Q4 2024 1stdibs.Com Inc Earnings Call
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Kevin LaBuz, Kevin LaBuz, Thomas Etergino
Kelvin: Good morning and thank you for standing by. My name is Kelvin and I will be your conference operator today.
Speaker Change: At this time, I would like to welcome everyone to the 1st Dibs 4th Quarter 2024 Earnings Call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Kevin LaBuz, Head of Investor Relations and Corporate Development. Please go ahead.
Kevin LaBuz, Kevin LaBuz, Thomas Etergino
Speaker Change: Good morning and welcome to FirstDibs earnings call for the quarter and year ended December 31st, 2024.
Speaker Change: This call will be available via webcast on our Investor Relations website at investors Dot <unk> Dot com.
Speaker Change: Before we begin please keep in mind that our remarks include forward looking statements.
Including but not limited to.
Speaker Change: Statements regarding guidance and future financial performance.
Speaker Change: Market demand growth prospects.
Speaker Change: Plans strategic.
Speaker Change: Strategic initiatives.
Business and economic trends, including e-commerce growth rates.
Speaker Change: International opportunities and competitive position.
Speaker Change: Our actual results may differ materially from those expressed or implied in these forward looking statements as a result of risks and uncertainties, including those described in our SEC filings.
Speaker Change: Any forward looking statements that we make on this call are based on our beliefs and assumptions as of today.
Speaker Change: And we disclaim any obligation to update them, except to the extent required by law.
Speaker Change: Additionally, during the call, we will present, GAAP and non-GAAP financial measures.
Speaker Change: A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which you can find out our investor Relations website, along with the replay of this call.
Speaker Change: Lastly, please note that all growth comparisons are on a year over year basis, unless otherwise noted.
Speaker Change: I will now turn the call over to our CEO David Rosenblatt.
Speaker Change: David.
David Rosenblatt: Thanks, Kevin Good morning, and thank you for joining us today I am pleased to share the progress we made in the fourth quarter.
David Rosenblatt: We exceeded our guidance achieved our highest GMB growth since 2021 and gain market share.
David Rosenblatt: In 2022, and 2023, we reduced operating expenses rationalized, our product lineup and maintained our focus on conversion.
David Rosenblatt: These actions paid off in 2024, while full year <unk> was flat following a 15% decline in 'twenty to 'twenty three we exited the year with CMV growing 9% in the fourth quarter the fastest pace in three years.
David Rosenblatt: For the year as a whole conversion active buyers orders revenue and gross profit all inflected back to growth.
David Rosenblatt: Tighter focus and accelerated product velocity are fueling these gains.
David Rosenblatt: Throughout 2024, we double down on what was working while reallocating resources from lower return projects to higher return projects driving higher conversion rates.
David Rosenblatt: Revenue growth occurred against the backdrop of continued weakness in our market. According.
David Rosenblatt: According to the National Association of Realtors U S home sales a key driver of furniture demand mirrored a 30 year low in 2024.
David Rosenblatt: In addition, syndicated credit card data showed that the broader online furniture in premium home furnishings markets contracted.
David Rosenblatt: This downturn is cyclical not structural we expect that the market for luxury real estate and luxury home goods will eventually rebound and we continue to see a large and compelling opportunity in that market.
David Rosenblatt: As such we are investing selectively in the long term drivers of our success.
David Rosenblatt: Doing so will enhance the value that we bring to buyers and sellers.
David Rosenblatt: And our competitive position.
David Rosenblatt: Returning to revenue growth is an important step toward realizing our long term vision, we aspire to build a business serving hundreds of thousands of active buyers generating billions in GMP and hundreds of millions in revenue, while delivering strong profitability and free cash flow.
David Rosenblatt: We recognize that there is a long way to go in the path there likely won't be linear, but we are pleased to be on a positive trajectory after a difficult few years.
David Rosenblatt: We also made progress on our path to profitability in 2024 by remaining vigilant on expenses and maintaining strict efficiency thresholds on performance marketing.
David Rosenblatt: On an annual basis operating expenses declined for the second consecutive year and we delivered our best adjusted EBITDA margins as a public company.
David Rosenblatt: Relative to 2023 revenue increased by $3 $6 million and adjusted EBITDA increased by $5 $3 million due to expense reductions and high incremental flow through demonstrating our operating leverage potential.
David Rosenblatt: After a resetting expenses in 2022 and 2023, our path to profitability now depends on sustaining revenue growth and maintaining operating leverage.
David Rosenblatt: Our asset light model allows us to scale T N V and revenue without proportionate increases in our workforce of.
David Rosenblatt: Approximately 60% of our operating expenses are head count related and our plan for 2025 is to hold head count flat and unlock operating leverage at mid single digit revenue growth.
David Rosenblatt: Moving to quarterly results. We finished the year on a high note with CMV up 9% quarter.
David Rosenblatt: Quarterly G M D revenue and adjusted EBITDA margins, all exceeded the high end of guidance.
David Rosenblatt: From a funnel perspective conversion rates grew for the fifth consecutive quarter.
David Rosenblatt: Traffic declines moderated and average order value inflicted from a headwind to a tailwind.
David Rosenblatt: Increasing conversion remains our operational priority and highest leverage activity.
David Rosenblatt: We continue to see great momentum here with improving conversion rates for both new and returning buyers.
David Rosenblatt: These gains are being driven by our heightened pace of product velocity.
David Rosenblatt: The number of AB test, we ran during the quarter grew double digits sequentially and triple digits year over year, hitting a new record.
David Rosenblatt: Consistent with previous quarters, increasing conversion was the primary focus of our product development efforts and we had several notable wins during the quarter.
David Rosenblatt: First.
David Rosenblatt: We launched a machine learning based pricing model for jewelry, providing stronger or more precise recommendations tailored to maximize conversion.
David Rosenblatt: This is the second category for which we have rolled out ml pricing recommendations following on from furniture in the third quarter.
David Rosenblatt: We expect that continued progress on determining market pricing for our products gaining seller adoption of these prices and communicating them to buyers effectively will be prerequisites for continued conversion gains we.
David Rosenblatt: We also believe that our relative market share it gives us a unique ability to implement these three pricing related priorities.
David Rosenblatt: Second we re architected, the backend of checkout to significantly increase speed.
David Rosenblatt: Every second matters, there's a strong relationship between decreasing checkout speed and improving conversion rates today.
David Rosenblatt: Today, our checkout experience is meaningfully faster, resulting in higher checkout completion and conversion.
David Rosenblatt: Third we increased the prominence of our seller recommendations. This helped to increase the engagement and adoption of our seller recommendations, which are aimed at increasing sell through and conversion.
David Rosenblatt: The increased volume of features and enhancements as a function of an accelerated pace of testing. The result of a product development culture that has become more entrepreneurial over the past 18 months.
David Rosenblatt: This was a significant contributor to conversion growing double digits in 2024.
David Rosenblatt: Turning to supply we ended the quarter with approximately 5900 unique sellers down 24%.
David Rosenblatt: As we mentioned last quarter churn was elevated due to the retirement of our central Solar program in late November.
David Rosenblatt: Of the approximately 2200 unique sellers affected by this change over 1200 upgraded to a monthly subscription plan.
David Rosenblatt: In total the churn cohort accounted for less than 30 basis points of G. M V over the trailing 12 months and under 40 basis points of listings.
David Rosenblatt: Okay.
David Rosenblatt: Although unique seller count has been volatile due to subscription pricing optimizations, we continue to see steady listings growth and ended the quarter with over $1 8 million listings up 5%.
David Rosenblatt: Looking ahead, we expect churn to normalize in the first half of 2025 and continued listing growth.
David Rosenblatt: Turning to 2025, while we believe that the worst of this down cycle for luxury home furnishings is now behind us the pace and timing of recovery remain uncertain.
David Rosenblatt: In light of this we are looking to create our own luck through self help initiatives to increase <unk> and revenue improved margins and win market share.
David Rosenblatt: Our roadmap focuses on creating value for both sides of the marketplace to cement, our leading position in online luxury design.
David Rosenblatt: For buyers this means reducing friction and building trust for sellers. This means delivering tools and insights to drive more sales.
David Rosenblatt: And a historically opaque market, we can add a lot of value by providing transparency.
David Rosenblatt: Building on foundational work completed in 2024 hour roadmap is anchored by four themes.
David Rosenblatt: The first is accelerating organic traffic growth given that approximately 70% of our traffic is organic improvements here should drive efficient buyer acquisition.
David Rosenblatt: Projects include improving site performance refining our site structure and improving the size and the effectiveness of our email marketing program.
David Rosenblatt: The second is competitive pricing.
David Rosenblatt: However prices are often perceived as being too high impacting buyer trust and conversion.
David Rosenblatt: The objective here is ensuring that listings and shipping costs are transparently and accurately priced.
Work streams include expanding the use of machine learning driven pricing models across all categories, expanding the number of product display pages views with a shipping quote and improving the accuracy of shipping quotes.
David Rosenblatt: We know from our internal data that items with shipping quotes have higher conversion rates compare to those that don't so increasing the prevalence of shipping quotes and the accuracy of those quotes should boost conversion.
David Rosenblatt: The third is continuing to optimize our conversion funnel.
David Rosenblatt: We want to make it easier for shoppers to find and buy the perfect item.
David Rosenblatt: Projects include improving personalization and discovery enhancing buyer incentives.
David Rosenblatt: Optimizing the design and performance of our various surfaces, especially mobile web and empowering sellers to better manage and optimize their listings.
David Rosenblatt: Last we are focused on elevating the level of service, we provide with initiatives like faster case resolution expanded live chat support and proactive communication on common issues.
David Rosenblatt: These efforts are designed to drive conversion through greater customer satisfaction and higher repeat rates.
David Rosenblatt: Executing on our 2025 roadmap will build on the progress we made in 2024 solidifying our leading position in online luxury design.
David Rosenblatt: We aim to accelerate growth improve margins and capture market share all while strengthening our foundation for scalable long term success.
David Rosenblatt: Turning to capital allocation.
David Rosenblatt: Given the continued disconnect between our rising confidence in the business and our assessment of intrinsic value compare dollar market price, we remained active with share repurchases.
David Rosenblatt: In 2024, we repurchased approximately five 6 million shares for $28 1 billion, including approximately one 3 million shares in the fourth quarter.
David Rosenblatt: We believe that this will be very accretive in the long run given the size of our opportunity our operational progress and the fact that we are well positioned to capitalize on a market recovery.
David Rosenblatt: We exited 2024 from a position of strength after navigating a challenging few years, our renewed momentum market share gains and margin improvements validate our strategy.
David Rosenblatt: These milestones reflect our market leadership and the strategic actions we've taken in 2025, we intend to build on this momentum by sustaining growth expanding market share and driving towards profitability.
David Rosenblatt: Thank you for your continued support and I will now turn it over to Tom to review, our fourth quarter financial results and first quarter outlook.
Tom: Thanks, David.
Tom: <unk> revenue and adjusted EBITDA margins exceeded the high end of our guidance range driven by improving conversion funnel dynamics, a rebound in average order value and continued vigilance on expenses.
Tom: <unk> was $94 $5 million up 9% the fastest pace we've seen in three years.
Tom: This performance is in Stark contrast to our end markets, which continue to contract signifying market share gains.
Tom: On a sequential basis GMP growth rates accelerated approximately 14 percentage points.
Tom: This was driven by moderating traffic declines continued conversion improvements and higher than anticipated average order values.
Tom: The average order value of approximately $2600 was up 2% and median order value of approximately $1200 was up 4%.
Tom: This compares to declines in the third quarter.
Tom: This rebound was driven by a slight mix shift away from orders under $1000.
Tom: In total these orders accounted for approximately 46% of total in the fourth quarter.
Tom: From just over 47% a year ago.
Theres no other digital marketplace at our scale, which has the buyer and seller trust to transact at our average order value across multiple verticals.
Tom: We're able to deliver qualified buyers at price points, ranging from under $100 to over $1 million.
Tom: Return your funnel trends traffic declines moderated with improvements to organic traffic being partially offset by slower paid traffic growth.
Tom: We ended the quarter with approximately 70% of traffic from organic sources and 30% from paid.
Tom: Conversion gains moderated versus the third quarter, but remained healthy.
Tom: Conversion rates have now increased year over year for five straight quarters.
Tom: Confident in our road map and see ample headroom to increase conversion over time.
Speaker Change: Returning to JMP consumer JMP and trade M GMP both group.
Speaker Change: JMP increase for all verticals, except for in your own custom furniture, which was down 1%.
Speaker Change: Encouragingly Finch agenda, and cheap furniture, our largest vertical grew double digits.
Speaker Change: We ended the quarter with approximately 64300 active buyers up 6% year over year and 3% sequentially.
Speaker Change: This is the first quarter of year over year active buyer growth since the second quarter of 2022, and the third consecutive quarter of sequential growth on an absolute basis.
Speaker Change: On the supply side of the marketplace, we experienced steady listings growth.
Speaker Change: Ending the quarter with over $1 8 million listings up 5%.
Speaker Change: We ended the quarter with approximately 5900 unique sellers down 24%.
Speaker Change: As anticipated seller churn was elevated due to retiring our central seller program in November.
Speaker Change: Of the approximately 2200 unique sellers are affected by this change over 1200 upgraded to a monthly subscription plan.
Speaker Change: Seller churn had a de minimis impact on champion listings, we expect churn to normalize in the first half of 2025.
Speaker Change: Turning to the P&L net revenue was $22 $8 million up 9%, marking the third consecutive quarter of year over year expansion in our fastest growth rate in three years.
Speaker Change: Transaction revenue, which is tied directly to GMP was approximately 75% of total revenue with subscription is making up most of the remainder.
Speaker Change: Take rates were stable year over year.
Speaker Change: Gross profit was $16 $5 million up 10%.
Speaker Change: Gross profit margins were 72% up approximately one percentage point.
Speaker Change: Sales and marketing expenses were $10 $5 million up 22% driven by severance expenses seasonal increases in performance marketing.
Speaker Change: Related expenses due to our annual merit increases awarded in March.
Speaker Change: Sales and marketing as a percentage of revenue was 46% up from 41% a year ago.
Technology development expenses were $5 $5 million up 23% driven by higher head count related costs due to our annual merit increases awarded in March and some selective hiring and training our machine learning team.
Speaker Change: As a percentage of revenue technology development was 24% up from 21%.
Speaker Change: General and administrative expenses were $6 $6 million up 6% with higher head count related expenses due to our annual merit increases awarded in March and higher professional service fees.
Speaker Change: As a percentage of revenue general and administrative expenses were 29% down from 30% a year ago.
Speaker Change: Lastly, provision for transaction losses were approximately $840000, 4% of revenue flat year over year.
Speaker Change: Operating expenses were $23 $4 million up 16% year over year.
Speaker Change: Excluding onetime severance charges operating expenses increased by 12% year over year, and 1% sequentially due to seasonal increases in performance marketing spend.
Speaker Change: On this basis operating expenses have been approximately flat for the past three quarters.
Speaker Change: Adjusted EBITDA loss was $1 $6 million compared to a loss of $1 $7 million last year.
Speaker Change: You better margin was a loss of 7% a one percentage point improvement year over year.
Speaker Change: Looking forward, we remain focused on lowering the revenue threshold required to achieve operating leverage in 2025, our expense base is set up to deliver operating leverage at mid single digit revenue growth. Additionally, we plan to keep head count flat year over year.
Speaker Change: Moving onto the balance sheet, we ended the quarter with a strong cash cash equivalents and short term investments position of $104 million.
Speaker Change: During the quarter, we repurchased approximately $5 $3 million worth of shares.
Speaker Change: Launching our first share repurchase program in August of 2023, we have repurchased approximately $6 4 million shares for a total of $31 $6 million.
Speaker Change: At the end of December we had approximately $3 $8 million of outstanding authorization remaining.
Speaker Change: Turning to the outlook.
Speaker Change: And she flex quarter to date results and our forecast for the remainder of the period.
Speaker Change: We forecast first quarter GNP of 90 million to $96 million down 2% to up 5%.
Speaker Change: Net revenue of $21 7 million to $22 8 million.
Speaker Change: Down 2% to up 3% and adjusted EBITDA margin loss of minus 12% to minus 8%.
Speaker Change: Our GMP guidance reflects continued conversion gains traffic declines in average order value growth from a macro perspective, our outlook assumes a continuation of the soft demand environment. We saw throughout 2023 and 2024 due to prolonged softness in the luxury housing and high end discretionary markets.
Speaker Change: Finally, we are lapping a leap year, which translates into roughly 100 basis point drag on year over year growth rates.
Speaker Change: Adjusted EBITDA margin guidance reflects gross margins in the 71% to 72% range.
Speaker Change: <unk> head count related costs due to one month of annual Merit increases in March and higher health insurance premiums increased professional service fees, particularly on audit and Sox related items and a provision for transaction losses of approximately 4% of revenue in line with historic levels.
Speaker Change: We're not providing annual guidance. It is worth noting that we expect <unk> to grow year over year in 2025, assuming no major changes in the macro environment.
Speaker Change: Our annual Merit cycle goes into effect on March 1st So the full impact of higher salaries will be felt in the second quarter.
Speaker Change: On an annualized basis, our 2025 plan targets generating operating leverage at mid single digit revenue growth and keeps head count flat.
Speaker Change: In conclusion, we're proud of the progress we've made this year highlighted by a strong return to growth in the fourth quarter and clear market share gains importantly, we've reduced operating expenses for the second straight year, demonstrating our commitment to financial discipline moving forward, we're focused on maintaining this balance driving growth capturing market share.
Speaker Change: Generating operating leverage as the business scales.
Speaker Change: We appreciate your continued support and look forward to updating you on our progress in the coming quarters. Thank you.
Speaker Change: I will now turn the call over to the operator to take your questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session. At this time I would like to remind everyone to ask a question Press Star then the number one on your telephone keypad.
Speaker Change: I'd like to withdraw your question Press Star one again, one moment. Please for your first question.
Speaker Change: Your first question comes from the line of Nick Jones of citizens. Please go ahead.
Nick Jones: Hi, good morning, Thanks for taking my questions I guess first.
Speaker Change: Think about kind of marketing strategy as you as you look.
Speaker Change: Okay navigate I guess kind of depress home transaction was particularly on the luxury side, what are kind of some key channels or investments youre, making there you know throughout this kind of early cycle, we keep hearing folks increasingly look to build integrations.
Speaker Change:
Speaker Change: Meta product and kind of focused on mid funnel all the way to kind of show selection to shoppers kind of where they are can you kind of talk about how you're thinking about your marketing strategy. This year. Thanks.
Speaker Change: Yeah, Hey, Matt good morning.
Speaker Change: When we think of marketing strategy, we think of it more in terms of customer acquisition.
Speaker Change: Of course, we have efforts focused on retention and cross selling and Upselling and so on but I mean.
Speaker Change: The most important part of the marketing for US is customer acquisition I think we were happy that in Q4 that we were able to.
Speaker Change: Higher volumes without relaxing our return criteria and threshold.
Speaker Change: We've seen a lot of.
Speaker Change: Success on Facebook actually.
Speaker Change: And beyond that we've continued to make incremental improvements in our historically primary channels the biggest of which is Google.
Speaker Change: Okay.
Speaker Change: Great and then maybe a second question.
Speaker Change: I think AI is a big focus.
Speaker Change: Got it seems like your platform given kind of the uniqueness of the listing and the breadth of things.
Speaker Change: You know it might be well equipped to kind of benefit from the jet think AI can you talk about any efforts you guys have with age I think they are just you have to touch dive deeper and more broadly thanks.
Speaker Change: Yes, so it's an important focus for us and we think that AI.
Speaker Change: <unk> in particular will have a meaningful impact on both the revenue and the cost side over time.
Speaker Change: So we built the team at the end of Q3, so we've been added for a little bit over sorry, Q3, Q4 of 2023, so we've been at it for a little bit more than a year.
Speaker Change: The initial and I think kind of highest return product projects have been related to pricing. So in Q3. For example, we rolled out an MLP model to recommend optimal pricing to our furniture sellers in Q4, we rolled that out to our jewelry category and we will complete the rest of it.
Speaker Change: In 2025, we were are also pointing ml add shipping pricing for us that's a big source of leverage I think bigger than most ecommerce companies.
Speaker Change: And that's.
Speaker Change: Both ensuring that we have as high coverage a pre quotes as possible and also that that pricing is.
Speaker Change: As competitive as possible and then beyond that.
Speaker Change: A lot of the applications are similar to those in other companies.
Speaker Change: And those are all on our roadmap things like personalization.
Speaker Change: Customer service agents and so on but I think where we where we are most focused right now and where do we expect to see the biggest return is from pointing ml ad pricing.
Speaker Change: Okay.
Speaker Change: Great. Thanks for taking my questions.
Speaker Change: Your next question. Your next question comes from the line of Austin Riddick of Evercore. Please go ahead.
Hi, guys. Good morning, a quick one for me.
Speaker Change: Outside of the macro what are the main levers to bring adjusted EBITDA closer to positive territory and how are you balancing those measures with investments in growth.
Tom: Yes, Hi, this is Tom I'll take that I mean.
R.
Speaker Change: Our television.
Speaker Change: Getting to breakeven and adjusted EBITDA positive.
Speaker Change: Really going to be centered around.
Speaker Change: Revenue growth, we are very disciplined on expenses, we continue to remain disciplined on expenses and we will stay that way.
Speaker Change: But.
Speaker Change: Our breakeven or EBITDA positive will come from additional revenue sustained revenue and GMB growth.
Speaker Change: What we are aiming to do in 2025 around our expense base is to deliver operating margin leverage.
Speaker Change: Mid single digit revenue growth.
Speaker Change: So we are structuring our expenses to two.
Speaker Change: Produce better bottom line.
Speaker Change: Once we once we.
Speaker Change: Exceed that mid digit Rev.
Speaker Change: Revenue growth in 2021.
Speaker Change: Your next question comes from the line of Ralph <unk> with William Blair. Please go ahead.
Ralph: Good morning, Thanks for taking the question.
Speaker Change: In terms of the script, you talked about expecting churn normalization in the first half of 2025.
Speaker Change: Maybe just give us an update there and the signals you're seeing how that's progressing.
I have a follow up.
Speaker Change: Sure So hi.
Ralph: Hi, Ralph the most important metric that we optimize to on the supply side as listings.
Speaker Change: Rather than the number of sellers.
Speaker Change: And we were happy with our progress there in the fourth quarter, we ended with over $1 8 million listings, which was up 5% year over year, we did see a spike in churn.
Speaker Change: You know the majority of that came from retiring our central solar program in the fourth quarter. The Central Solar program is the one under which we offered a zero sub fee plan for sellers.
Speaker Change: Of the roughly 2200 unique sellers that were affected by that change over 1200 upgraded to a monthly sub plan. So what we did there is we retired it and asked people either to leave or to pay.
Speaker Change: Minimum monthly subsidy and again 1200 out of the 2200 that were impacted by that chose to upgrade to the paid program.
Speaker Change: But I think importantly, the churn cohort.
Speaker Change: Accounted for less than 30 basis points of <unk> and also less than 40 basis points of listings over the prior 12 months, meaning the sellers that last sort of self selected into.
Speaker Change: Neither using the marketplace nor of course correspondingly being willing to pay for and we were fine with that if they are not committed to it they are not going to be successful looking forward, we expect churn to normalize sometime in the first half of this year and also to see continued listings growth.
Speaker Change: That's helpful. David and then just one more from me.
Speaker Change: In the script today.
Speaker Change: <unk> mid single digit revenue growth I think for 2025 is just wanted to clarify is that what you are contemplating for 2025 or is that sort of the optimal level that you would need or the condition you would need to return back to Shanghai.
Speaker Change: Leverage in the model. Thank you.
Speaker Change: No I think what we were talking about was.
Speaker Change: We don't give guidance for the full year, Budd, we sort of wanted to hear a directional.
Speaker Change: I don't know confidence that we believe that we have the ability to grow <unk> this year.
Speaker Change: And.
Speaker Change: Without without putting numbers on it and I think look it's important to kind of zoom out for a second.
Speaker Change: I recognize that.
Speaker Change: 24 over 23.
Speaker Change: It was I think an important inflection point for us as a company.
Speaker Change: The prior year GMB shrank by 15% in line with the market.
Speaker Change: Last year <unk> was flat of course with with a pretty healthy exit.
Speaker Change: Right and we <unk> growth rate and we expect to see <unk> growth to continue into 2025 at the same time. It's also.
Speaker Change: Important to note that our expense base is setup to deliver operating margin leverage in the mid single digits of revenue growth. So that may have been what you are referring to.
Speaker Change: Hopefully that clarifies it.
Speaker Change: It does thank you.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: There are no further questions at this time with that ladies and gentlemen that concludes your conference call.
Speaker Change: Thank you for participating and ask that you. Please disconnect your lines.
Okay.
Speaker Change: Yeah.