved.

Speaker 1: but more modestly than other categories. Overall, semilead times are above pre-pendemic levels, and IPAD times are modestly above pre-pendemic levels.

Speaker 1: The pricing environment remains stable during the quarter. At the beginning of the quarter, we still saw handful of suppliers raise prices primarily due to the higher input cost for the components. As a result of the current demand elite tank conditions, our booked-able ratio remains below parity in all regions.

Speaker 1: at levels similar to last quarter, and our backlog remained relatively consistent with the end of last quarter.

Speaker 1: Inventory levels have made it elevated across the supply chain and our inventory increased in the third quarter as well. Our customers' inventory levels are elevated due to a combination of softer demand and certain areas and overall market conditions as it relates to component availability. They continue to seek certain key constraint parts that are needed to complete their end products.

Speaker 1: As a result, we are managing through the just-restore backlog. While cancellation rates are up, they're still within our normal range.

Speaker 1: We remain confident in the quality of our inventory and are working to improve turnover and to ensure the inventory on hand is aligned to the near-term sales outlook. So with that, let me turn to the highlights for our business.

Speaker 1: Our electronic components business sales grew 4% year-of-year in constant currency, which led to EC delivering a 5% operating income margin. Our targeted margin is above 5%, so we're pleased that EC achieved this milestone this quarter as it demonstrates our ability to continue to drive operating leverage.

Speaker 1: as we focus on top line sales growth.

Speaker 1: I am particularly pleased with the America's team delivering another solid quarter of sales and operating income. Our America's business delivered the highest level of operating income margin in the past several years.

Speaker 1: The Amir region delivered the second consecutive record sales quarter and our Asia business was able to maintain their operating margin despite the seasonally lower sales.

Speaker 1: Asia has been impacted by reduced demand in verticals like consumer and communications. We saw overall softness in key markets like China leading to quarter of a quarter sales to clients, which we expect to continue for at least the next two quarters.

Speaker 1: We achieved another quarter of record revenue and gross profit dollars for demand and creation. Further proof of the value we provide to our customers and supplier partners despite the mixed market conditions.

Speaker 1: Demancreation and customer expansion remain critical to us, as well as our supplier partners. Just a few weeks ago, I was able to meet with leaders of three of our top 10 suppliers. And one of the first things they wanted to discuss was demand creation and how adnet can continue to help them grow their sales and increase their customer accounts. This program was just back in early Burgundy, they may look at changes in? payment. What did they make—and it was that wheeled in that four- ??? In the early dogg?s the investor energy blobitance gave them the right to check their partner or is in legal investigation that it's still their new ESR service. And yet the thinking for insurance and it still let the läre dialog be found that they should ?????!

Speaker 1: The success of our engineering teams and the digital design tools have been key to improving our margins, particularly in the Americas and the Mea regions.

Speaker 1: Roughly one-third of our revenues come from demand creation. And this strategic priority is one of the elements that should enable us to achieve our higher margin goals in the medium term.

Speaker 1: Now, let's turn to our Cornell business.

Speaker 1: Arnell's sales increased 9% sequentially and 1% year-of-a-year in constant currency.

Speaker 1: For now's operating margins held steady sequentially at 9% during the quarter and were down year over year, primarily due to the expected unwinding of pricing premiums as certain components become more available.

Speaker 1: Overall, Farnell continues to be our highest margin business, and we expect the operating margin to expand as supply constraints on single board computing devices ease in the first half of our fiscal 2024.

Speaker 1: To be clear, there continues to be a healthy backlog for single-board computers, and when the semi-locked components become more available to complete their production, we expect to begin to realize improved sales as we move into the September quarter.

Speaker 1: We have made substantial investments in finals and inventory offerings over the past three years and plan to make additional investments where we see the potential for accelerated growth and a solid return.

Speaker 1: Our front-end limitaries have increased nearly 50% in the past year. As front-endow has expanded its line card, replenish inventory levels, and continue to focus on both on the board and off the board growth opportunities.

Speaker 1: Farnels e-commerce business mix continues to improve with 56% of Farnels total sales and 74% of total orders placed through their e-commerce platform.

Speaker 1: We remain excited about FNL and continue to see opportunity leverage for NELs and electronic components unique and synergistic collaboration which is a key differentiator for AdNet.

Speaker 1: Our near-term milestone is driving for now to over $2 billion of annual sales at double-digit operating margins.

Speaker 1: While we are pleased with the sales and earnings results for a third quarter, we are closely monitoring market conditions and the impact of component lead times on our backlog and inventory levels as products become more available.

Speaker 1: We also continue to manage the impact of inflation and higher interest rates on our overall business, which we have successfully done over the past few quarters.

Speaker 1: In the same way that demand assets supply over the past two years.

Speaker 1: supplier product has begun to exceed overall demand. Our current view, supported by our supply chain industry tracking metrics, is that we're experiencing an inventory correction that will take a few quarters to play out.

Speaker 1: As we manage through this correction phase, we will continue to work with both our supplier partners and customers to regulate the incoming orders and prioritize getting the right inventory levels to support sales and improve our terms.

Speaker 1: Although the market correction is underway, we are not overly concentrated to any supplier and market.

Speaker 1: We continue to believe that due to our balance line card combined with a diverse and market we serve We're well positioned to outperform the overall components market the gay market share and expand our for any margins when market conditions normalize

Speaker 1: With that, I'll turn it over to Ken to dive deeper into our third quarter results. Thank you, Phil. Good afternoon, everyone, and thank you for your interest in AbNet.

Speaker 2: With another quarter of your-over-year sales and operating income growth, we believe our third quarter financial performance demonstrates further progress toward achieving our medium-term financial targets led by the 5% operating income margin achieved in our electronic components business.

Speaker 2: Our sales for the quarter were $6.5 billion, modestly higher year over year, and exceeding the top end of our guidance range. In constant currency, sales growth was 3% year over year. On a sequential basis, sales were down 5% in constant currency, which is lower than a historical seasonal trend of sequential sales growth. Sales grew year over year, led by a Mia with nearly 10% growth and the America...

Speaker 3: currency.

Speaker 2: Quarter of a quarter of electronic component sales were 6% lower in constant currency.

Speaker 2: For our NL sales declined 3% year over year, but we're up 1% from the prior year in constant currency and 9% higher sequentially in constant currency.

Speaker 2: Excluding sales of single-board computers, Farnale Sales grew 2% year-over-year in Fountain, Currently.

Speaker 2: For the third quarter, gross margin of 12.5% improved 79 basis points quarter over quarter and was relatively flat year over year.

Speaker 2: The sequential improvement in gross margin was primarily due to higher gross margins across all of our regions, and from the seasonal shift in sales mix from Asia to the Western regions that experienced every third quarter.

Speaker 2: We continue to maintain discipline around S-GNA expenses as adjusted operating expenses were $497 million for the quarter, down 2% year-over-year and up 3% sequentially. Foreign currency negatively impacted operating expenses by $12 million in the third quarter as compared to the second quarter.

Speaker 2: As a percentage of gross profit dollars adjusted operating expenses were 61% in the quarter, 138 basis points lower than a year ago, and 41 basis points lower than last quarter.

Speaker 2: For the third quarter, we reported record-adjusted operating income of $315 million, which increased 4% year-over-year and grew more than two times greater than sales and constant currency.

Speaker 2: This is the ninth consecutive quarter of operating income growth exceeding our sales growth by more than two times. Our adjusted operating margin was 4.8% in the third quarter, which improved 15 basis points year over year and improved 36 basis points quarter over quarter.

Speaker 2: By operating group, electronic components operating come with $305 million, up 15% year-over-year.

Speaker 2: EC operating margin was 5% up 64 basis points year over year and up 34 basis points quarter over quarter.

Speaker 2: All three EC regions saw Eurovere operating margin expansion led by our EC America's business which expanded operating margin at more than 80 basis points.

Speaker 2: For an out operating income was $41 million down 41% year over year.

Speaker 2: For now, operating margin was 9% in the quarter down 589 basis points year over year, but held steady quarter over quarter.

Speaker 2: For now operating margin continue to be impacted by the expected unwinding of pricing premiums experienced due to component shortages and from unfavorable changes in foreign currency exchange rates. During the quarter, the for now operating margin was also impacted by certain non-recurring expenses recognized in the quarter.

Speaker 2: We're now continuing to be the highest margin business within ABNET. And overall, operating margins continue to benefit from our focus on their growth and continue investment in their inventory systems and distribution centers.

Speaker 2: We expect far now operating margins to remain at similar levels for the fourth quarter of fiscal 2023 With improvements in operating margin beginning when certain components impacting the completion of single board computers become more available

Speaker 2: Turning to expenses below operating income, third quarter is expense of $72 million increased by $46 million year-over-year and $13 million quarter-over-quarter. Primarily due to a combination of increases in interest rates and from higher average borrowings to support working capital increases.

Speaker 2: This increased and interest expense negatively impacted adjusted diluted earnings per share by 37 cents a year over year.

Speaker 2: All right, just an effective income tax rate was 24.5% in the quarter.

Speaker 2: Adjusted deluded earnings per share were $2 for the quarter, which decreased 7% year over year, but were flat quarter over quarter.

Speaker 2: differences in foreign currency exchange rates negatively impacted adjusted diluted earnings per share by 9 cents year over year.

Speaker 4: Oh.

Speaker 2: Turn into the balance sheet and liquidity.

Speaker 2: During the quarter, working capital increased by $232 million, including a $381 million increase in emitories.

Speaker 2: for an currency negatively impacted the increases in working capital by $62 million overall of which $45 million impacted inventory.

Speaker 2: As a result of this working capital increase, working capital days were 96 days for the quarter, which increased 12 days quarter over quarter. Our inventory days increased by approximately 9 days and our receivable days increased by approximately 2 days quarter over quarter.

Speaker 2: Our inventory is grudering the corridor and as Phil mentioned in his remarks, this is consistent with a broader trend across the supply chain in our customers.

Speaker 2: The quality and freshness of our inventory continues to be good.

Speaker 2: Consistent with last quarter, inventory turnover slowed in the third quarter as customers request for rescheduling of product shipments continued as customers managed through their own inventory and production timing challenges.

Speaker 2: Our return on working capital continues to be more than two times greater than our cost of capital however.

Speaker 2: In the third quarter, we generated $18 million of cash from operations and we expect to generate positive cash flow from operations in the fourth quarter.

Speaker 2: Our debt decreased by approximately $80 million. We ended the quarter with a gross leverage of 2.3 times which was an improvement from the second quarter.

Speaker 2: At quarter end, we had approximately $750 million of available committed borrowing capacity, and our teams continue to work on selling inventory on hand and collecting receivables to provide additional liquidity.

Speaker 2: With regard to our capital allocation, in the near term, we continue to prioritize the needs of our business, including working capital and capital expenditures. During the third quarter of cash used for capital expenditures was $26 million.

Speaker 2: For the long term, we remain committed to our roadmap of delivering a reliable, increasing dividend and sharey purchases to increase our shareholder value when we believe our shares are undervalued by the market, which continue to be the case in the third quarter.

Speaker 2: In the third quarter we paid our quarterly dividend of $0.29 per share or $27 million. We have $319 million left on our current share, Reburchase Authorization as we enter the fourth quarter. Book value per share improved to approximately $50 a share.

Speaker 2: or a sequential increase of approximately $2 a share, do primarily to our strong earnings for the quarter. Turning to guidance. For the fourth quarter of fiscal 2023, we are guiding sales on the range of $6.1 billion to $6.4 billion and adjusted deluded earnings per share in the range of $1.60 to $1.70.

Speaker 2: Our fourth quarter guidance is based on current marking additions and implies a sequential sales decline of 1% to 6%.

Speaker 2: This guidance assumes below traditional seasonality in sales across all regions.

Speaker 2: This guidance also assumes similar interest expense compared to the third quarter, an effective tax rate of between 22 and 26 percent, and 93 million shares outstanding on a diluted basis.

Speaker 2: In closing, I want to thank our team for delivering another solid quarter of your over-year operating income growth and margin expansion. Our team continues to deliver great results while demonstrating our value to our customer and supplier partners. With that, I will turn it back over to the operator to open it up for questions.

Speaker 5: Operators. Thank you. Ladies and gentlemen, we will be now be conducting a question and answer session.

Speaker 5: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove that question from the queue.

Speaker 5: for participants using speaker equipment and maybe necessary to pick up your hands up before pressing the star keys.

Speaker 5: using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for any questions.

Speaker 5: In our first question comes from the line of Rupaloo Bhattacharya with Bank of America. Please proceed with your question. All right, thanks for taking my questions. Phil, last quarter you had expected...

Speaker 5: In 3Q, both Europe and America's revenues to be flat to slightly down sequentially, but they grew. What was better than expected, which products or what which were equal came in better than you had thought? Then when you look at the demand environment today versus 90 days ago, you think that the demand is the market.

Speaker 1: It's the few we talked about. I mean, the automotive or transportation continues in our world to be very good. You know, I always say transportation. That includes your e-bikes, carts, trucks, everything, right? And industrial. Industrial market is held up. Frankly, probably a little bit stronger than we anticipated this time.

Speaker 1: last quarter ago. So it's really those two and then of course in more America's.

Speaker 1: centric of the defense and aerospace has been Really really positive for us so they're to they're to handful of articles and it's pretty like it's had pretty broad across the regions So real positive. Yeah on the pricing trends, you know what kind of

Speaker 1: holding on right now. So we touched on that in the script briefly. Actually in the beginning of the quarter, we had a handful of suppliers that actually raised prices. Up to 15 to 20, still rate uncertain. Again, this was key, Rubel, uncertain technologies, not everything, right? Because the input costs are still there.

Speaker 1: But other than that, I would say the pricing environment right now is relatively stable. And on the overall question on demand environment, how do I see it going forward? Well, we've got some typical seasonality coming into play a bit with the quarter.

Speaker 1: But I would say kind of steady, you know, look, we know there's inventory out there, some buildups in all the verticals to some degree. But right now I would just say steady, you know, just kind of, it's holding on right now and thus the guidance that we gave for our June quarter.

Speaker 5: It's very mixed back out there, RuPods. Yeah, thanks for the details there, Phil. Let me ask Ken something on inventory. So it looks like sequentially inventory was up 8%. Was there some timing issue I think you talked about? So when we think about inventory working capital and free cash flow.

Speaker 2: part of its timing, you know, there was some stuff that we received to the end of the quarter, but a lot of its stuff that received during the quarter and weren't able to ship out. So I wouldn't say there's one in particular fact. I mean about 10% or so is foreign currency 10% as far now and the 80% is really the bulk of the the EC business across the board between all regions. And so you know, looking into into into next quarter.

Speaker 5: We'd expect inventory to be flat, as we still think it's going to take a couple quarters to really get through the inventory levels being elevated. Canif, I can squeeze one more in real quick. So the core components margins, even on sequentially 200 million lower revenues, it grew to five...

Speaker 5: sustainable or at what revenue levels can this margin level of 5% be sustainable. Thank you so much.

Speaker 2: Yeah, I think we need to have in the mid $6 billion to make the 5% sustainable. I will say as we kind of look out there, we don't really foresee sales in any quarter dropping below $6 billion or really operating margin dropping low 4% as we currently see it.

Speaker 2: But getting into the current core, we did have a favorable mix. So about half and half, half was a more favorable mix than we thought. But I would point out for Amir and America, it was still below normal seasonal growth. So although we did better than expected in those regions, coming out of December quarter, it was still lower in terms of growth rates than we'd expect to see in a normal environment. And the rest was a little bit better.

Speaker 2: margin in each of those regions. So they did drive a better mix. We talked about demand creation. So it's all those things we've been talking about, helped to contribute to the little bit higher gross margin in all the regions as well.

Speaker 2: in each of those regions so they did drive a better mix. We talked about demand creation. So it's all those things we've been talking about help to contribute to the little bit higher gross margin in all the regions as well. Thanks for all the details and congrats on the strong execution.

Speaker 6: Thanks, we'll move. The next question comes from the line of Melissa Fairbanks with Raymond James. Please proceed with your question.

Speaker 7: Hi guys, thanks so much. Congrats on a great quarter and guide. Really nice progress on the margins. It's really good to see in this kind of an environment.

Speaker 7: I know you're probably tired of talking about it, but I'd like to dig on the inventory levels. Thanks for providing the color on the FX impact. I'm curious if price inflation is also impacting the new inventory you're bringing in. You've seen continued price increases in the past quarter. We've heard a few suppliers so far this quarter signal that more price increases are coming.

Speaker 7: And then separately, there's a number of suppliers that have been holding inventory back from the channel, including in distribution. As the supply continues to ease, we'd expect these suppliers to begin releasing more inventory. Is there potential for your inventory levels to continue to rise? Is this happened?

Speaker 2: Let's take the first part. I think how I characterize it is pricing is clearly unimpact not only to the sales growth but also the inventory levels. I would say it's more muted than it was a couple quarters ago. That's a component I wouldn't characterize. The inventory increase overall. It's 80% coming from the core business. I wouldn't characterize, let's say, more than 25% coming from pricing.

Speaker 2: And you kind of see that in our sales growth as well. Going back to the question about whether or not, you know, inventory levels could rise. I mean, I think we, that's a possibility. That's where aiming to resolve, I would say it was more than we expected to rise come into this quarter. But what I would say is, you know, if that happens with certain suppliers that are going to give us more inventory because of, you know, our demand or our orders, you know,

Speaker 1: which is not aging. And.

Speaker 1: If I get any Pareto, there's a handful of concentration where the inventory is really grown. So it's not across the board, right? So it's not every line or every technology. So it's really a classic Pareto there with a concentration in a handful.

Speaker 1: And the other thing is we're balancing the customers requirements. You're kind of going back to their previous, how do we see demand, and it depends on the vertical. We're managing the customers. How much can they take? Maybe they might have a little bit too much inventory. So we're trying to manage, being in that center, technology supply chain that suppliers and the customers and what the real needs are.

Speaker 1: And we're in the front of all of these customers. So they maybe can't take it this quarter, hey can they take it next quarter? And then maybe we have to extend a little bit of ARs. You heard one out a little bit as well. It's all kind of hand to hand combat on every one of these deals.

Okay, great. Thanks very much. That's super helpful. Maybe just one really quick follow-up. This might be for 10. So this is definitely not a quote-unquote normal cycle because of some of these supply constraints and you know changing behavior of holding more inventory on the supplier side. Does this potentially change the normal counter-cyclical pattern of the world?

the receivables from those higher sales and that's what creates the cash. That still holds true, but the inventory hasn't gone down, right? We look at more cash when we've got this quarter, next quarter, you know, but the key is going to be getting the inventory down to actually create that larger counter-circuable effect. So we don't believe it's changed, have not seen the inventory, whereas you've seen how the cycle's the inventory goes down a couple quarters after the sales go down.

Okay, great. Thanks very much. That's all for me. Thanks, boys. And the next question comes from the line of Matt Sheeran with Steeple. Please proceed with your question. Yes, hey, thanks. Good afternoon, everyone. Phil, just your comments regarding, I think I think you said that you expect that it the correction.

and how long that will take. Are you expecting your sequential or less and seasonal trends at least through the rest of the fiscal year or the calendar year?

Yeah, thanks, Matt. Well, first of all, the seasonal trends and the typical seasonality has kind of been thrown out the window. So it's tough to let me just tell you what we're seeing. And our guide reflects that. And, um, um,

As far as our estimate based on the backlog we have, the inventory we show pipeline coming in and the revenue forecast gave me the facts to say, yeah, I think it's about a couple quarters, maybe it's two or three quarters kind of burn off. It's just a very different cycle than we've seen before. And there's so many mixed signals, Matt. I mean, some vehicles, IE, PC, consumer, you know, are down mobile. And then other ones.

So the industrial continues to be a strong or steady and automotive. So it's given us just so many different mixed signals this time. But that's our estimate. We think that the demand and what we see in our forecast, we're getting in from our customers, going to allow us to 2 to 3 quarter cycle.

Yeah, I don't know. I don't think so. I think they're catching up. I mean, you know, because lead times in many cases are coming in. So they're catching up to the old promise dates or required dates. We're not. I'm a real one emphasize in the suppliers as noted earlier, even working with us that they're not shipping early. So we are not taking in products quarters earlier or anything on those lines. Some of it just catching up so quickly, then you can't pass it on to the customers. Even if they remiss in a gold screen, they can't build it all in a month. Right. So they got to they got to plan out their manufacturing and things are coming in quicker than they thought. So it's kind of a, I can say it earlier. It's everyone's a bit of a a one off. But I do not believe that the suppliers want to ship early or are shipping or at this point in time. We're not we're not we're not seeing that.

Got it. I know you're guiding revenues down roughly 4% sequentially. Would you expect all regions to be down sequentially? I think I would say Normally, Matt Asia would be up a little bit coming off the lunar year and they're up less than we'd like and then you know Amia and America's would be down is kind of that so it's a little bit more unfavorable mix than it was in the third quarter I would say with the with the 6.25 billion

And that's typical in the West, Matt. Europe and America is coming down from the March quarter, Stibbler, one of our large quarters.

Yeah, Matt, I mean, I think that's the priority. As cash gets generated, we pay down the debt, and I think we're kind of hit the plateau there with the peak there, the 70 million, but yeah, we got to work that down as well. And clearly, you can see the headwind it's created with the EPS, right? Or EPS would be a lot more robust. Hadn't we had that, you know, additional expense to fund the working capital? Yep, fair enough. Okay, thanks for the answers. I appreciate it. Thanks. Thanks, Matt. And ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tele will indicate that your line is in the queue. You may press star two to remove that question from the queue.

For participants using speaker equipment, it may be necessary to pick up your hands up before pressing the star keys. Our next question comes from the line of Joe Quattrochi with Wells Fargo. Please proceed with your question.

So, feel good there. You know, in the banking situation, you know, we were able to, and congratulations to our treasure team to close a debt deal right before some of that noise happened. To give us a little bit more liquidity, we're glad we were able to get in before the noise. You know, we had some customers that had their banking and some of these, you know, regional institutions that were impacted, but overall, it's not been an impact to us, I would say. Yeah, just with that on the AR, just, ARs, it receivables a strategic for us, right? So, we knowingly are working with our customers. There's no real surprises on the AR going out. And we're, as we get the image right into, they can't afford to take it right now. We'll hold a little bit more of, we ship, we extend it, they're receivable. It's again, they're all, they're all one-on-one conversations with the customers. Because again, we're in the front of all.

pretty much within our range, okay, and at 30, 25 to 30 percent range, we are seeing some pushouts, right? Which again is not necessarily a bad thing, but the customers are still reluctant to cancel the back cloud, which is interesting. Hey everyone, there are no further questions at this time, and I'd like to turn the floor back over to Phil Galgur for any closing comments. Yeah, I'm just thank everyone for attending today's earnings call and look forward to speaking to you again at our fourth quarter fiscal earnings report in August . Have a great day. Thanks.