Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) Q3 2023 Earnings Call Transcript

Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) Q3 2023 Earnings Call Transcript November 9, 2023

Ritchie Bros. Auctioneers Incorporated beats earnings expectations. Reported EPS is $0.72, expectations were $0.52.

Operator: Good day. My name is Chris, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the RB Global Third Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I’ll now turn the call over to Mr. Sameer Rathod, Vice President of Investor Relations and Market Intelligence to open the conference call. Mr. Rathod, you may begin your conference.

Sameer Rathod: Hello, and good afternoon to everyone. Thank you for joining me and our Chief Executive Officer, Jim Kessler, on today’s call. The following discussion will include forward-looking statements, which can be identified by words such as expect, believe, estimate, anticipate, plan, intend, opportunity and similar expressions. Comments that are not a statement of fact, including, but not limited to, projections of future earnings, revenue, gross transaction value, debt and other items, business and market trends and expectations regarding integration of IAA, including anticipated cost synergies are considered forward-looking and involve risks and uncertainties. The risks and uncertainties that could cause actual results to differ significantly from such forward-looking statements are detailed in our news release issued this afternoon as well as our most recent quarterly report and annual report on Form 10-K, which are available on the Investor Relations website as well as EDGAR and SEDAR.

On this call, we will also discuss certain non-GAAP financial measures, including forward-looking non-GAAP financial measures. For the identification of non-GAAP financial measures, the most directly comparable GAAP financial measures and the applicable reconciliation of the two, see our news release, Form 10-K, Form 10-Q and investor presentation posted on our website. We are unable to present a quantitative reconciliation of forward-looking non-GAAP financial measures as management cannot predict all necessary components of such measures. Investors are cautioned not to place undue reliance on forward-looking non-GAAP financial measures. All figures discussed on today’s call are U.S. dollars unless otherwise indicated. At this time, I would like to turn the call over to Jim.

Jim?

James Kessler: Thank you, Sameer, and good afternoon to everyone. Our marketplace platform and growth initiatives showcased their strength and effectiveness again in the third quarter as we achieved 17% growth in gross transactional value on a pro forma combined basis. GTV growth across all our verticals reflects our teammates’ dedication to being trusted partners to our customers. Our focus on cost and execution drove strong flow-through resulted in robust adjusted EBITDA growth. We continue to make significant strides in integrating IAA. During the third quarter, we brought together our global senior field leadership team for a 2-day session. And this meeting served as a platform to emphasize our foundational values of being one team, all in all about the customer and easy to do business with.

I was excited and energized to see how the teams came together, learn from each other and how eager everyone was to drive our shared vision of success as one cohesive team. It is this, one cohesive team of 8,000-plus members that works hard every day to drive successful outcomes for our customers. And to us, success for our customers comes from consistency. Consistency of over delivering on our commitments, consistency of being proactive with our customers and consistency of driving the best outcomes for the transactions they entrust us with. This consistency continues to build trust with our customers and ultimately positions us to unlock more market share in all of the sectors we service. We have taken quick decisive steps to improve consistency in our automotive sector.

This journey’s first step was in the second quarter, where we streamlined the senior leadership team. The new structure made it easier for our customers to partner with us, as we transition management of service level agreements or SLAs to a holistic customer-based approach departing from the prior segmented by SLA approach, which caused a lack of accountability. We are now implementing new business process to measure our SLAs in real time, and I personally scrutinize our progress against our commitments weekly. If needed, I actively involve myself in addressing any potential concerns. Through this process, we have also delineated critical responsibilities held by our team members, whether various cash should be owned at the branch level or how to have corporate best support success in the field.

We are looking to implement permanent solutions and not temporary fixes where customers have to yoyo in their experience. We are also implementing tech improvements and prudently investing to give our teammates the tools they need to drive consistency for our customers. I am delighted to say that we have already seen an uptick in our SLA performance. With one example being improved on-time vehicle pickup, we will also implement a new incentive structure for our branch manager at the start of next year. So they are better aligned with the performance they are responsible for driving. We are happy with our SLA performance recently have made substantial strides since closing. Despite these recent improvements in SLA performance, one customer has notified us that they intend to shift all their assignments away from us by the end of the year.

This customer accounted for approximately 4% of total GTV and approximately 5% of total unit volumes annually. I am disappointed that we were not giving a chance to continue our partnership especially considering our demonstrated ability to exceed SLAs in the recent months. We are going to continue to over deliver on our commitments to all of our partners like we had in the past quarter and continue to do so in the current quarter. Beyond this, our proactive approach has not gone unnoticed by many of our partners, especially regarding cats. This year, we have had CAT events ranging from wildfires in Hawaii to hailstorms in Texas to floods in New York. And of course, there was Hurricane Idalia, where I and other leadership team members went to Florida a state where we have more than 1,500 acres available for CAT storage, although the impact of these events was relatively small compared to a large hurricane, our ability to mobilize our resources across multiple geographies and including internal tow capacity in some regions within overlap in time frame allowed us to showcase the breadth and depth of our capabilities.

Overall, we have sustainable competitive advantage when responding to CAT events stemming from our combined company footprint, the flexibility afforded by our NASCAR partnership and our facility to pull teammates from across RB Global to process CAT volumes with remarkable efficiency. Moving to the construction and transportation sector. Within the sector, our enduring robust and trusted partnerships have consistently placed us in the prime position as the preferred disposition partner in the industry. And this quarter, we saw strong contributions from both our strategic account groups and our Regions business. Supply chains in the construction space continued to normalize, Aiden end users to obtain new equipment as they purchase new equipment, it powers the trade-in cycle ultimately lead into the need for disposition services.

On the transportation side, there continues to be stress in the industry. accelerating the need for liquidity solutions for our customers. Our recent illustration of this was the Yellow Corporation bankruptcy, which involved a highly competitive bid in process. This unique advantage of having IAA and RB yards at our disposal allowed us to demonstrate that 90% of yellow assets were within a 100-mile radius of any RB global location, a distinction no other bidder could claim. The combined fiscal footprint not only redefines industry standards, but also reinforces our commitment to serving our large enterprise customers precisely where they desire and in the manner that best suits their unique needs. To be clear, even with this transaction, we have more than enough capacity at our yards to effectively service all our customers.

We are dedicated to optimizing price realization and our interest leading global buyer base provides our customers with unparalleled depth and breadth of liquidity. Like any other transaction, we intend to harness the analytical capabilities of Rouse and leveraging our pricing teams to identify the most effective format, location and channel to drive the best outcomes. We currently anticipate it will take three to four quarters to work through the bulk of the yellow consignment. The combination of yards, our marketplace liquidity, and our size allowed us to win the trust of this customer and showcases our ability to do transactions of any size. We never take our customers’ trust for granted, and we are committed to continually enhancing their experience.

Moving to integration. We realized $12 million in actual cost synergies in the quarter and have actioned a total of $51 million in annual run rate cost synergies since the close of the transaction. Based on our progress, we expect to deliver at least $100 million to $120 million of annual run rate synergies by the end of 2025. As part of our integration efforts, we evaluated our land strategy, including the decision between leasing and owning. In discussions with our value partners, it became evident that land ownership is not a requisite for meeting our service level agreements or securing market share. We maintain a surplus of land capacity across our asset classes, allowing us to accommodate our operational requirements easily. However, our capital allocation strategy is guided by financial prudence.

We will strategically and opportunistically purchase property in regions successful to cats or where the market opportunity makes strong financial performance sense for us to make this investment. Given these considerations, we are increasing our 2023 net capital expenditure outlook to approximately $310 million. Let me now hand the call to Sameer to discuss our financial results for the third quarter. Sameer?

Sameer Rathod: Thank you, Jim. Before we jump into details, please note that year-over-year comparisons for GTV and revenue refer to the comparison to the pro forma combined results of Ritchie Bros. and IAA for the prior year period. Total GTV increased 17%, with strengthened volumes across all sectors. Automotive GTV increased 11%, benefiting from the higher unit volume and higher average selling prices. The existing customer portfolio drove the growth in unit volumes as the salvage industry continues to benefit from a rebound in the total loss ratio. In the third quarter, CCC indicated that the loss ratio increased approximately to 19% compared to 17.5% in the same period last year. Recall that the total loss ratio is the number of vehicles deemed solid as a percent of total accidents.

Used automotive prices continue to trend lower year-over-year, where repair cost inflation remains elevated, creating a fertile environment to deem a car total loss after an accident. GTV in the commercial construction and transportation sector increased 22% and driven by increases in lot volumes, partially offset by a decline in average price per lot sold. Part of the average price per lot sold decline was due to mix as lot volume growth came from rental and transportation customers where asset values are intrinsically lower compared to traditional yellow iron construction assets. Additionally, we continue to observe declines in price year-over-year on an apples-to-apples basis. Next slide. Moving to service revenue. Service revenue increased by 20% with our service revenue take rate expanding approximately 60 basis points, 20%.

Service revenue increased due to GTV growth and a higher average service revenue take rate. The increase in average take rate was driven by higher average buyer fee rate and growth in our micro place services revenue, partially offset by lower commission rates. That lower average commission rate was driven by a higher mix of construction and transportation assets sourced from our strategic accounts and lower realized rates on guaranteed commission contracts. We expect the lower average commission rate trend to continue in coming quarters. Moving to inventory. Inventory declined 7% with lower revenue contribution from the automotive and commercial construction and transportation sectors. The inventory rates for the quarter contracted 220 basis points year-over-year to approximately 6.5%.

The decrease in inventory rate can be primarily attributed to the performance of a few large deals in our construction and transportation sector where pricing declined faster than initially anticipated between the purchase date and the sales date. As previously noted, we expect the environment for at-risk deals to remain competitive in our commercial construction and transportation sector. Turning to earnings. Adjusted EBITDA increased 32% compared to the combined adjusted EBITDA of IAA and Ritchie Bros. for the year ago period. The strength resulted from solid flow-through from strong GTV and service revenue growth combined with disciplined cost management. Additionally, SG&A exclusive of [indiscernible] payments and other adjusting items was $179 million, which came in below the low end of the range we communicated last quarter.

Adjusted earnings per share increased 36% on strong operational performance, partially offset by higher share count, higher interest expense and the impact of the Series A senior preferred shares. Looking ahead to the fourth quarter, we expect the adjusted effective tax rate to be between 23% and 26%, corresponding to a GAAP tax rate of 23% to 25%. Next slide. At the end of the third quarter, our adjusted net debt to trailing 12 months adjusted EBITDA was 3.2x. Adjusted net debt to trailing 12 months combined adjusted EBITDA was 2.4x, down approximately 2% of return compared to last quarter. We remain focused on deleveraging to approximately 2x by the end of the first quarter of 2025. In the fourth quarter, we expect interest expense to be between $65 million to $69 million.

I will now return the call to Jim to discuss the outlook for the fourth quarter and closing remarks.

James Kessler: Thank you, Sameer. Looking ahead to the fourth quarter, I wanted to lay out our current thoughts. We expect GTV growth to be between high single digits and low teens year-over-year on a combined basis. Note that this anticipates an approximately 200 basis point headwind due to cycling over cat-related GTV in our automotive sector last year. Regarding the cost of service, tow and fuel costs continue to trend higher due to the rebound in diesel prices. Additionally, we continue to experience inflation in our labor costs and an acceleration in rent expenses associated with leased property. Turning to SG&A. We expect SG&A to be between $180 million and $190 million exclusive of share-based payments and any other adjustment items.

Thank you again for your interest in RB Global. I hope you can hear how excited we are as one team all in and I want to thank our team for their focus on execution and dedication to our customers. With that, operator, you can now open the call for questions.

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Q&A Session

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Michael Doumet, Scotiabank. Michael, please go ahead.

Michael Doumet: Hey. Good evening, guys.

James Kessler: Hi. How are you, Michael?

Michael Doumet: Very good. So I mean, I think everyone is going to circle around this with different questions, but I understand customers, particularly if I can make decisions based on different variables. So the question is, how can you come away feeling like the loss was customer-specific rather than potentially a leading indicator?

James Kessler: Hey, Michael. It’s Jim. Thank you for your question. And look, for me, our main focus when we came into IAA and looked at their performance was really thinking about how do you turn it around? And in my mind, I never thought about this as a V-shaped type of all of a sudden when a company was going through decline in market share over the last number of years that it was just magically going to come up. And I’ve always thought about this as a U-shape type of curve of what we’re going to have to deal with. So to be able to make this U-shape to happen, what I feel really great about is the progress that we’ve already made on the SLAs and the commitments to our customer, which are well ahead of where I thought we would be at this point.

Unfortunately, the timing of when those changes started to happen and the decision that a carrier had to make just didn’t line up. But what makes me feel really good is the progress we’ve already made, and we continue to make going into the current quarter. is what I get very optimistic about as we think about slowing down market share growth flatten and then ultimately growing it.

Michael Doumet: Okay. Perfect. And just to maybe expand on that a little bit. So the 4% of GTV headwind, can you walk us down from there to maybe gross profitable EBITDA? Just trying to think about the operating leverage by [indiscernible].

Sameer Rathod: Yeah. Hey, Michael. I think you have enough historical information to get to that number. We’re not necessarily guiding to a gross profit or adjusted EBITDA range associated with the loss. As you can imagine, we’ve improved the efficiency of both organizations through the transaction. Jim, do you want to talk about the cost savings?

James Kessler: Yeah. No, look, I think as you can see, reaffirming where we’re at with the cost synergies, I’m really comfortable with the range that we gave as we think about, but to Sameer’s point, we wanted to make sure you had the GTV guidance, and I think there’s probably enough information to kind of get down to the levels that you’re talking about.

Michael Doumet: Okay. Those are my two. I’ll leave it there, guys.

Sameer Rathod: Thank you.

Operator: Thank you. Your next question comes from Craig Kennison, Baird. Craig, please go ahead.

Craig Kennison: Yeah. Hey. Thanks for taking my questions as well. Circling back to this insurance topic. Can you just confirm that is a different insurance carrier than the one that’s impacted results in recent quarters?

James Kessler: I think we can confirm that, yes.

Craig Kennison: And then, Jim, I guess I’d just ask, were you surprised by this decision? And if so, like should investors be concerned that IAA and that team didn’t see this change coming?

James Kessler: Look, as I mentioned before in the previous question, in my mind, I always thought this was going to be a U-shape that — when we did our due diligence in IAA, we knew about market share losses and we knew where their performance was. And what we’re going to have to do to slow that market share loss down then flatten it out and bring it back up. So again, not surprised. Would I have loved this decision not to have happened and had more time with the performance that we’re seeing right now and have nine months of the current performance instead of three, I would. But look, timings everything. But again, I would — we never thought this was going to be a V-shape. We always thought this was going to be more of a U. And so from that fact, I’m not surprised.

Craig Kennison: Thanks. And then just on the — you had announced some new incentives for your territory and branch managers starting next year. Could you give us a sense for what those KPIs might be? And the kind of impact you think it may have on your business?

James Kessler: Look, I think it’s just keeping the company in sync with our SLAs that we make for our partners and the commitments that we made in those contracts. Think about the previous more company level, regional level, but these are very specific around the commitments that each branch has to deliver compared to the SLAs that we’ve agreed to.

Craig Kennison: Okay. Thank you.

Operator: Thank you. Your next question comes from Steve Hansen, Raymond James. Steve, please go ahead.

Steven Hansen: Good afternoon. Thank you for the time. Can you perhaps speak to the cadence of the expected yellow dispositions? I know you after a couple of quarters, but do you expect it to be evenly the first? Or how do you think about that pattern?

Sameer Rathod: Yes. Hey, Steven. That’s a good question. I think some of this will be market dependent on how to best optimize price. Where we’ve already actively mobilized resources against us. But at a high level, I think what we’ve said is it will take us through the four quarters to get to the bulk of the disposition.

Steven Hansen: Okay. That’s helpful. And then if I’m just going to circle back and beat the horse a little bit here on the carrier that’s made the decision. Can you maybe just speak to the rest of the portfolio and any expected renewals that are coming up over any particular time frame and whether there’s milestones that we should be mindful of as we move through the next sort of two or three quarters? Are there any other renewals that are going to surprise us?

James Kessler: Look, I wouldn’t get definitely nothing that will surprise us. But like everything you can imagine, every insurance carrier has a different cadence of when their contract comes up and whatever is going on in the environment. But I can at least tell you there’s no active RFQs that we’re dealing with right now.

Steven Hansen: Okay. That’s helpful. I appreciate your time.

Operator: Thank you. Your next question comes from Sabahat Khan, RBC Capital Markets. Sabahat, please go ahead.

Sabahat Khan: Great. Thanks and good afternoon. I guess just on the yellow. Based on kind of your view of the channels that you might utilize to disperse that equipment, how should we think about the take rate on that disposition relative to maybe the company average? Because we’ve seen some numbers on the number of units the value that yellow held it up. But just curious what you think about take rate based on the mix of channels.

Sameer Rathod: Hey, Sabahat. It’s Sameer. As you can imagine, this is a complicated multifaceted deal, and it will depend on the percent of assets that are actually transacted via strategic bulk sales. That said, as you would imagine, the deal of the size, the total take rate is lower than our current average, much like how we’ve spoken about strategic accounts, more broadly speaking. Very accretive to profit dollars, we’re happy with this transaction and how it’s structured.

Sabahat Khan: Okay. Great. And then I guess maybe just on the kind of the same topic on the customer. I guess as you look out to ’24, are you able to maybe give us some perspective as we tweak our models on net where you think the year might look like with the exit of this customer? And then just kind of second part is do you have a cadence of how this customer sort of leaves your numbers? Is it all at once at the beginning of the year? Or does it happen slowly throughout the year?

Sameer Rathod: Hey, Sabahat. So we’re not going to talk about 2024 just quite yet. But the way the contract is structured, they have the right — they’ve indicated that they’ll curtail assignments by end of this year. So typically, there’s a cycle time associated with the inventory we currently have on our books. So most of the impact would happen in the first quarter, and you won’t get kind of a clean run rate until the second quarter of 2024.

Sabahat Khan: Okay. Sounds good.

Operator: Thank you. Your next question comes from Maxim Sytchev from National Bank Financial. Maxim, please go ahead.

Maxim Sytchev: Hi. Good evening, gentlemen.

James Kessler: Hi. How are you?

Maxim Sytchev: Good. I was wondering if you don’t mind maybe commenting around sort of a lower magnitude of hurricane activity and how that impacted the auto business in the quarter? I presume it was margin accretive, but any way that you can maybe quantify that would be helpful. Thanks.

James Kessler: Yeah, So Maxim, you mean what it was from last year since there was really nothing this year.

Maxim Sytchev: Exactly, yes. Yeah. Just — yes, so we can sort of gauge kind of the cadence on a going-forward basis.

Sameer Rathod: Yeah. I’m not sure if we’ve quantified what the CAT impact in terms of GTV it was in the third quarter. of last year. Let me take that away, and I’ll get back to you on that.

Maxim Sytchev: But maybe just directionally, so like more activity kind of negative to margin less better from margin. Is that how we should be thinking about this?

James Kessler: No. For last year, the CAT event was accretive to EBITDA. So with the level of volume, it wasn’t negative for IAA. So I would think about it as it was accretive in last year’s numbers when no CAT events this year. But kind of think about less than $100 million type of level, but definitely accretive from an EBITDA standpoint.

Maxim Sytchev: Okay. Thank you. And then maybe just going back to sort of the CapEx expectations. I mean the first question, I guess, what is that really going to generate for you guys in terms of returns? And should we expect this kind of bump to 300 to start moderating and by when and how much like — any color you can give there would be helpful. Thanks.

Sameer Rathod: Yeah. No. As we described in the script, Max, these — either we’re making these investments for strategic reasons opportunistically, we’re able to purchase land in some cases, below market value since our leases are up. We’re not going to quantify the exact impact. It would show up in our cost of service next year. And then no real outlook for 2024 CapEx. But we’ll stay tuned and we’ll give you more color on that next quarter.

Maxim Sytchev: Sorry, just to clarify, so cost of service will go down on a prospective basis?

Sameer Rathod: Yeah. I mean when you buy property, you’re reducing your rent expense. But at the levels we’re doing, we’re not we’re not giving any specific numbers around the exact dollar savings or the margin impact. But where you would see it is in the cost of service.

Maxim Sytchev: Okay. That’s helpful. Thanks a lot.

Operator: Thank you. Your next question comes from Michael Feniger, Bank of America. Michael, please go ahead.

Michael Feniger: Hey, everyone. Thanks for taking my question. Just one, Jim, you kind of discussed earlier around the V shape versus the U-shape. And your goal is to kind of slow down the market share flatten out and grow it. And just kind of piggybacking off the last question, I know you guys raised your CapEx, and just going forward, given this customer loss, is your assessment that you need to invest more to kind of achieve that U-shape? I understand you’re not giving specifics on 2024. But just with your assessment and taking over, is it that we need to — is this going to be a higher CapEx, maybe even more investment in the business to kind of get that U-shape? Just curious like how you’re kind of thinking about that, not looking for specific numbers, but if there is a little bit more intensity that’s needed for us to get that U-shape

James Kessler: Yeah. No. So — and Sameer will jump in, but just at the highest level, for our partners on the auto side, what we need to achieve is operational consistency against our commitments that we’ve made to them. And look, there’s very little CapEx that has to be invested to do that. This is all around execution, consistency, clarity and accountability at the field level. So I’m not expecting to be able to retain and grow capital. to invest capital to be able to do that. I think as we think about real estate and a financial decision to make around lease versus owned, that’s going to be a financial decision that we make, that’s best for the company. But and the two were disconnected from having to go out and get business from our auto partners. Sameer, to have anything that you want to.

Sameer Rathod: Yeah. No, I think you hit it, Jim. Michael, at a high level, purchasing land, having land is not a prerequisite for meeting our SLAs. The capital intensity to improve consistency, relatively minor, the purchases we are making is a financial decision, just lease versus own economics, that sort of thing.

Michael Feniger: Fair enough. And just lastly, just curious, Jim, Sameer, like, in the last towards the end of October, maybe even what you’re seeing in early days in November. Just is there — has there been any step function changes when you think of used equipment values, either on the auto side or either on the construction and transportation as we kind of start to look to finish off the year. If there was anything you noticed through the quarter and towards the end and to now. Thank you.

Sameer Rathod: Yeah, Michael. Great question. So if you think about the month of October, used equipment pricing year-over-year for construction in the U.S. was down, call it, 6% and transportation was down 19%. We’re still above 2019 levels by a healthy amount. But I wouldn’t say there was a step function change in the month of October.

Michael Feniger: Perfect. Thank you.

Operator: Thank you. Your next question comes from Steve Hansen, Raymond James. Steve, please go ahead.

Steven Hansen: Thanks a lot guys. I’m not sure if it was covered. I might have missed it earlier in the remarks, but can you perhaps speak to some of your efforts thus far on the whole car market and the aftermath agreement that you laid last quarter or two.

James Kessler: Yeah. So Steve, just as we talked about probably a couple of months ago, very early on in our stages, we have done our strategy planning for it. And are early stages of execution against that. So from a in a number standpoint, nothing in the past quarter. So something more in 2024 than anything that’s going to help 2023.

Steven Hansen: Okay. Thank you.

Operator: Thank you. [Operator Instructions] Your next question comes from Larry De Maria, William Blair. Larry, please go ahead.

Lawrence De Maria: Thanks. Good afternoon, everybody.

Sameer Rathod: Hey, Larry.

Lawrence De Maria: Hey, Sameer. Jim, two questions. First, any color or timing on the filling out of some of the C-level positions that are open? And secondly, you talked about the SLAs, which are a nice change, obviously. Just for clarity and for a little bit more information, are they being rolled out staggered by customer? Are they fully rolled out? And you mentioned better pickup times. What are some of the other things that will get better over time and potentially towards more business coming in?

James Kessler: No, you got it. So I’ll start with the second question first from an SLA standpoint. So think about same day tailwind being able when you get an assignment to pick up the car, we’re feeling really good about our progress from a tow standpoint. The next big one is around total making sure the time after you get the car were as quickly as possible, then as you can imagine, gross returns. But look, with each passing day, our position is improving and it’s strengthening, and what we really need to get is that longer track record of consistency under our management of the company. And once we see that build and trust with our customers. And then just to answer the other question, just repeat it for me.

Lawrence De Maria: Just filling out some of those C-level positions that are open.

James Kessler: Yeah. Got it. So really, the major one that we’re going after is the CFO first. We are down to a handful of candidates that have now made their way through our committees, and we had an internal committee going through it and then a couple of members of our Board going through the process. And we’re hoping that in the next 30 days, we’re going to have someone in seat as we’re going through it. But now we’re down to the financial part of the position.

Lawrence De Maria: Great. Thanks and good luck.

Operator: Thank you. There are no further questions at this time. Please proceed.

James Kessler: All right. Everyone, thank you for taking the time. We really appreciate it and looking forward to catching up with everyone. Thank you so much.

Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.