Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) Q1 2024 Earnings Call Transcript

Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) Q1 2024 Earnings Call Transcript June 4, 2024

Sportsman’s Warehouse Holdings, Inc. misses on earnings expectations. Reported EPS is $-0.47 EPS, expectations were $-0.38.

Operator: Greetings, and welcome to the Sportsman’s Warehouse First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Riley Timmer, Vice President of Investor Relations. Thank you. You may begin.

Riley Timmer: Thank you, operator. Participating on the call today is Paul Stone, our Chief Executive Officer; and Jeff White, our Chief Financial Officer. I’ll now remind everyone of the company’s safe harbor language. The statements we make today contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which includes statements regarding expectations about our future results of operations, demand for our products and growth of our industry. Actual results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described in the company’s most recent Form 10-K and the company’s other filings made with the SEC.

We will also disclose non-GAAP financial measures during today’s call. Definitions of such non-GAAP measures as well as reconciliations to the most directly comparable GAAP financial measures are provided as supplemental financial information in our press release, included as Exhibit 99.1 to the Form 8-K we furnished to the SEC today, which is also available on the Investor Relations section of our website at sportsmans.com. I will now turn the call over to Paul.

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Paul Stone: Thank you, Riley, and good afternoon, everyone. The mission of Sportsman’s Warehouse is to provide great gear and exceptional service to inspire outdoor memories. As we outlined on our last call, these are the two key areas of focus as we center our efforts on resetting the business over the next several months. Our first quarter results continue to reflect the challenging macroeconomic environment, which we are carefully navigating as consumer discretionary spending remains under pressure. Net sales for the first quarter were $244 million compared to $267 million in the prior year, with same-store sales down 13.5% compared with last year. During the first quarter, consistent with the adjusted mix data, our hunting department sales were down about 7% versus the prior year.

While we continue to outpace the adjusted mix on a unit basis and take share, fewer customers purchased firearms and ammunition during the quarter, which was the primary driver of the Q1 decline. As we outlined on our call just a couple months ago, our strategy centers on resetting and rebuilding the fundamentals of great retail operations, which for Sportsman’s Warehouse are great gear and exceptional service. From a net sales by department perspective, camping was down approximately 6%, apparel was down approximately 26%, and footwear was down about 28%. While these departments were down in Q1, they outpaced the decrease in year-over-year inventory levels, which we view as encouraging. Having moved through a significant amount of distressed inventory during the second half of last year, we are now slowly building back inventory in these departments with brand relevance, newness, and depth with key vendors, putting us in a much better position for our key hunting and holiday seasons.

Having the right merchandise that resonates with our core customer will continue to be a key strategic driver of our inventory management efforts during 2024. In mid-March, we started to see trends improve in our fishing category, resulting in positive comp sales growth in this department for Q1. Our stores were set early with newness and depth in key seasonal items, positioning us to capture both demand and a greater share of the fishing market. We saw good results with our opening and mid-price point items like rod and reel combos, tackle boxes, and fly fishing. This is a prime example of where the SKU rationalization is working, allowing for depth and the right merch of our core items. We will continue to lean into fishing with relevant purchases and regional merchandising, as Q2 is the highest penetrating quarter for this department.

I am proud of how quickly both the merchant and store operations team executed to have us positioned and ready early for the spring fishing season. Similar to the improved assortment and store visual layout enhancements we made in Q1 to our camp and fish departments, we are in the process of implementing similar improvements in the other departments in our stores. We expect to have these efforts completed in time for the key fall selling season. I want to remind everyone that the first quarter is our lowest volume quarter of the year, particularly the months of February and March, given the seasonal nature of our specialty outdoor gear business. Although Q1 is the lowest volume quarter of the year, we were not happy with our results, particularly the trends in our hunting and shooting sports department.

Traffic was challenging during the quarter, and we are moving at a high velocity to improve the trends of the business. What we are currently seeing with the consumer is a hunt for newness and value when they shop our stores. We have made significant progress over the last couple of months to reset our stores with improved sightlines, in caps presented with high margin and high attachment items, more strategic drive aisles, and improved feature space. We have emphasized products with newness and value that align with key outdoor seasons to highlight these critical selling spaces. Given the hunt for value, we believe that leaning into the warehouse part of the name has never been more important to attract and retain customers. Our messaging for this competitive warehouse advantage will be centered on no-frill shopping, quality products at affordable prices, get in easy, find what you need easy, and get outdoors-making memories.

And, come talk with our local store outfitters, ready to outfit you for your next outdoor adventure. Given this challenging macroeconomic environment and the topline headwinds we are currently facing, it is critical we continue to focus on the areas of the business we have greater control over. We were pleased with our expense management efforts, reducing overall costs by $4.6 million versus the prior year first quarter. By lowering our cost structure, we have positioned ourselves to generate positive free cash flow during the year, even on these reduced comps. Additionally, we are pleased with the overall health of our inventory, with total inventory down about $75 million versus this time last year. We have significantly more newness and relevance in our inventory, which is evident when you visit our stores.

Having the right products, in the right place, in the right amount, at the right time, are key to winning the upcoming season. We continue to move with speed on our key initiatives to improve Sportsman’s Warehouse and return business to profitability. The team is now largely in place with our store operators, all of whom have significant retail experience, implementing best-in-class service models and the process needed for operating great stores. Last month, we relaunched two of our value-add service programs, our Firearm Service Plan and our Safeguard Warranty Program. Each of these provide inherent value to our customers and its margin accretive to the business. We are also further refining our Marketing Mix model to better understand what resonates with our customers and further expand our omni-channel reach and effectiveness.

Our short-term emphasis will be focused on leveraging our loyalty platform and total customer database to win back customers we know already shop our stores. With this approach, we can be more efficiently and effectively deploy capital as we carefully execute our digital marketing strategies. In an effort to drive more consumers into our stores, we’ve implemented more aggressive promotional activities during the second quarter. Our goal is to win the 100 days of summer and give customers a compelling reason to visit and shop our website and stores. For us, the second quarter is highlighted by Memorial Day, Father’s Day and the Fourth of July, which are all high-volume periods for our business. We feel good about our store sets, product assortment and inventory levels of key items as we navigate through these key summer seasons.

Although we are dealing with difficult macroeconomic headwinds, we remain optimistic about 2024. We are in the early innings, call it the third inning of a reset, and look to see progress as we move through the year. We are positioning ourselves for a relaunch of our stores in early fall, setting us up for a successful back half of the year. Our strategic edge remains as the premier local and convenient choice for consumers. We provide a strong mix of value, quality, selection and service that we know will benefit the customer. Our focus remains on the areas of the business we can control. Through close management of our variable expenses, inventory levels and merchandise margins as we work with urgency to get our top line trends moving in the right direction.

We are making the necessary investments and improvements in our stores to better convert and capture a greater share of customers’ wallet. The strategies are in motion and implementation is well on its way. We are laser focused on providing great gear and exceptional service as we look to grow this company and create value for our shareholders. With that, I will now turn the call over to Jeff.

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Jeff White: Thank you, Paul, and good afternoon, everyone. I will begin my remarks today with a review of our first quarter 2024 financial results, then cover our liquidity balance sheet and capital allocation strategy, and finally, review our outlook for 2024. As Paul mentioned, net sales for the first quarter were $244.2 million compared to $267.5 million in the first quarter of the prior year. Our net sales remain pressure from a challenging macroeconomic environment and persistently high inflation weighing on consumer discretionary spending, particularly in firearms and ammunition sales. Same store sales decreased 13.5% in the first quarter compared with the same time period of fiscal year 2023. Gross margin for the first quarter was 30.2% versus 29.9% in the prior year period.

This 30 basis point improvement was primarily driven by improved mix and rate from our fishing department, which carries a higher overall margin profile. As a percentage of net sales, SG&A expense was 38.6% compared to 37% in the first quarter of the prior year. In absolute dollars, SG&A was down $4.6 million year-over-year, reflecting our cost cutting and expense management efforts implemented over the last few quarters. While rent and depreciation expenses were up $3.7 million versus last year due to 11 new stores, those increases were offset by a $7.3 million decrease in payroll and pre-opening expenses. On a per store basis, SG&A dollars in Q1 were down 12.3% versus Q1 of 2023. As part of our ongoing expense reduction efforts, during the first quarter we identified an additional $5 million to $7 million of annualized cost savings that will benefit both SG&A and gross margins.

This is in addition to the $25 million of annualized expense reductions currently being realized. We expect to begin realizing these cost reductions during the second quarter. We will continue to look for areas of the business where we can reduce expenses, simplify the business, and drive top line growth. Net loss for the first quarter of fiscal 2024 was $18.1 million or negative $0.48 per diluted share compared with the net loss of $15.6 million or negative $0.42 per diluted share in the first quarter of the prior year. The increases in rent, depreciation and interest expense contributed $4.5 million to the year-over-year increase or $0.12 per diluted share. Adjusted net loss in the first quarter was $17.8 million or negative $0.47 per diluted share compared with adjusted net loss of $14.8 million or negative $0.39 per diluted share in the first quarter of the prior year.

Adjusted EBITDA for the first quarter was negative $8.7 million compared with adjusted EBITDA of negative $7.8 million in the first quarter of 2023. I will now take a minute and review our balance sheet, cash flows, and liquidity as of the end of the first quarter of 2024. Total inventory at the end of the first quarter was $391.7 million compared to $469.5 million at the end of the first quarter of 2023, a decrease of $77.9 million. This is a decrease of approximately 22% on a per store basis. Compared to the end of 2023, which is the lowest level for inventory during the year, we are up $36.9 million as we were able to appropriately buy into the key spring and summer seasons with both new and relevant inventory. We are now in a much better position to seamlessly transition in and out of seasons with our inventory, allowing us to be more productive as we work to improve our terms.

Given the improvement in processes, rationalization of slow-moving SKUs, and non-performing vendors, and the health of current inventory, we expect to end the year with less inventory than we did in 2023. While we believe inventory will be lower, it will be the right inventory in the right stores to better support and serve our customers. In regards to liquidity, we ended the first quarter with a debt balance of $164 million and total liquidity of $80.8 million. Inventory management and tightly controlling variable expenses will remain a primary focus throughout the organization as we move through 2024, and we will continue to prioritize the use of our excess-free cash flow to pay down our debt. Turning now to our guidance. We continue to focus our efforts on long-term measures and reiterate our guidance for the full year.

We estimate fiscal 2024 net sales to be in the range of $1.15 billion to $1.23 billion. We expect adjusted EBITDA for fiscal 2024 to be in the range of $45 million to $65 million. And finally, we expect CapEx for 2024 to be between $20 million and $25 million relating to technology investments to improve store service and merchandising productivity, as well as our normal store maintenance. That concludes our prepared remarks today. I will now turn the call back to the operator to facilitate questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Ryan Sigdahl with Craig-Hallum Group. Please proceed with your question.

Ryan Sigdahl: Thank you, Paul and Jeff. Jeff, maybe just staying on guidance, the last point there, I guess given the slightly weaker Q1, sounds like a little more promotional Q2, at least to start the quarter. I guess what gives you confidence to reiterate the guide for the year?

Jeff White: Great question, Ryan. As we went through Q1, there was a little softness that we saw. It’s our smallest quarter of the year. So as we looked at the opportunity in the rest of the year, you’re right that we will have to get more promotional and Paul talked about that in his script. You’ll see us get more promotional in Q2 as we focus on driving foot traffic in the doors. I still am focused on the opportunity that we have in the back half of the year. As we start the anniversary, the heavy clearancing and discounting that we had to go through last year, there’s a lot of opportunity for us to make up profitability and really drive home the sales in that back half of the year. If you think about the opportunity and a strained open to buy last year, we’re going to be able to enter in the back half, which is really our prime time of the season, with a lot better merchandising, a lot of relevant seasonal and regional merchandising as we move through the back half of the year.

Ryan Sigdahl: Have you guys seen – any change in the recent week or two here just with some political and regulatory chatter?

Jeff White: You know, Ryan, we haven’t seen a significant change with the regulatory or political chatter that’s been going on. I’ve seen the same thing you’re seeing in the market. I would say we have not seen it move the needle significantly, from trends that we saw before some of that started up.

Ryan Sigdahl: Then last one from me, you called out fishing and it’s great to hear that turned positive with the refreshed inventory and strategy there. Any other categories where you’re seeing early signs of improved trends, or where we should be looking specifically?

Paul Stone: Yes, I think that, you know, looking at it right now, as we got into fish that, was really the only category where we actually started the year fresh. And as we went through this distress, because as we got through the back half of the year, and we were a little later into camp than we probably would have wanted to be from a set standpoint. But overall, I think even as we look at apparel footwear, where we’re at versus our inventory levels with, still the lack of newness for coming into the back half the year. That we think we’ve got a huge opportunity to be able to lean in on that. And I would just say there’s parts of fish that connect to camp and connect to our apparel business as well, where we feel really good with that.

And I think it really just goes back to needing to be in the market early, needing to invest in the inventory dollars at the right time to get the product at the right place. So I would say big picture next year will be even earlier on camp to be able to have that set now that we’ve made adjustments in the stores, and opened up the space much more for seasonal and given greater line of sight to that merchandise. But I mean, overall, fish is really, I think, the success story as we think of Q1.

Ryan Sigdahl: Very good. Thanks, guys. Good luck.

Operator: Thank you. Our next question comes from the line of Matt Koranda with ROTH MKM. Please proceed with your question.

Matt Koranda: Yes, good afternoon. Thanks for taking the questions. I wondered if maybe you were willing to unpack the progression of comps that you saw during 1Q. Just curious if maybe there was some volatility to the comps in the quarter and in any quarter to-date trends that you can share with us, just in terms of what you’re seeing with the new merchandise strategy and how it’s been working. And then promotion-wise, I guess we’re through Memorial Day, but we still have Father’s Day and 4th of July left. So just wondering if maybe you’d be willing to kind of discuss some quarter to-date trends to give us confidence that we can see some improvement from here?

Jeff White: Yes, Matt, as you think about Q1, we came out at the end of last year at the lowest inventory. We had just been clearancing inventory for the better part of six months. So we started the year in a very, I would say, bad position in terms of what we had in store in our in stocks. So as we started off, comp store sales would have been tough. And then as we got the merchandise in, we would have seen improvements in comp store sales as we moved through to the end of the quarter, particularly in the fishing category. We walked out at the end of last year. You were in ice fishing season. There really wasn’t much activity in ice. As we loaded in the spring set, that’s where fishing really came alive. And we were able to end the quarter at the flat comp, for the first quarter.

So I’d say as you peel back the onion, and you look at the trends, that’s how it panned out. It was tough right out of the gate. Because we were in the lowest inventory position we’ve been in for a while, with just ending a huge part of clearancing. As we’ve moved into the summer, we’re still seeing very good trends out of the fishing category. I think that, to what Paul said, that just goes to show that when we enter the season early and we invest in the right merchandise, we can continue to see good trends in that part of the business. But as we think about the macroeconomic environment, it’s a tough environment out there. We’re seeing across the board, retailers having to be more promotional and more aggressive in their discounting, in order to drive traffic.

And we’re not immune to that. So, as we think about what the rest of the summer brings for Sportsman’s Warehouse, you’re going to see us be more aggressive in the areas of the business that help us drive traffic that, is kind of our core competency.

Matt Koranda: Okay. Got you. That’s helpful. And then as you’re more promotional, maybe just if you could discuss the implications for gross margins, I guess. Like if I were to think about the year, I sort of was assuming you’d see a steady improvement each quarter across the year, but maybe it sounds more like its back half loaded now, in terms of the gross margin improvement, and we should not expect an uplift sequentially in the second quarter. But maybe just level set everybody on your thinking with respect to gross margins in the near term?

Jeff White: Yes, I would say that as we think about the promotional activity that we’re going to have to run during the summer months, it is not too dissimilar to similar promotional activity that was ran in the prior year. And then as we get into the back half of the year, that’s where the promotional activity in LY was much more significant and aggressive and really took a significant impact on margin. So you’re correct in your thinking that as we move into the back half, that’s where we see a lot of opportunity and potential, to really outperform in terms of margin as we are in stock with full price goods and the right merchandise. And we can go through a hunt and holiday season, without having to be very promotional. One thing as Paul and I sit here and are maniacally focused on, it’s ending the season with clean inventory.

So you’re going to see us get out of inventory positions that are seasonal in nature, make sure that we’re clean, and be able to start seasons with good inventory. That’s a much different scenario than what we were in in the back half of last year.

Matt Koranda: Okay, makes sense. And then just last one from me, you mentioned in the prepared remarks, Jeff, I think it was $5 million to $7 million of incremental cost savings that you’ve identified. Maybe just talk about how those layer in this year, the split between SG&A and gross margin and how that may be built into the full year guide, if at all?

Jeff White: Yes, that’s a great question. To frame it up, the majority of those expenses are going to be seen in the gross margin line. It relates to some renegotiations that we were able to execute on in terms of freight contracts. So, I would say the majority of that you’re going to see, flow through the freight line in terms of gross margin. And that one’s going to be instantaneous. So those contracts are renegotiated, the rates are done, those impacts are being seen as we sit here today. Some of the other items that we executed on should be immediate in nature, it just deals with more contract renewal, process improvement, the way that we purchase, the way that we buy things, contracts that we renegotiated. So those items should be immediate as well and flow through in SG&A, but the majority of the $5 million to $7 million noted, is going to flow through into the freight line in gross margin.

Matt Koranda: Okay. Got you. I’ll leave it there. Thank you.

Operator: Thank you. Our next question comes from the line of Anna Glaessgen with B. Riley. Please proceed with your question.

Anna Glaessgen: Hi, good afternoon. Thanks for taking my questions. I guess first it came up in some of the earlier questions, but where are we in terms of the retail adjustments and resetting the stores? What percent of the fleet have already gone through those adjustments? And anything you could give on our seasonal categories performing better in stores that have those adjustments, anything around that?

Paul Stone: Yes, I think, I mean, we’re in a good position there. I mean ultimate goal is to be able to, by the time we get to August and relaunch the back half of the year and to be able to have all of the stores set. I think just from a space allocation and the openness, no different than what you’d seen. We’re really close to being able to get through the entire fleet there. But I think now just the ability to be able to flex more, as we come into our really big part of the back half of the year around hunt, to be able to add that and to bring that to life as we get there. But for the most part, the physical movement, the ability to be able to open up the stores, we’re in really good position there. We might have a handful that are kind of offline that we need to work through, but for the most part, we’re in really good position.

I mentioned it earlier. I just looked at it from a camp. I mean, as we started flowing and we went from a complete liquidation and SKU rationalization and back half of the year and we were getting into camp. I mean, we started slow from an inventory build as we got into February and March. I think as we go through correction of errors, and now being a much cleaner place around inventory, working capital. That we’re going to have the ability, to be able to take the same stance with camp, as we saw the benefits from fish this year, and being able to do that. So, I would say we’re not in a position, where we’re looking at it and going anything other than, we could have moved quicker from a camp position to be to be in a really good seasonal set, as we come into it.

But now that we’re into the set and now we get into the Q2, I think we have the good float in the right place. We feel much better with where we’re at with new relevant items there. And as I look back on Q1, like I said, from a correction of errors, we started at ground zero to be able to build back And to be able to move into a quicker that we could have been, with spring coming a little bit earlier this year, than what we’ve seen in seasons past and parts of the country. We could have been a little quicker to be able to move to help us get our inventory levels back where we needed there Anna.

Anna Glaessgen: Great. And touching on inventory, could you put a finer point on the mix as it stands today? Is it fairly clean, or are there still areas of cleanup that you’re trying to get through as we go through the year?

Paul Stone: I think – I mean it’s fairly clean. We’re happy with where we are in position and look at that across from just best-in-class from a retail standpoint. We feel, I think the way you said it, that we’re fairly clean. You’re always going to have pockets that you’re working to be able to clean up, and to get out of goods or out of date goods that we need to move through. But I think that’s normal course of business in retail. Jeff said it a little bit earlier. I mean, the goal is as we get promotional to drive additional traffic here in Q2, we’re going to take the opportunity to ensure that we’re getting out of these seasonal merchandise within the season, to be able to be clean as we start into Q3, build us some working capital, where we ensure that we’re in a good position on inventory, as we come into really our peak season in Q3 and Q4.

Anna Glaessgen: Great. Thanks. That’s it from me.

Operator: Our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.

Mark Smith: Hi, guys. First off, as we look at segments, it sounds like you’re still in kind of the broad hunt, shoot category, outpacing mix. Curious if you can give us any more kind of insights there, within firearms specifically. Do you feel like you’re taking share? And was there any other pieces that really moved there that, maybe helped or hurt?

Jeff White: Yes, Mark. As we look at the firearm category, I think what we’re seeing there is continued pressure, just from an overall discretionary spend standpoint. As we look at what’s performing and what’s not within that category, you can look at the quarterly results, and just see that overall some softness while during Q1, we still outpaced the adjusted mix. It’s not – I would say we weren’t happy with the performance. We need to do better. And I think adjusting our assortment strategy, looking at pricing, looking at, what we can do in order to use that vehicle to drive traffic into the stores, is something that you’ll see us focus on, as we talked about those clearancing activities. It’s a highly competitive market. It’s not in the situation that it was three, four years ago, where there was shortage of supply.

So, we’re in a very competitive environment where there’s plenty of supply, and we need to make sure that we maintain our competitive edge, whether it be from a service standpoint, or from a pricing standpoint as we focus in on that part of the business.

Mark Smith: Okay. And then looking at apparel and footwear, just curious if you can discuss, kind of as we cleared out the aged inventory late last year, new buys in and inventory in today, kind of how you’re managing those segments differently today, than you previously did?

Paul Stone: Yes, I mean, we talked about the last Q, but I mean, you’re going from 50 or 70 suppliers down to a dozen key partners that you’re working with. And I mean, that really takes the pressure off the buying team. And as we’ve really narrowed the focus and looking at the overall portfolio, it really, really helps us. But I think the addition, and I think that the disciplines the team has brought in with the markdown cadence to be able to get in early the first strike from a pricing standpoint, we have confidence as we get through. And as we look at our inventories versus years past, we are much leaner in those – in apparel and footwear. I mean, big time leaners, I would share with you as we think about it. I mean, we’re in cases down 40% from an inventory level in both footwear and in apparel, which allows us to have the freedom to be able to go with some depth, with those key and the smaller amount of suppliers we have.

And then ensure we get on the product at the right time. But the cadence and what the team’s working through right now, is there’s no wait to be able to get out of it. But for us to be able to be very strategic on when we take our marks, and ensuring that we get out of the marks, as we get through the end of the season this year, and have no carryovers we go into the fall winter.

Mark Smith: Okay. Last question from me is just as we think about private label assortment, how maybe that has changed and if you’re seeing any early successes within private label?

Paul Stone: Yes. I mean, we’re on a journey there, I’ll tell you, and we have to do it right. But we’re clearly seeing, I think, the value consumers are coming to the stores, their shopping value. And as the team’s brought in and start making movement, to quality products with the Sportsman’s Warehouse name, that we can see that there’s clearly a move to private label. And I think as we think about the journey here, is really being able to build this thing out the right way, with the right support team to ensure that we’re getting the quality, to go with the product from a sportsman. We’re happy with the adjustments we’ve made so far. We clearly see the consumer likes what they see. And I think that just goes back to the promotional and the value that we’re seeing, from that customer basis are coming into the stores.

So it’s a big objective for us as we think over the next couple of years, of how the company can look and how the private label, will help insulate us as we go through ups and downs, and cycles within any type of event that happens that you have the private label, and the confidence of the consumer on it. So, we’re on the journey. I would say you’ll see it in the stores now. You’ll see high quality goods that we’ve moved to the Sportsman’s Warehouse name, and we’re simplifying the process. And I think – I go back to it to say it’s a journey. You’re not going to walk in one day and see 25% of our goods being sportsman, but we’re going to do it the right way, and build it out.

Mark Smith: Excellent. Thank you.

Operator: Thank you. We have reached the end of our question-and-answer session. And with that, I would like to turn the floor back over to Mr. Paul Stone for any closing comments.

Paul Stone: Thank you for joining the call today. And thank you to all the passionate employees around the country for their commitment to Sportsman’s Warehouse. Together, we look forward to providing our customers with great gear and exceptional service.

Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.