Upexi, Inc. (NASDAQ:UPXI) Q2 2023 Earnings Call Transcript

Upexi, Inc. (NASDAQ:UPXI) Q2 2023 Earnings Call Transcript February 15, 2023

Operator: Greetings and welcome to the Upexi, Inc. 2023 Fiscal Second Quarter Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. . As a reminder, this conference is being recorded. It is now my pleasure to introduce to your host, Valter Pinto, Managing Director at KCSA Strategic Communications. Thank you. You may begin.

Valter Pinto : Thank you, operator. Good evening and welcome everyone to Upexi 2023 fiscal second quarter financial results conference call. I’m joined today by Allan Marshall, Chief Executive Officer and Andrew Norstrud, Chief Financial Officer. Before we begin, I’m going to remind everyone that statements made during today’s conference call may be deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company’s business, I refer you to the press release issued this evening and filed with the SEC on Form 8-K as well as the company’s reports filed periodically with the SEC.

The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless otherwise required by law. In addition, during the course of this call, we may refer to non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States. And that may be different from non-GAAP financial measures used by other companies. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings released issued this evening unless otherwise noted. I would now like to turn the call over to Upexi’s CEO, Alan Marshall.

Allan Marshall : Thank you, and welcome to our 2023 fiscal second quarter operating results conference call. Since joining Upexi as CEO in May of 2019, the company has grown from approximately $7.4 million in annual revenue to $44 million in 2022, with an estimate of $100 million in revenue expected in 2023. We experienced a substantial growth despite two years of COVID pandemic and a challenging 2022, when for many macro economic reasons, consumer companies in the market struggled to find growth. For our most recent fiscal second quarter ending December 31, 2022 we exceeded internal expectations by generating record revenues of $27.1 million, an increase of 444% as compared to $4.9 million for the same adjusted period the prior year, and an increase of 134% as compared to $11.6 million sequentially.

Revenue Growth was predominantly driven by strong yearend sales in many of our brands, including E-Core, Tytan Tiles, Vitamedica and Cygnet Online, as well as strong sales from our pet product business, LuckyTail. During this fiscal second quarter, not only did we generate record revenues but were able to return to positive EBITDA after the sale of Infusionz. The last nine months have been very productive for the company. During that period, we successfully closed on several important acquisitions. We divested our select CBD operations during that time, which represented approximately $20 million of the 44 million revenue we generated in 2022. This decision has allowed us to focus our acquisition strategy on high growth recession resistant, cash flowing businesses.

In April 1, 2022, we completed our acquisition of Cygnet Online LLC, a well established secondary market seller on Amazon, with over 1,200 SKUs, branded OTC products and supplements in health, wellness and beauty verticals. August 22, 2022 we entered the pet vertical with the closing of LuckyTail, which has experienced double digit year-over-year sales growth through both strong Amazon distribution and direct-to-consumer sales on lt.com. On November 2, 2022, we announced the closing the E-Core acquisition along with its subsidiaries, Tytan Tiles and New England Technology. The transaction added over $40 million in trailing 12 months sales and increased our projected calendar 2023 revenue to $100 million Tytan Tiles is a toy brand and maker of popular magnetic tiles and building blocks.

And New England Technology is the national distributor for branded consumer products. Tytan has been one of the top selling toys at Sam’s Club since 2018, a best seller on Walmart.com and a top seller on walmart.com during Cyber Week in 2022. Additionally, the product line were featured in the 2022 Walmart Toy Book. Subsequent to the quarter end we announced two additional significant milestones for our brand, with the launch of its first branded DTC store on amazon.com and placement of Tytan Tiles products on Walmart shelves in over 2,000 locations nationwide. Working with our retailers, we have developed a full assortment of new Tytan Tiles products including magnetic cubes, fort builder kit, a Donald tiles kit and a princess tiles kit. During 2023 we plan to launch up to four of these new products in the current retailers and on amazon.com.

The educational toy category remains a key focus for us, both to protect our future acquisitions and as we continue to build our organic growth. We now operate in several business segments including health, wellness, pet, beauty, educational toys, with sales channels, including direct-to-consumer, Amazon Direct and large and big box retailers. The Amazon — Amazon liquidation business operates under Cygnet Online with current sales in health, wellness, beauty and nutraceuticals. We are currently expanding this business into electronics, as well as other new categories. Our netessential.com business specializing in name brand distribution of inline merchandise, excess inventories, premium and premium center programs is a major supplier to the largest Deal of the Day sites and brick and mortar retailers in the United States.

A diverse business mix of non-discretionary health, wellness pet products, and liquidation and wholesale, direct to consumer and Amazon gives us a well rounded revenue stream that provides opportunity in most economic environments. We intend to build on this substantial growth as we look toward reaching $100 million sales in 2023. Thank you to all our teams at Upexi, as well as our investors, customers and partners. I will now pass the call over to Upexi CFO, Andrew Norstrud to discuss our financial results in more detail.

Andrew Norstrud : Thank you, Allan. In accordance with the rules regarding the presentation of discontinued operations, the assets liabilities and activities of Infusionz and certain manufacturing operations have been reclassified as discontinued operations for all periods presented. The three month and six month ended December 31, 2022 include the acquisitions of Cygnet Online, our Amazon aggregation business, LuckyTail, our pet product brand and E-Core our product distribution business which also includes Tytan Tiles. These acquisitions coupled with the elimination of discontinued operations from the sales of Infusionz and certain manufacturing operations, has significantly reduced the value of comparing our current operation to the operation a year ago.

Management believes that the current operations are more indicative of the future and we will continue to improve gross profit while reducing general administrative expenses as compared to sales as we continue to consolidate operations and implement our growth strategies. Revenue for the three months ended December 31, 2022 totaled $27.1 million, an increase of 444% as compared to the $4.9 million for the same period in the prior year. Cost of revenue during the quarter totaled $16.8 million compared to only $700,000 for the same period in the prior year. Gross profit for the quarter was $10.3 million, an increase of 141% as compared to the $4.3 million for the same period of the prior year. Operating expenses totaled $12.5 million, an increase of 83% as compared to $6.8 million for the same period in the prior year.

Sales and marketing expense increased by approximately — $1.9 million or 100% compared to the same period in the prior year. Beyond just the increases from the acquisitions, management increased the sales and marketing budgets for the quarter to capitalize on an opportunity to increase sales at lower costs to estimated value through an aggressive sales strategy. While most companies are cutting back we saw this as an opportunity to increase the investment yield for customer acquisition and accelerate consumer growth. We anticipate our advertising expenses will be reduced in the following quarters, which will increase our overall profitability. Distribution costs increased $2.7 million or 335% compared to the same period in the prior year. The increase in distribution costs was primarily related to the three acquisitions, offset by the sale of Infusionz and the classification of these expenses as part of discontinued operations.

In addition to these changes, there were slight increases in transportation costs and third party provider rates, which are expected to be short term and management has a strategy that will start to decrease the overall percentage of distribution costs to sales. General and administrative expenses decreased by approximately $100,000 or 3%, compared to the same period last year. As the company has changed with the acquisitions and the sale of Infusionz management has focused on controlling the general and administrative costs, and will continue to implement strategies to decrease the percentage of G&A when compared to sales. The company had net loss from operations of $2.1 million for the three months ended December 31, 2022, representing a 16% improvement compared to the $2.5 million loss for the same period the prior year.

Adjusted EBITDA is used by management as an important indicator of the company’s performance and improvement. Since non-cash expenses such as amortization of acquired intangible assets significantly decreased the reported net income. The adjusted EBITDA for the second quarter ended December 31, 2022, was approximately $119,000, compared to an adjusted EBITDA loss of approximately $971,000 for the first quarter ended September 30, 2022. Management expects the sales and marketing expenses to return to normal levels and have identified an additional $502 million of cost reductions in the third and fourth quarter fiscal year 2023 resulting in an adjusted EBITDA improvement of $1.5 million to $2 million over the next two quarters. The company had cash of $4.5 million and stockholders equity attributed to Upexi stockholders of $36.9 million as of December 31, 2022.

As of today, February 14, 2023, there were 17,960,748 shares of common stock outstanding. Management expects revenues to continue to increase in calendar 2023, both organically, acquisitions completed during the 2022 fiscal year, as well as additional strategic acquisitions that align with management’s long term growth strategies. For calendar 2023 management continues to estimate annual revenue to be in excess of $100 million. At this time, I’d like to turn the call back over to Allan for closing comments.

Allan Marshall : During our fiscal second quarter ending December 31, 2022, we continued to transition the sale of our Infusionz division and started our consolidation of E-Core and Tytan Tiles businesses. Our quarter was highlighted with the highest revenue quarter since the company’s inception, driven by growth in our DTC, Amazon, Tytan Tiles and E-Core businesses. Our ability to generate better overall sales than anticipated in a very challenging retail environment is a testament to our ability to efficiently operate our business and execute. In the past, we have always focused on growth with a balanced approach for spending for long term growth and profitability. Our transition this quarter from an EBITDA loss to EBITDA positive was the first step in the right direction of creating efficiencies and driving margin increases in the coming quarters.

We have ample runway for further efficiencies throughout the remainder of the calendar year. Additionally, many of the adjustments made during this economic downturn will prove to be beneficial for us as the economy normalizes. The business is well-positioned to meet our projected revenue goal of $100 million for calendar 2023. We anticipate our EBITDA margin to increase steadily throughout calendar 2023 as we trend towards 8% to 12% EBITDA by the end of 2023. Regarding the sale of our Infusionz assets and gain associated with this. While it is not our business to buy and sell businesses, we could consider the sale of other assets as they mature, especially if the value is not represented in our overall valuation and makes sense for total return for our business and for our shareholders.

In closing, management is confident 2023 is set for our largest revenue year reported as well as calendar 2023 meeting our projected $100 million. We also feel confident in continued strong growth into 2024 as we continue to evaluate possible acquisitions and push for organic growth across the company. Now let’s open the call for questions. Operator?

Q&A Session

Operator: Thank you. We will now be conducting our question-and-answer session. . We have a first question from the line of Mike Albanese with EF Hutton. Please go ahead.

Michael Albanese: Yeah, thank you. And thanks guys for taking my question. Really nice quarter here. Nice job driving, adjusted positive EBITDA and with the sale of CBD assets and a couple of nice acquisitions. Just a couple of questions from me. I think first, just kind of from a macro perspective, I’d love to get some more color around what you’re seeing across some of your different brands.

Allan Marshall : This is Allan Marshall. Thanks for the question. We’re seeing reasonable growth. We have pricing power so far in most of our brands. We’re not seeing the average ticket price go as high as it has in the past. So I guess that’s probably the slight reduction that we’re seeing on the overall market. Our number of orders on a couple of our brands continue to be the same as the total sales number per order is a little bit lower. So most of our stuff, again, due to the kind of non-discretionary a lot of — we’re not seeing as much as we had feared. And into the yearend, we really didn’t see — we saw increases across, I think pretty much across everything over the last six months. So we’re pretty comfortable. The consumer seems to be holding up for us at least better than anticipated.

Michael Albanese: Great. Thank you. All right, and then your $100 million guidance for the year, I mean, is there organic growth baked into this? Or is that just kind of run rate given the acquisitions that you’ve piled in? Or helped me understand a little bit what’s driving that?

Allan Marshall : I think it’s organic growth and the acquisition. So we sold $20 million worth of business. We did $44 million. We added, various I mean, I guess, percentages with the acquisitions, but there is growth baked in across all our brands. Probably not. We don’t have any growth baked in on the acquisitions themselves. So that would be the upside if we get — if it worked out that way.

Michael Albanese: Understood. Okay. All right, great. And then kind of help me understand, I guess, the drivers in terms of improving EBITDA margins throughout the year, right, I think 8% to 12% kind of target by the end of the year. I mean, is this all coming from OpEx really? You mentioned and I apologize if I got this wrong, I think $500,000 to a $1 million. Is that just purely advertising or was that across all OpEx? G&A, decreased a little bit. I guess help me understand what your expectations are from OpEx standpoint? And if that’s really what’s driving EBITDA margins, or if there’s a — you’re kind of forecasting an improvement to gross margin as well?

Allan Marshall : Both. So we’ve been able to put — so the last quarter we spent about a $1 million, we know we can cut out without hurting the sales of the company at all. And then we probably — we probably pulled forward some sales with upping our advertising spend per customer, even though it’s still a positive. That should come back to us over the next couple of quarters. So that can be normalized. We were able to get more traffic than normal on the ad spend. So we spent it even though, we normally would on a certain product, we have $40 cost for acquisition. We moved that up to $50 or $60. So we did give away a little bit of the lifetime value. And thus we were able to sell that customer more value over time, which is what we’re betting on.

So we see — yes, we’ve seen all of those, and then we were able to get price increases on several of our products and we think we can push through a few more. And then you know G&A like general administrative expenses there’s some more room to decrease there. We already made adjustments in this quarter. And still kind of when we sold that the CBD side we still have employees that are stuck in, I guess you’d call it, purgatory or figuring out where they fit in the company or whether or not there are many cuts. So all of those things combined make us pretty confident that we can at least reach that bottom end of that number by yearend.

Michael Albanese: Got it. Thank you for that context. It’s very helpful. And then I guess just my last one, I just want to make sure, you paid off all your debt?

Andrew Norstrud : We had — we paid off — yeah, we paid all the debt from E-Core off. And that’s really what all the proceeds from the beginning, the first payment from the sale of the assets. So we really used that cash to pay off that debt.

Michael Albanese: Okay, great. Awesome. All right. That’s really it for me. Thanks, guys.

Allan Marshall : Thank you.

Operator: Thank you. We take next question from the line of Aaron Gray with Alliance Global Partners. Please go ahead.

Aaron Grey : Hi, good evening. Thank you for the questions and nice quarter and inflection to profitability. So first question from me, just I want to kind of turn back to the revenue and the implied guidance. So just wanted to be curious, in terms of was there a decent amount of seasonality in the quarter? I know, just for the holiday, maybe with the toys, because you hit $27 million. You had E-Core for two months. So if you assume a full quarter for that, on a pro forma basis, it looks like you could almost hit the $100 million for the fiscal year 2023, let alone the calendar. So I know you gave some guidance towards flat for some of the newly acquired and growth for some of the legacy business, and the newly acquired ones of Cygnet and E-Core to make the majority of the revenue.

But just want to go back to in terms of, what you’re expecting in terms of that growth? Because it does look like you’re well on your way to potentially build — hit that $100 million target for fiscal year, unless there’s some seasonality in that quarter there? Thanks.

Allan Marshall : Again, Allan Marshall. I think there’s — the quarter was a little more robust than we thought. So Tytan Tiles drove significant revenue, E-Core drove more revenue than anticipated. Each of the brands drove a little bit more than anticipated. So I don’t think by my math because of the discontinued operations, I don’t think we could hit 100 by June end. But I mean, if we do that it would be great for everyone. So I think we’re really — we did pull some revenue probably forward into that quarter. We anticipated somewhere around $20 million, $21 million to $23 million. So I think throughout the year, it should tear up as it goes, Q1, Q2, Q3, Q4, but not a lot of seasonality. I don’t think you’ll see in the coming year.

Aaron Grey : Okay, great. That’s helpful. Second question from me. You mentioned in terms of Amazon liquidation business right now, a lot of electronics looking to expand. I believe you said potentially into wellness, correct me if I’m wrong, but just want to know is kind of the wellness kind of liquidation, how would that kind of differ versus — it’s a lot more discretionary, just kind of shifting into a different type of category. So talk about how synergistic that might be and then does that also provide a platform for you to expand into other CPG categories? I know you mentioned, educational toys and otherwise. Thanks.

Allan Marshall : So there’s two parts to that, like Cygnet’s really focused on as an Amazon reseller or liquidator. And they do sell a lot of third party and liquidated products. Their main focus has always been kind of that health, wellness, wellness nutraceuticals, even though they spread across other categories because they do have 1,200 SKUs. And then on the E-Core, they do much larger kind of liquidation business in larger quantities. So bigger orders, smaller overall margins but still a good margin and overall expense on those margins. On the G&A side, a lot less so. What we do intend to do is the E-Core business, it will really — in the past they sold to Amazon liquidators for some of the overstock. So now they just have another asset available for liquidating part of the larger orders if they get, small, small lots left. And that should overall drive higher margins for those two businesses going forward.

Aaron Grey : Okay, great. Thanks. That’s really helpful. And then last question from me. You kind of touched on it there. Just on the gross margin front, obviously down sequentially there. And you mentioned some other things in your prepared remarks, Andrew. But just if you could maybe help out in terms of how much that was driven by equal what seems like a structurally lower gross margin business, just due to the electronics liquidation business. So how much of the sequential decline in gross margin was just driven by the acquisition versus the legacy business? Thanks.

Allan Marshall : Andrew, you got that?

Andrew Norstrud : Yeah, absolutely. The margin — I mean, it’s significantly impact, as we move towards the not necessarily liquidation, but as we move to selling to the bigger boxes and everything that’s done on with E-Core and with Cygnet, those margins are going to be impacted. That’s the most significant part of it. Our branded products are still in that, 70% to 80% gross margin from what the product cost to what the product sales are. That is different when we don’t own that brand. So I mean, I can get the exact breakdowns, but most of that decline is from actually that part of the business not from our actual products because our products we’re still maintaining the high margins.

Aaron Grey : Okay, great. Really helpful color there. I’ll jump back in the queue.

Operator: Thank you. We take the next question from the line of Matt Koranda with ROTH Capital Partners. Please go ahead.

Unidentified Analyst: Hey, guys. It’s Matt Devlin on for Matt. Wanted to start with the progress at Tytan Tiles. I know, it’s early. We just started hitting shelves in January. But I guess first, how are we tracking so far? And second, any way to quantify the benefit or just qualitatively speak to how the sales lift we expect to see from the physical store sales at Walmart fits into the revenue outlook for 2023?

Allan Marshall : So we don’t have anything public about those sales yet. We did have strong sales in that brand on walmart.com, which normally, on Cyber Week, so that normally bodes well for the future. And with more launches into that category, hopefully, we can secure the new launches into the same supply chain. It’d be great to think that every time you want something, you could get that kind of contract with Walmart or Camping World or wherever else, we have a distributor. So we’ll see on that but nothing public out there yet. And we’ll kind of update everyone when we get closer to the end of the quarter at the end of the quarter on that. But it is nice to have another let’s say like another lever to pull for us, another avenue.

Each of these things make incremental differences in the business and even on the last question with Aaron like, the reason our margin is so — that gross margin can be — can grow over time if we add more of the high margin business there, direct to consumer and Amazon that would skew that gross margin number back up again. We are excited about the category.

Unidentified Analyst: Got it?

Allan Marshall : Don’t know if I answer it. But if you need then just ask again. Maybe Andrew can just step into.

Unidentified Analyst: Yeah. No, that works. I get nothing public out there. We’ll wait for an update. But next question on the M&A front. Maybe if you could just speak to the acquisition pipeline, just how big is the pipeline in terms of companies? What does total potential acquisition revenue for the pipeline look like? And further just what our valuation multiples looking like in the current environment? Anything to call out in terms of changes since last quarter.

Andrew Norstrud : No valuations continue to get normalized on acquisitions. Right now we’re really comfortable with where we’re at and really focused on, I think the next couple of quarters and really want to try to squeeze that business and produce the kind of margins that we think we can, to give everybody a look at how — what we think are the potential. We’re sticking to that 3.5 to five times multiple on a business that makes sense for us. Obviously, if the business was super accretive in an area that we wanted to grow, we may consider some sort of structure deal. We’re very fiscally conscious of how difficult it is to bring in an acquisition and squeeze all the margin and how long it takes. So the pipeline is good. We see we have a lot of opportunities.

But like I said, we’re kind of just cruising here. And let us see how much we can get out of what we got. Unless something’s just so appetizing for us to take a bite off now, but I really don’t think in the next quarter or so.

Unidentified Analyst: Yeah. Okay. Makes a lot of sense. Thanks, guys.

Andrew Norstrud : Thanks.

Operator: Thank you. . We have next question from the line of Lew Greichner an investor. Please go ahead.

Unidentified Analyst: Hey, Allan, congrats on a fantastic quarter. Most of my questions have been answered already. I did have one question. From your prepared remarks, I forget your exact wording. But you had mentioned something about being willing to divest assets, if you feel as if the market isn’t properly valuing them. Is that something you guys are actively pursuing? Or how are you going about that? Is it sort of if you’re approached, or if you could talk a little bit about that, that’d be great.

Allan Marshall : I mean, I think, CBD for us made sense to move on from it, even though it was a decently high margin business. It just lacked a lot of growth for us. And the value that we’re hoping to get from it, it made sense for the overall shareholders, right. I think our balance sheet is strong, we’re able to leverage debt, we’re able to streamline the business. So we do evaluate the value that we think each business — the overall value of each business inside the portfolio, as compared to our market cap where the overall perception by the markets is something we would consider, right. Like we have a tech asset in that Interactive Offers. In a different environment and programmatic advertising, with the patent that has, it could be way more valuable than, than we know that it is on our books.

But so we talk about those things internally. And as a responsible, CEO and CFO and Board look at every opportunity to return the most amount of money for the shareholders. So it’s not our business. But we certainly would look at it.

Unidentified Analyst: Got you. Okay. Thank you. That’s it for me. Everything else is answered. I appreciate it.

Allan Marshall : Thanks, Lew.

Operator: Thank you. We take next question from the line of John McCaulis with Paulson . Please go ahead.

Unidentified Analyst: Hey, guys, nice quarter. Let’s feel good. Andrew, interest expense for the quarter, and how much D&A do you have left after getting rid of the CBD business?

Andrew Norstrud : As far as the — are you talking about the interest expense that we had at 1.79 that we incurred because of getting rid of Acorn?

Unidentified Analyst: No, just

Andrew Norstrud : Okay. I’m sorry.

Unidentified Analyst: The acquisition interest costs, which I know are 3% or 4%? What was that number if you could? Do you know it?

Andrew Norstrud : Of the acquisitions?

Unidentified Analyst: Yeah, the interest you pay the acquisitions that haven’t fully — you haven’t fully paid for yet.

Andrew Norstrud : In the quarter, it was less than $35,000 that we haven’t fully paid for. But that’s because the one acquisition, we don’t have any — on the LuckyTail, we don’t have any interest expense on it. And with the New England one, we only have the interest expense related to two months.

Unidentified Analyst: Got it. And depreciation and amortization, how much — what was that number?

Andrew Norstrud : Depreciation and Amortization for the quarter was about $1.2 million. The most significant thing is going to continue to be the amortization of the intangible assets because as we continue to acquire these entities it’s just going to continue to grow.

Unidentified Analyst: Thank you. That’s good. So last question is, you know, think of this some now you’re developing kind of a lot of data, giving you customer information. What’s the marketing budget look like? And have you changed your idea about how to cross-sell and go after the clients that you’ve garnered through organic growth and acquisition?

Allan Marshall : It’s Allan Marshall. No, not. We haven’t really changed our perspective on that. We really don’t want to chase too much additional advertising right now. Like I said, our focus really here is that we’ve got a really — I think a really great set of assets, with high potential for growth, both internally and organically. We can add an acquisition and make sense. But when we did spend extra last quarter our idea is we know what the lifetime value of our current customers is on our current brands, can we sell them someone else? And can we increase their lifetime value? And again, it’s not — you don’t always get an opportunity to get more data for a marginal additional amount of money. Usually, to get more data when it’s very competitive in advertising, it’s a larger increase, which sometimes makes it not economical.

So really just — it was a test for us. And then we’ll we track those customers that come in. We look at when the next time the order is and what the return is on that spend. If that works out really well for us over this quarter, then we probably would put a little more into it again. It’s fine tuning advertising, marketing and customer acquisition is just constant fine tuning of your spend, and you’re being conscious of how to do that properly.

Unidentified Analyst: Thanks. Congratulations again.

Allan Marshall : Thanks, Tom.

Operator: Thank you. Ladies and gentlemen, we’ve reached the end of the question-and-answer session. Now I’d like to turn the floor back over to Alan Marshall, CEO for closing comments. Over to you sir.

Allan Marshall : I want to I just want to close the call with thanking everyone for joining us today. Appreciate the questions, appreciate the company and all its employees, appreciate the support. We will look forward to the third quarter call and that ends the call for today. Thank you.

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