GrowGeneration Corp

NASDAQ:GRWG

Earnings Call Transcript 2024-Q3

[Operator]

Hello, everyone, and welcome to GrowGeneration's Third Quarter 2024 Earnings Conference Call. My name is Lovely, and I will be your operator for today's call. [Operator Instructions] This conference call is being recorded, and a replay of today's call will be available on the Investor Relations section of GrowGeneration website.

I will now hand the call over to Phil Carlson with KCSA for introductions and the reading of the safe harbor statement. Please go ahead.

[Phil Carlson]

Thank you, and welcome, everyone, to GrowGeneration's third quarter 2024 earnings results conference call. With us today are Darren Lampert, Co-Founder and Chief Executive Officer; and Greg Sanders, Chief Financial Officer of GrowGeneration.

The company's third quarter earnings press release was issued after the market closed today. A copy of this press release is available on the Investor Relations section of the GrowGeneration website at ir.growgeneration.com.

I would like to remind everyone that certain comments made on this call include forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any of the forward-looking statements made today.

During the call, we'll use some non-GAAP financial measures as we describe business performance, the SEC filing as well as the earnings press release, which provide reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are all available on our website. Following prepared remarks, management will be happy to take your questions. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, please reenter the queue and we will take them as time allows us.

Now I will hand the call over to GrowGeneration's Co-Founder and CEO, Darren Lampert. Darren, please go ahead.

[Darren Lampert, executive]

Thanks, Phil, and good afternoon, everyone. We appreciate you joining us today as we report our third quarter performance. I'm pleased to share that our results were consistent with our internal expectations, reflecting the solid progress we've made under our restructuring plan. In particular, we met our targets with store closures and exceeded our targets for proprietary brand and same-store sales performance, all of which I will provide details on shortly.

Throughout the quarter, we remain focused on driving operational efficiency, enhancing our product offerings and positioning GrowGeneration for sustainable growth as we look towards 2025. Our entire team's commitment has been instrumental, and I want to extend my thanks to them for their hard work and dedication.

We believe that the foundational improvements we're making today will not only strengthen our current performance, but will also serve as a springboard for our growth initiatives with an emphasis on high-margin proprietary brands, digital expansion, and a leaner, more efficient resales footprint.

Our third quarter results included net revenue of $50 million, slightly down from $53.5 million in the second quarter of 2024, as we had anticipated due to store closures as part of our restructuring plan.

We are balancing our focus on profitability as we execute on our key growth initiatives. These actions are positioning GrowGen for profitable, sustainable revenue growth. They should enable us to increase sales in high-growth areas with our commercial and B2B customers as we enhance margins and optimize efficiencies across our organization. We are pleased with our progress and believe these actions will improve profitability and reduce expenses by a minimum of $12 million on an annualized basis.

I'll briefly recap the 3 major components of our restructuring plan that we announced during the third quarter, which are: One, a focus on proprietary brands with goals of adding approximately 50 new products to our proprietary brand lineup over the next 12 months and for these brands to account for 35% of total sales by the end of 2025. Further, we continue to focus on preferred partners who bring best-of-breed products to our customers.

Two, the digital transformation of sales throughout our entire organization with a B2B customer focus. This includes launching a B2B e-commerce portal, which we expect to launch in the fourth quarter.

Three, and continuing to streamline our operations and rightsizing GrowGen's retail footprint to align with current market dynamics. We expect to retain the majority of our commercial customers to adjacent locations, our commercial sales force and the B2B portal.

We've been making substantial progress across all these areas. As previously stated, the plan included closing 19 stores in order to prioritize our best-performing locations serving higher customer volumes. When we last spoke, 7 store closures have already occurred. Since that time, the 12 additional stores we noted have also been closed.

As of today, the company retains 31 operational stores. Digging a little deeper into our third quarter results, we want to highlight that our same-store sales grew by 12.5%. It is of paramount importance to note this marks the first quarter of positive same-store sales in 3 years. We think this growth shows the high performance of our core store locations and reinforces the rationale behind our restructuring plan.

Our third quarter results also display the strength of our proprietary brands. As a percentage of Cultivation and Gardening net sales, proprietary brands sales grew to 23.8%, up from 19.4% last year. This growth was mainly driven by several new product launches during the quarter.

Our strong performing proprietary brands and a consistent pipeline of innovative new products, we're on track to reach our target of proprietary brands comprising 35% of total sales by the end of 2025. This growing portfolio of proprietary offerings is central to our profitability strategy, enabling us to provide differentiated high-value products that meet customer needs and contribute to stronger margins for GrowGeneration.

As part of our strategic transformation, we are fully embracing a digital-first approach across our sales channels with a strong focus on our B2B customers. This quarter, we made substantial progress on launching our new B2B e-commerce portal, which is set to go live in the fourth quarter. This platform will serve as a central hub for our commercial clients, enabling them to seamlessly place orders online, view real-time inventory availability and access tailored product recommendations and pricing, all designed to simplify and streamline their purchasing experience.

As we finish the year and move into 2025, we will further sharpen our focus on profitable growth and maintaining a strong balance sheet. Our cash position remains very solid with $55.2 million and no debt as of September 30, 2024. Our no-debt position and strong cash reserves reflects our financial resilience.

We also repurchased an additional $1.8 million of stock during the third quarter as we continue to believe our equity has compelling value.

Moving on to guidance. We are reiterating our full year 2024 estimate of net revenue between $190 million to $195 million. We continue to review our outlook for adjusted EBITDA in light of our ongoing restructuring actions and the resulting cost savings we anticipate. We will have greater visibility when we close our full year results and expect to provide full year 2025 net revenue and adjusted EBITDA guidance on our year-end earnings call.

I would now like to provide a brief update on MMI, our storage solutions business. As we have previously discussed, we believe there is a significant opportunity to further monetize this business. Lake Street Capital is currently assessing strategic opportunities related to MMI, and we are in the process of receiving and reviewing bids. The process is ongoing, and we will provide any further updates when appropriate.

To summarize, our third quarter results were consistent with our expectations and show the progress of restructuring measures. GrowGen is strategically positioned in the evolving cannabis industry, especially with the upcoming rescheduling discussions and new leadership pro-cannabis stance to capitalize on industry growth opportunities.

I will now hand the call over to our CFO, Greg Sanders. Greg?

[Greg Sanders, executive]

Thank you, Darren, and good afternoon, everyone. We are pleased to report that our third quarter results were in line with guidance as we continue to execute the plan. As I will cover in depth, same-store sales growth, reduction in expenses and the improvement in proprietary brand sales demonstrates the alignment of our results to our strategic priorities.

Starting with third quarter sales, net revenue was $50 million compared to $55.7 million in the year ago period, a decline of 10.2% primarily attributed to 25 store closures in the trailing 12 months. Sequentially, revenue declined 6.6% from $53.5 million last quarter. The company closed and consolidated an additional 12 retail stores in the third quarter, which had an impact on overall sales.

We could not be more satisfied to report that our third quarter same-store sales metric increased by 12.5% year-over-year. For GrowGen, this marks the first quarter of positive same-store sales in 3 years.

We saw continued improvements in our business within Michigan, Oregon and California markets and observed challenges in Oklahoma and Maine. Relative to the strength of the third quarter, same-store sales turned positive for the full fiscal year-to-date through September 30.

Cultivation and Gardening net sales were $41.4 million for the third quarter of 2024 compared to $48 million for the comparable year ago period. Proprietary brand sales increased to 23.8% of Cultivation and Gardening sales for the third quarter of 2024 compared to 19.4% for the third quarter of 2023, a 4.4% improvement. This was driven by continued market adoption of our proprietary brands, including Charcoir, Drip Hydro and the Harvest Company. We remain laser-focused on delivering 35% of sales in 2025 to be driven from our proprietary brands.

For the third quarter, the percentage of consumable product net sales in the Cultivation and Gardening segment generally remained flat at 73% to the prior year, which we view as a positive indicator of stability. Net sales of commercial fixtures within our Storage Solutions segment increased by 12.9% to $8.6 million for the third quarter of 2024 compared to $7.6 million from last year's third quarter. This increase was largely due to timing of revenue recognition on various large projects.

Gross profit margin was 21.6% for the third quarter of 2024 compared to 29.1% for the third quarter of 2023. Within margin, we incurred a 381 basis point impact from inventory costs, closed store liquidation sales and freight expenses related to the closures of 12 retail stores in the period. In addition, we incurred a 227 basis point impact from heavily discounted sales of discontinued inventory in Q3, which also contributed to our ability to reduce inventory by $12 million in the period.

Within our restructuring initiatives, we are revising our product mix to align the business to execute the 35% proprietary brand sales for next year. We expect that this initiative, which will carry into the fourth quarter will have an impact on fourth quarter margin as well, but will allow the business to report a sustainably higher gross profit percent in 2025.

Another area worth noting is that we continue to realize steady improvements in expenses as a result of our strategic rationalization efforts. Store and other operating expenses in the third quarter declined 13.9% to $10 million compared to $11.7 million in the third quarter of 2023.

Meanwhile, selling, general and administrative expenses for the quarter were $7.4 million compared to $7.6 million in the third quarter of 2023, a 2.3% improvement. While SG&A was slightly up from the second quarter of 2024 of $7.1 million, this is largely due to expenses related to severances and other restructuring costs to further optimize our operating model. We expect to communicate additional cost improvements in Q4 as we position the business for 2025 and beyond.

Depreciation and amortization was $5 million for the third quarter of 2024 compared to $3.6 million in the second quarter of 2024. This increase is due to acceleration of certain depreciable assets from our restructuring initiatives through year-end, for which we expect to retire set assets at December 31. In addition, we recorded a $220,000 impairment, which was fully related to leases of closed stores in the third quarter.

Net loss was $11.4 million for the third quarter of 2024 or negative $0.19 per share compared to a net loss of $7.3 million or negative $0.12 per share in the third quarter of 2023. Adjusted EBITDA, as defined in our press release, was negative $2.4 million compared to negative $0.9 million in the same period last year.

Turning to the balance sheet. As of September 30, 2024, the company had $55.2 million of cash, cash equivalents and marketable securities and no debt. During the quarter, we utilized $1.8 million to repurchase company shares. We continue to maintain a strong cash position and do not foresee any near-term financing needs. As Darren mentioned, we are reiterating our full year 2024 guidance for net revenue to be in the range of $190 million to $195 million. We expect to provide full year 2025 guidance for net revenue and adjusted EBITDA on our 2024 year-end conference call.

In closing, the financial position of GrowGeneration remains strong. We made significant progress towards restructuring the business for long-term profitability in the third quarter. Our primary focus is long-term margin expansion, cost reduction and generating opportunities for positive top line growth. We are dedicated to growing the business on a more sustainable and leaner footing, enabling us to deliver profitable growth for our shareholders.

I will now turn the call back over to Darren for closing remarks.

[Darren Lampert, executive]

Thank you, Greg, and thank you to everyone for joining us today. As we wrap up our third quarter call, I want to emphasize our excitement and confidence in GrowGeneration's path forward. The progress we've made through our restructuring efforts have put us on a stronger footing to drive revenue growth, optimize margins and build a leaner, more profitable company.

Our focus on expanding high-margin proprietary brands, advancing our digital transformation and streamlining our retail footprint is already showing results, and we're committed to maintaining this momentum into 2025.

Our entire team remains dedicated to executing on this strategic plan, and I'm deeply grateful for their hard work and adaptability as we position GrowGeneration for long-term success. I'd also like to thank our investors for their continued support and confidence in our vision. We're excited to deliver meaningful value to our shareholders by building a more resilient and sustainable business. We look forward to keeping you updated on our progress as we move into the new year. That concludes our prepared remarks.

Operator, please open the line for questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Brian Nagel from Oppenheimer.

[Brian Nagel, analyst]

A couple of questions, if I could. First off, I guess, just numbers. You talked about the kind of the ongoing rationalization of the store base. Could you remind us where you want to get to and when that will be done?

And then my second question, I guess, is bigger picture. But Darren, with respect to the continued build-out and rollout of your proprietary brands, which seems like it's happening quite quick. How -- could you maybe talk about the performance -- as you're adding these new brands, how is the sales performance of the new brands added versus maybe some of the legacy brands, the same customer base or are you introducing products that appeal to different customers?

[Darren Lampert, executive]

Yes. I can start, Brian. We have 31 stores right now. So we're down from about 65 stores. We've closed 19 stores this year. And when you look year-over-year, we're down 25 stores. I think we're at a pretty comfortable spot right now of this 31, not to say that we may not close a couple more stores next year.

GrowGen has changed tremendously as we evolve in the industry. GrowGen is now a go-to name right now for most cultivators. So the amount of stores is certainly not necessary around the country as we build out distribution and we build out our B2B network. So we're comfortable right now. We're able to service our customers around the country right now from our locations, certainly our bigger locations. But I do believe you'll see a couple more store closings next year, but that will probably be the whole 9 yards of it.

With regards to private label, GrowGen has been -- has spent the last 3 years through R&D and testing products within cultivation around the country. What you're starting to see right now is everything coming together. It takes 6 months to a year with certain of these products just going through testing in certain facilities to get some of our customers to either switch or adopt these different products that we're bringing to market in different sides of the industry, whether it be on the nutrient side of it, which is feeding the plant on the soil side of it, on the lighting side of it and Harvest Co, which is a new brand for us on the -- really on the picks and shovel side of it and really on the ancillary side of it. And we're just giving our customers more optionality.

So what you're seeing right now is both of our customers adopting some of our products. And also, we're also selling it into distribution. So I think you're seeing sales increasing from both ends. But when you start looking at the margin picture for GrowGen, you're looking at products that are -- that GrowGen is 40% margin business, really opposed to some low 20s on a lot of the other products we're selling. So we do believe going into 2025 that you start seeing a balancing of our margins that should land in the high 20s to low 30s, especially when we're looking at 35% of our -- of what we believe of sales next year will be private label products.

But with that also, we continue to work with the best-of-breed distributors, manufacturers out there and working very closely with our partners selling their brands to our customers. So we've always said that GrowGen gives a choice. And our products are not always the choice for some of our customers. And we sell to our customers what they're looking for. So we keep a very open eye with what we sell.

[Operator]

Your next question comes from the line of Aaron Grey from Alliance Global Partners.

[Aaron Grey, analyst]

So first question for me. I just wanted to hear more in terms about your efforts to build out the commercial business, increasing your sales with some of the larger players in MSOs. It sounds like there's still a lot of white space opportunity. So any color you could give on that initiative would be helpful there.

[Darren Lampert, executive]

Yes, Aaron, I think there's a tremendous amount of opportunity. And I think as this industry grows up and evolves and gets more commercialized in a lot of ways, GrowGen becomes the go-to, whether it's accounting, whether it's credit, whether it's product, whether it's distribution. We've built a network around the country right now where we sell best-of-breed products, albeit either GrowGen products or our vendor products.

But on the other side of it, we have a very vibrant software system at GrowGen accounting systems. We give credit to all our customers. So it's just -- again, it's making it easier for our customers to shop. And I think that's what it's about in this day and age, getting products to our customers in a timely fashion, best pricing with credit and just making their jobs easier. Our accounting department consolidates their bills from facility to facility.

We work with our customers. Like anything else, we have a very big balance sheet. We have $55 million of cash on our balance sheet. Right now, we have the largest inventory positions in the industry. So the plants never sleep and our customers don't sleep. And like anything else, we're there 24/7 to fill orders and do what we can for our customers.

On the other side of it, we have an extremely talented commercial team at GrowGen. Our commercial team is at the facilities on a daily basis, answering questions about new products coming to market, helping out if there's issues within the grow facilities. So it's not only that we're selling products to our customers, we're also helping them grow. We're helping them with yield. We're helping them with quality through innovative products or again, our partners' products. But again, we have a team at GrowGen that I believe is par none in the industry right now.

[Aaron Grey, analyst]

Appreciate that color there, Darren. Second question for me. I know you touched briefly on private label continues to perform well for you, 24% of sales. So can you just break down in terms of -- as we think about where it is now, getting to that 35% you said new products and expanded distribution. Could you help us maybe quantify the drivers? How much of that should we think about being driven by the new products and innovation that you guys have going versus just the legacy SKUs continue to drive growth there and higher mix of sales?

[Darren Lampert, executive]

I think it's a combination of both, Aaron. Again, we don't really look at it as legacy SKUs. Most of our SKUs are still growing. So there's not much legacy within it. Most of them have come to market in the last few years that are really driving sales, except for Charcoir. But Charcoir is coming out with innovative products whether it's a 70-30 coco perlite mix right now, and you're also seeing Coco Coins. And as we told you, as we've been talking about, Drip powders have come to market at the beginning of the year that are starting to grow very quickly and also Harvest Co.

So I think you're seeing growth in our products that have been out for a few years, but you're also seeing new products coming to market. So I think you'll see a mix. We don't believe that products that we've launched in a couple of years are stagnating. I think they're all still growing. I think you'll see a nice number within the fourth quarter on growth of our private label division. It's tracking much higher than it was last quarter. So we believe that 35% is attainable next year. And from there, we still do believe that you may see it in the 40s a couple of years later.

So again, we couldn't be any more excited with where we are on the private label product. I think it certainly helps with sales. Our commercial division is out selling it. We have individuals that go to facilities, as I said earlier to Brian, facility managers and facilitators. And so we're out there right now. And I think you know more than any how hard we're working on the business. And we spent the last 3 years restructuring GrowGen, be it closing close to 40 stores, 35 stores, half our stores and really building what we believe is a wave of the future. So 2025, we believe, will be a tremendously different year than 2024.

[Operator]

Your next question comes from the line of Eric Des Lauriers from Craig-Hallum Capital Group.

[Eric Des Lauriers, analyst]

Congrats on all the restructuring progress and very nice same-store sales growth here. My questions are on the B2B portal. First one, just kind of high level. I mean, I know that you've sort of discussed this B2B portal a few times already. But just wondering if you could maybe expand a bit more on what's new here from your previous e-commerce capabilities. I mean, is this more of like a centralized or company-wide approach to inventory availability and pricing and overall, a more simplified approach?

And I guess, ultimately, what I'm getting at is, is this -- should we be thinking of this B2B portal as more of a gross margin expansion initiative? Or are there some incremental revenue opportunities that you see by adopting this portal?

[Greg Sanders, executive]

Yes, I think it's both, Eric, and we've worked quite hard on it. We're opening it up to our commercial customers to start with. It will give them individual pricing. Again, a lot of our customers have different pricing schedules for different products. So you'll have pricing on it, you'll have availability. Right now, when individuals want to order our commercial customers, they go through our commercial team. And it's very manual, hand-driven. And so it's really going to a portal right now that's going to take pressure off of our staff. They'll know where the products are. They'll know what the pricing is. So it will give our staff much more time to go to facilities to work with our customers to look for new customers.

So we believe that that's the wave of the future like anything else. The industry is maturing tremendously, and it's something that's needed. I mean it's nothing different than you see in most industries. Individuals usually don't order through commercial salespeople. They go online and they order unless they have questions, and they don't have their direct salespeople. So I believe it's just -- it's ease of use. It's finding different products that they need.

And it's just giving GrowGen way more color on the other side of it. We know what's coming in, so we know what products are properly stock, where to have these products. It's just -- it's GrowGen 2.0, and it should increase margins for us because the products will be in the places we need it. The shipping will be much easier. And I think the customers, again, will enjoy it much -- it will be much easier for our customers to order, transact business.

On the other side of it, what we're also doing is we're also starting to open up B2B portals for individual products for any size growers. So opposed to having -- going online and looking through websites, they can go direct websites where they'll learn how to use our products. They'll be teachings to our customers. And it will also open up, again, individual products to many other growers within the country.

[Eric Des Lauriers, analyst]

That's all very helpful color. In terms of the margin opportunity with this B2B portal and I guess, GrowGen 2.0 here, if we think of that versus the more traditional brick-and-mortar business, how should we think about the potential difference in margin? Obviously, I know you guys haven't launched this yet, so I'm not looking for an exact number, but if you can kind of help us understand maybe a reasonable range, whether that's on a gross margin or EBITDA margin basis, however you want to take it. Just wondering if you can help give us a bit more color of kind of what you're anticipating from a margin perspective with this B2B portal.

[Darren Lampert, executive]

Yes, Eric, I think more on the margin side, you're going to see cost savings, both to our customers and to GrowGen. Manual, again, we need more employees to do things manually than we do by portals. So I think products will be selling for the same price, whether individuals are coming into the stores or shipping them out of our warehouses. So it's still to be determined.

But once again, we're dealing with GrowGen products. Our proprietary brands as opposed to other brands, the margins are certainly higher. They're in the 40s as opposed to whether it's in the 20s or teens. So you'll see a balancing of margins going forward that we believe in 2025 will be whether it's the high 20s or low 30s.

And I think that if you unpack even our margins in the third quarter -- again, a lot of -- we sold through $12 million of products in the third quarter, bringing inventory down tremendously and selling a lot of products at a loss during the quarter, really to rationalize our inventory to get ready for 2025 with all these store closures.

[Operator]

[Operator Instructions] And the next question comes from the line of Mr. Mark Smith from Lake Street Capital Markets.

[Mark Smith, analyst]

Darren, first question for me is just around customer retention from the closed stores. Any idea of how much you were able to retain? And is that what really helped drive some of the comp is customers shifting over to these stores that are still in the comp base?

[Darren Lampert, executive]

I think it certainly is, Mark. What we always said to Wall Street is we believe that we will retain a majority of the commercial customers, certainly not walk-ins. But one of the reasons that we're opening these portals is for the walk-in customers in stores that we closed, that we will ship to them and make their lives much easier. But we are starting to retain customers from store closures. 12.5% same-store sales in the third quarter was certainly a nice surprise for GrowGen. It was off a very weak quarter last year, but we believe that same-store sales growth will continue.

We do believe that we are starting to see a very small turn in the industry right now, whether -- especially at GrowGen. So we look forward to getting the restructuring behind us. We still have another couple of months, and we believe that we should have most of it complete by the end of the year. So we look forward to really sharing our progress in 2025.

We did close all 9 stores. We did close -- I mean, all 12 stores within the 3-month span and 19 stores in the last 6 months. So we've been pretty hard at work, but we are starting to retain customers. They are buying our brands, and we feel pretty comfortable where we are right now with same-store sales on a go-forward basis.

[Mark Smith, analyst]

Perfect. And a follow-up to that, and you kind of hinted and talked about it a little bit, which is just trying to get a feel for the health of your customers and kind of spending habits, commercial and walk-in today, kind of how do you feel like your customers are doing, are we seeing investments back into operations and grow operations here? What -- anything that you can give us as to what you're seeing in the health of the industry today?

[Darren Lampert, executive]

The positives are receivables have been -- we're collecting our receivables. We also are increasing receivables, but having very little issues with getting paid in certain areas, so that's always a positive for GrowGen. As you can see, we haven't taken -- we haven't wrote off many receivables. We're pretty -- we're conservative in ways, but with long-standing customers we always try to help.

The industry is tough. There's been very little money raised in the last couple of years. We're still looking forward to some positive news from the government. It's been extremely tough sledding when it comes to that. Every time you think -- you believe things are turning on a legislative front, they don't.

But President-elect Trump has said that he believes on a state by state and that he will change the laws. And we look back at the last 4 years under the Democratic regime and nothing has gotten done. So we're cautiously optimistic in a lot of different ways. We do believe it will bring money back into the industry, whether it's the SAFE Act, whether it's rescheduling, whether it's the government staying out of it and leaving it state by state.

So we have if you ask me, it's been very tough sledding out there. I think we've navigated it wonderfully. We've kept our balance sheet in a great place to go forward. Certainly not happy with the price of the stock right now, but we certainly believe that performance will take care of that down the road.

So we just finished our share repurchase. We just bought back $6 million of stock. We believe that our stock was trading at a point where that it didn't make much sense. So again, we go into -- we finished the year very optimistic of what we've done in the last couple of years and where we're going in the future.

[Operator]

There are no more questions at this time. Please continue, Mr. Darren Lampert.

[Darren Lampert, executive]

Well, thank you for joining us today. We look forward to updating you on our progress on our year-end call. I wish all our shareholders and employees a happy and healthy upcoming holiday season. Thank you for attending today, and we look forward to closing the year and starting 2025 with strength. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.