Covenant Logistics Group Inc

NASDAQ:CVLG

Earnings Call Transcript 2023-Q2

[Operator]

Welcome to today's Covenant Logistics Group Second Quarter Earnings Release Conference Call. Our host for today's call is Tripp Grant. At this time all participants will be in a listen-only mode. Later we will conduct a question-and-answer session.

I would now like to turn the call over to your host, Mr. Grant, you may begin.

[Tripp Grant]

Thank you, Jen. Good morning, everyone, and welcome to the Covenant Logistics Group second quarter 2023 conference call. As a reminder, this call will contain forward-looking statements under the Private Securities Litigation Reform Act, which are subject to risks and uncertainties that could cause actual results to differ materially. Please review our SEC filings and most recent risk factors. We undertake no obligation to publicly update or revise any forward-looking statements. A copy of the prepared comments and additional financial information is available on our website at www.covenantlogistics.com/investors. I'm joined on the call today by David Parker and Paul Bunn.

We are pleased with our results for the quarter, which showed comparative resilience in the midst of a very soft freight environment. Consolidated freight revenue was down 9% compared to a very tough prior year comparable when the freight environment peaked. The decline related primarily to operating approximately 11% fewer weighted average tractors in our truckload operations and less overflow freight handled by our Managed Freight segment due to lower overall demand.

Adjusted operating income fell approximately $12 million or 43% compared to the prior year quarter, primarily as a result of our Expedited and Managed Freight segments, which declined by approximately $7.5 million and $6.5 million, respectively, offset by an increase of approximately $2 million in our Dedicated segment.

Adjusted net income decreased 44% to $14.4 million, and adjusted earnings per share decreased 34% to $1.07 per share compared to the year ago quarter. Weighted average diluted shares decreased as a result of our share repurchase program.

Key highlights for the quarter include; all four of our business segments, including Expedited, Dedicated, Managed Freight and Warehousing, achieved sequential improvement in profitability in the second quarter; the acquisition of Lew Thompson & Son Trucking, Inc., a dedicated contract carrier comprised of approximately 200 tractors, specializing in poultry and live haul transportation. We have been pleased with the operational results to date and are excited about the growth opportunities that lie ahead.

Within our combined truckload segments, operations and maintenance-related expenses declined on a cents per total mile basis by $0.06 or 21%. And fixed equipment costs, including lease revenue equipment, depreciation and gains on sale, remained flat compared to the prior year.

The average age of our fleet at June 30 remained flat sequentially at 26 months compared to March 31, 2023, largely due to the equipment acquired from Lew Thompson & Son Trucking. For the remainder of 2023, based on our current equipment order, we anticipate sequential improvement to the average age of our equipment.

Gain on sale of revenue equipment was $2 million in the quarter compared to $0.4 million in the prior year. Our TEL leasing company investment produced $0.29 per diluted share compared to $0.33 per share versus the year ago period. Our net indebtedness at June 30 climbed to $187.2 million in the quarter, primarily as a result of the acquisition, yielding a leverage ratio of approximately 1.7x and debt-to-equity ratio of 33.1%. On an adjusted basis, return on invested capital was 13% for the current quarter versus 17.6% in the prior year.

Now Paul will provide a little more color on the items affecting the individual business segments.

[Paul Bunn, President and Chief Operating Officer]

Thanks, Tripp. Taking a moment to dive deeper into what drove our results for the quarter, starting with our Expedited segment, freight revenue declined 7% compared to the prior year, largely due to a 6% reduction in the average fleet. Rates declined by just over 10%, but were offset by almost a 10% improvement in average total miles per truck compared to a year ago. The improvement in utilization was principally attributable to newer equipment in the fleet and reduced downtime.

While we are pleased with the segment's utilization improvement, we recognize that year-over-year freight revenue per total mile comparisons will continue to be challenging for the remainder of 2023. While cost headwinds from salaries and wages and fixed equipment costs compressed margins, they were somewhat offset with improvements to variable-based equipment costs for the quarter.

Our Dedicated segment experienced an 8% reduction in freight revenue compared to the 2022 quarter as a result of a 217 or 15% reduction on the average number of total trucks, offset by an 8% increase in revenue per truck. Despite the addition of Lew Thompson & Son Trucking fleet, the overall fleet reduction in our Dedicated segment aligns with our strategy of exiting unprofitable or underperforming business and replacing it when opportunities arise that meet our profitability and return requirements. We were pleased with both the year-over-year and sequential improvement to the adjusted margin and expect to continue to improve upon this segment's profitability over the long term.

Managed Freight experienced a 21% reduction of total freight revenue and a 76% reduction in adjusted operating profit. The significant reduction in revenue and operating profit was primarily attributable to little to no overflow freight from our asset-based truckload segments. The brokerage environment remains highly competitive with numerous brokers aggressively competing for volumes at the expense of margin. We anticipate continued margin pressure in this environment.

Our Warehouse segment saw a 37% increase in freight revenue compared to the prior year, resulting from the start-up of new customers during the previous 12 months. We are pleased with the top line growth we've achieved in this segment, and the team has done a phenomenal job in executing these start-ups, which are both intense and time consuming.

However, despite the significant top-line growth in the segment, we've only seen about a 10% improvement in adjusted operating profit compared to the prior year. Although we're pleased with the sequential profitability improvement within this segment, we will continue to focus on improving profitability at the mid single-digits through improved labor utilization and rate increases with existing customers.

Our minority investment in TEL contributed pretax income of $5.4 million for the quarter compared to $7.1 million in the prior year period. The decline was largely due to reduced gains on the sale of used equipment compared to the year ago. TEL's revenue in the quarter grew 11%, and pretax net income decreased by 26% versus the second quarter of '22. TEL increased its truck fleet in the quarter versus a year ago by 210 trucks to 2,283 and grew its trailer fleet by 84 to 7,031.

As a reminder, TEL focuses on managing lease purchase programs for clients, leasing trucks and trailers to small fleets and shippers, aiding clients in the procurement and disposition of their equipment through a robust equipment buy-and-sell program. Due to the business model, gains and losses on the sale of equipment are a normal part of TEL's business model and can cause earnings to fluctuate from quarter-to-quarter.

Our investment in TEL is included in other assets on our consolidated balance sheet and has grown to $66 million as of June 30, 2023, from our original investment of $4.9 million in 2011. In 2022, we received $14.7 million in cash dividends from TEL, and we are anticipating approximately $19.8 million to be received during the second half of 2023.

As we enter the third quarter, we are optimistic that the trough of the freight cycle is behind us, but are cautious about the rate at which we'll see improvements. Regardless of how the freight economy responds, our primary focus remains on the long-term by continuing to invest in areas that provide opportunities for us to make forward progress on our strategic plan. The acquisition of Lew Thompson & Son and our investments in new revenue-generating equipment, people, technology are examples of this.

Thank you for your time, and we'll now open up the call for questions.

[Operator]

Thank you. [Operator Instructions]. And our first question today will come from Jason Seidl with TD Cowen.

[Jason Seidl, TD Cowen]

Thank you, operator. Gentlemen, good morning. I wanted to queue in on that last comment that you talked about in terms of the broader trucking industry. I'm with you guys that we're sort of off the bottom here, but how should we think about pricing on a sequential basis? Because I'm still getting some feedback from some private truckers from some just really lowball pricing out there like paid in North Carolina at less than $1 a mile being offered. So how should we think about that at least in the near-term?

[Paul Bunn, President and Chief Operating Officer]

Jason, here's what I would say is we're still seeing that, too. But as a reminder, most of our stuffs tied up under contract rates. So when we talk about continuing to see margin pressure in the brokerage, that's really where we've got exposure to that. On the Dedicated and Expedited side, I don't think we're going to see any pricing pressure in the near-term. I think we'll see what contract rates do next year. I think that's probably will have the larger effect on us. And I think it's probably too early to tell exactly what those are going to do next year. But yes, a lot of the stuff that's out there in the spot market, I mean, it will negatively affect the brokerage a little bit, but it shouldn't affect Expedited and Dedicated for the balance of the year.

[Jason Seidl, TD Cowen]

That makes a lot of sense. Also, you called out a little bit of gains on sale. How should we look at gain on sale going forward? And what does the equipment market look like?

[Paul Bunn, President and Chief Operating Officer]

Let me talk about the market, and I'll let Tripp talk about gains on sale. Used equipment market has just continued to precipitously drop. It dropped a little bit from January to March. But since March, it's been kind of in a free fall. It seems like July maybe has kind of hit a little bit of a floor in the used equipment market, but March to July was a pretty big drop.

[Tripp Grant]

Yes, I agree. And quite honestly, and this is just me speaking, I don't see the used equipment market getting any better in the next six to eight months. It's continue -- especially when you look at the rate, it's continue -- it has dropped over the last few months. This is a -- we've talked about this in previous calls, but this is a very heavy CapEx year for us. We're -- really, over the last year and a half, I would say, we've been really investing in upgrading the fleet, and we're going to continue to do that, because we think it's for the best. It provides an optimized way of operating the fleet for us both, I would say, on kind of the ongoing variable cost and I think that there's some fixed cost benefits with uptime.

But here's what I would say. Going forward, yes, we do have more newer equipment. We're not -- you're not going to see a lot of fleet count growth in the back half of the year, which means that we're going to be selling a lot of equipment, too. So it's just a matter of how much it continues to drop. I don't think you're going to see huge gains on sale in Q3 and Q4, may see a little bit, but I don't think that anything -- I also don't think you're going to see significant losses either. So it's marginal, I would say. But we appreciate -- we watch our depreciation on our equipment and make sure that we're depreciating it adequately, and I think we'll be okay there.

[Jason Seidl, TD Cowen]

Okay. That's great color. Last one, and I'll turn it over to somebody else here. Lew Thompson, you got about two-thirds of a quarter, looks like a good acquisition for you guys, getting you in a niche end market that you really weren't in. When I was hosting some calls with industry people before earlier this quarter, a lot of them were talking about how there's a lot fewer financial buyers in the marketplace for sort of smaller niche acquisitions. Do you foresee other opportunities for yourself down the road, because multiples have come in a little bit?

[Paul Bunn, President and Chief Operating Officer]

Jason, here's what I would say. A, I agree, there's less financial buyers in the market; B, we're always looking for those really niche, value-add, contractual-type businesses. And so we got to digest. Remember, we did AAT in February of '22, and then we just did Thompson in April. So we got to digest. But any of that niche, good margin, contractual type businesses out there, yes, we continue to field calls and are -- we'll keep looking at stuff like that as it comes about.

[Tripp Grant]

Yes. And I just want to -- just adding to that a little bit is making sure that our balance sheet could absolutely support an additional acquisition, and it's something we may look at in the future. But our main focus, whether it's AAT or Lew Thompson, most recently Lew Thompson, is really focusing on learning that business and starting off, getting out of the gate on the right foot, which we have the first two months of -- since we acquired them. But there's a lot of executional risk at play with anytime you do something a bit different, I would say, or niche kind of, as Paul had mentioned.

But we're really focused on execution. We want to make sure we do those the right way. And I think we'll reap benefits from those that we've already done in the future if we can kind of continue to refine that and make sure we're executing at a high level.

[Jason Seidl, TD Cowen]

Well, thank you gentlemen. I appreciate the time as always.

[Tripp Grant]

Thanks Jason.

[Paul Bunn, President and Chief Operating Officer]

Thanks Jason.

[Operator]

And our next question will come from Scott Group with Wolfe Research.

[Scott Group, Wolfe Research, LLC]

Hey, thanks. Good morning guys. Can you just talk us through how you're thinking about back half of the year from an earnings standpoint? Do you think we see further sequential earnings growth from Q2 into the back half of the year? What are the puts and takes?

[TrippGrant]

Yes, I mean I don't want to get into giving any sort of like defined guidance, but we feel like we've got -- and you've probably read it in the release, I mean we're optimistic about the back half of the year. We said that there's, we feel like we're at the trough of the freight recession, and part of that may be due to our model. We've got a lot of LTL customers in Expedited. We've got, if you look at 2Q, we've got just two months of Lew Thompson. We've talked earlier about the optimism about how well Lew Thompson is running out of the gate as well as some potential growth opportunities that may come to fruition later in the year and early next year.

So I think I'm optimistic about being able to increase earnings sequentially in Q3. I think there's a big question mark. Q4, there's some downtime with the holidays and there's a big question mark about peak, not that peak is a big part of our business, but last year, it was virtually nothing. And I'm just not sure how much that's going to contribute this year in 2023. But yes, I think we're bullish on the next half of the year for us.

[Paul Bunn, President and Chief Operating Officer]

Yes, Scott, let me add one thing to that. I agree with everything Tripp said. I think the one thing to watch is with our reduced share count, a few things going in the right direction could really be accretive in the back half of the year. And one bad accident could pull it the other direction. I think that's one of the things everybody has got to remember with this reduced share count is the earnings have a lot of leverage up, but you also -- you have a bad accident or something, there's a lot of leverage on the downside. So on the balance, I agree with what Tripp said. I think we're optimistic about the back half of the year, and I think we can continue to improve earnings quarter-over-quarter.

[Scott Group, Wolfe Research, LLC]

Okay, helpful. And then -- so you just mentioned you got a lot of LTL customers. What are you seeing in the market right now in the last week or so as shippers are scrambling to leave yellow? How is this [indiscernible]?

[Paul Bunn, President and Chief Operating Officer]

Yes. We're fielding a number of calls in the Expedited division. As you know, we do business with practically every major LTL and freight forwarder in that division. And so we continue to field a lot of calls as people need some incremental capacity. And it's probably maybe 5% growth on Expedited revenue during the quarter. I mean it's definitely going to be a positive on Expedited in the third quarter. There was really none of that in the second quarter. So it should be a positive for Expedited in the third quarter and likely into the fourth.

[Scott Group, Wolfe Research, LLC]

Yes. And then just lastly, you mentioned the increased sort of leveraged earnings because of the buyback. What is the plan with the buyback going forward? Are you going to be continuing to be aggressive with it? Do you pause it? How do you think about that?

[Tripp Grant]

I mean, I can't really give specifics. All I can say, I guess, with that is we do have an open buyback plan right now that has some parameters around it that the bank will repurchase based on those parameters. But here's what I would say, I really like how we've deployed capital over the last couple of years, and buybacks have been a big portion of that.

So I think that there are always going to be on the playbook, not saying that we're going to buy back X amount of shares in Q3 or Q4, but I think as circumstances warrant, I think that there are always going to be the go to -- a go to -- potential go to in our playbook to activate as part of our capital deployment plan. We like them. We've seen benefits from them.

The question is, as circumstances change, how do you reprioritize those types of things and decisions? And I think they're always going to be there. And I think that you guys will probably see us think about it or talk about it and move forward with another one in the future when circumstances warrant.

[Scott Group, Wolfe Research, LLC]

Make sense. Thank you guys.

[Tripp Grant]

Thanks Scott.

[Operator]

And our next question will come from Jack Atkins with Stephens.

[Jack Atkins, Stephens]

Okay, great. Good morning and thanks for taking my questions guys. Congrats on a great quarter. So I guess, just kind of going back to the LTL and sort of the Expedited comments there for a moment. How are you guys thinking about approaching deploying additional capacity into that market? I mean is it -- you have some longer-term partnerships there. Is it really a function of looking to secure longer-term commitments for additional trucks that you'd be willing to deploy into that LTL line haul part of the market?

[Paul Bunn, President and Chief Operating Officer]

Yes, Jack, you hit it. I mean we're -- I would say we're -- there's a few trucks here, a few trucks there to a lot of folks. But for us to add a significant volume of trucks, it's going to be with the folks that we have longer-term partnerships with. And so, yes, it's the -- as we move those trucks around, they're going to be more heavily weighted towards folks that are willing to sign up for those on a longer-term basis and that have been part -- we were partners with through the '21, '22 cycle, and they've been partners with us through this '23 cycle. And so that's how we're going to allocate our resources on trying to grow these teams for them.

[Jack Atkins, Stephens]

But as you think about this from an investor perspective, I guess the point I'm trying to make there or the question I'm asking is, as you bring on new business there, this isn't just a short-term sort of stop gap for some of these guys. This is potentially a longer-term sort of step-up in business activity with this particular part of your customer base?

[Paul Bunn, President and Chief Operating Officer]

Yes. I think, we'll keep a high percentage of whatever we add with these customers on a longer-term basis. Because to your point, they're digesting this growth and their model is changing. And so, yes, we're strategically trying to make sure where we grow the most is for people that's going to be sticky.

[Jack Atkins, Stephens]

Yes. No, absolutely.

[David Parker, Founder and CEO]

Because, Jack, keep in mind, about 55% to 60% of that Expedited revenues is on guaranteed contracts.

[Jack Atkins, Stephens]

Right. Absolutely. That makes -- yes, that makes sense.

[David Parker, Founder and CEO]

Yes. We -- as Paul was saying, when we add these trucks, whatever we do that's going on to those customers that have been partners to us, and we're partners, and part of that partnership that we got are long-term agreements between us.

[Jack Atkins, Stephens]

Absolutely. And that's paid dividends over the last couple of years, for sure. So I guess, David, good to hear your voice. I guess maybe would love to get your perspective as well in terms of just how you're thinking about the cycle. I know you bring a lot of perspective to this. I guess, could you maybe kind of help us think about where we are in terms of coming off the bottom here? And as you sort of think about capacity and all the puts and takes, are you more or less optimistic about sort of where we're headed from a cycle perspective over the next six months?

[David Parker, Founder and CEO]

Yes. I was going to handle last week at a conference with the [indiscernible] insurance, but had a big carrier conference -- carrier panel. And -- because I think there's two things happening. We went around the room, the last question on the panel was, when do you think -- because the whole group was a bunch of smaller carriers, when do you think that things are going to get better and when that day is going to come? And the time, Jack, were anywhere from, I heard spring, I heard 12 months from now, I heard spring, I heard December.

And I was the last one to answer the question on there because this is the way I do believe. And I believe that we're going to fill it in September. I believe in the next couple of months for the trucking industry, truckload guys are going to feel capacity constraints. I'm not saying it's going to be 2022 over again, but it's going to feel better than the last 12 months that we've gone through. And it's all because of -- because I'm not sure about the economy. But capacity had left and is leaving our industry, added by the fact of what Paul said that's happened on the used truck prices just in the last 60 days.

It hurts, and it hurts right now. It hurts this month. But overall, it's good because as capacity leaves, the pricing power will return, and the pricing will make up for whatever shortfall we're disappointed in that we didn't sell a used truck for. And that's all happened over the last 60 days. So I really believe trucking will start sensing it in the next couple of months, a timing of capacity, as long as the economy at least kind of stays and hangs where it's at today. Those are my thought.

[Jack Atkins, Stephens]

Okay. All right. No, I appreciate that. Maybe last question, long-term strategically. I mean, as you guys think about the way you'd like to have your mix of assets deployed within the truckload market, you've been investing more outside of the kind of traditional long-haul, over-the-road, highly cyclical parts of the truckload market into things like AAT, Lew Thompson & Son, longer-term commitments within your Expedited team business for LTL. How do you think about the long-term mix of assets between traditional OTR truckload, and it was more niche parts of the market that really removed the cyclicality and where you can really see kind of compounded growth?

[David Parker, Founder and CEO]

I would say this. I would say that we've been on this journey now really in 2015 when we brought over Delta Airlines. I actually went to the Board and said, we're going to change our company around. We're not going to be this feed for famine and hope things get better tomorrow. We are going down another road. And so we started that in 2015. It really came into fruition in 2018 with the acquisition of Landair. It really came into fruition in 2020 when we shut down SRT in the over-the-road solo side of the Covenant business, and we got out of the solo business.

And we're really in the market of Expedited, Dedicated, Warehousing and Managed Freight. And Managed Freight is brokerage of TMS. And we are really looking at those four avenues. And as I look at the whole and at this is that we get two things got to happen. We got to bring value to the customer, but that customer has got to bring value to us. That's going to be a two way street that we're both bringing value because at the end of the day, if we're not bringing value, if our customer is not bringing value, the relationship will eventually end. Something will happen.

And we were just so tired over all those years, 35 years or 33 years or whatever it's been of, okay, the market is up, let's go increase rates 5%. The market is down, let's give it all back. And our model today is not doing that, and it's because we're bringing value. Our Expedited side of our business, our teams, everybody doesn't have teams, we're one of the largest team providers out there. If you truly need teams, then pay me for what it costs me to operate these teams, and we'll be there during the great times of 2022, the Expedited side.

It's not that they came in larger just on rate. They came in this last year, instead of 20 trucks, I think, 17. And we work with our customers on that. And we got to make sure that we've got a pipeline to be able to take care of the ones that give you back, and then the broker side is really filling the OTR side of our business. And as you know, brokerage is up and down and barges are up and down. But as long as we can -- it's a high ROI on that business.

And so I'm very pleased with that, and then Paul talked about the Warehousing. But those are the four areas that we're concentrating in. And those are the areas that we're going to continue to build either through internal growth or through acquisitions, as you call it, niches and those kinds of things. So that's what we love. We love something that's hard and something that everybody doesn't do and it brings value to the customer. So that's our model.

[Jack Atkins, Stephens]

David, it looks like it's clearly working. I'll hand it over.

[Operator]

[Operator Instructions]. And our next question comes from Barry Haimes with Sage Asset Management.

[Barry Haimes, Sage Asset Management]

Hi guys. Thanks very much. Good quarter. I had two questions. One is, David, I wanted to circle back on your comment about capacity leaving the industry. Is there -- so when you look at your brokerage segment, you might be able to get a read on that in terms of all the carriers that you work with. So is there anything either numerical or anecdotal that you could talk about to flesh that out a little bit more? And then I had one other question, but go ahead.

[David Parker, Founder and CEO]

Yes. I just want to say, on the broker side, yes, you can. And I would say the main thing that's happened on the brokerage side is that the small carriers have reached a point that they're not going no lower. And that's what we have seen is that we can't get the capacity for any lower rate than what's out there. So it's showing you that capacity is starting to tighten a little bit because the rates are not falling like they were.

[Barry Haimes, Sage Asset Management]

Got it. Okay. Thank you. And then the other question is on the asset-based businesses that, as you pointed out, are more contract, are most of those roll in the spring? And any feel for where contract rates are in the market now versus where they might have been six months or a year ago? Thanks.

[Paul Bunn, President and Chief Operating Officer]

Yes, most of our stuff is in the spring. And I would say January to April is when most of the asset-based contracts reset. Pricing is probably down mid single-digits on -- if you combine Dedicated and Expedited, I would say our pricing is probably down mid single-digits if you kind of weight those. I would say people that have more of OTR they able to say U Call We Haul type exposure, those are probably down a lot more than mid single-digits. David, any more color you want to add on that?

[David Parker, Founder and CEO]

No, I agree. It's bringing a bit next year when rate starts, then we start looking at rates again. And I agree with Paul on this thing.

[Barry Haimes, Sage Asset Management]

Great. And just one last quick follow-up on that. So looking at the cost side for next year, as we start thinking about next year. Are there any big puts or takes we should think about as we're thinking about cost structure in '24 versus '23? Thanks.

[Tripp Grant]

So on the cost side, I mean we've been pleased with what we've seen. And with a lot of the costs, we've been really laser focused, I would say, as an enterprise starting in the fourth quarter of last year, kind of seen. I think we -- it's safe to say we kind of first felt it pretty significantly in November of 2022. And as a response to that, we've been laser-focused on cost. And the enterprise as a whole has done a great job and just really focused on cost savings throughout the enterprise, whether in a business unit or a back office.

And that being said, that can only go so far. But I think a big part of the success story of where we have seen success, I would say, is on the investment in our new tractors. And we've done a lot there. It was painful last year. We had to pull some trucks early and created some fleet disruptions and created some drag on the P&L and impairment charge. If you go back and read the Q4 release, it was a little bit muddy.

But we are seeing improved fuel economy. We're seeing improved maintenance costs. We're seeing improved retention, because we're in -- it's a different market, but we'd like to think of it that they're in newer equipment, better equipment, and more efficient. And so our utilization has improved as well. So I do think that we'll continue to see cost improvements as we continue to upgrade and reduce the average age of our fleet.

Fuel is kind of a wildcard. It goes up one month and goes down another month. I think directionally, it's going to be going down. But quite honestly, I don't see a lot of reduction in wages. So it's a little bit of a mixed bag. I feel good about our cost journey to date. But 2024, when we have that type of leverage, we squeeze and turn it pretty hard this year.

And how can -- do we have the leverage to kind of offset some of those costs? But it's kind of a hard question to answer, because I think there's some ups and downs in there. But we feel good about the things that we can control, and we're really happy with what we've done to date.

[Barry Haimes, Sage Asset Management]

Great. Thanks very much. Good luck.

[Tripp Grant]

Thank you.

[Operator]

[Operator Instructions]. And it appears there are no further questions at this time. Mr. Grant, I'll turn the call back to you for any additional or closing remarks.

[Tripp Grant]

Yes, Jen, thanks so much. I just wanted to thank everyone for your time and participation today. We're excited about the quarter, pleased with our results and are optimistic about the future. And we look forward to speaking with everyone next quarter. Thanks very much, and have a good afternoon.

[Operator]

This concludes today's conference call. Thank you for attending.