Neogen Corp
NASDAQ:NEOG
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Neogen Corp
Earnings Call Analysis
Q4-2024 Analysis
Neogen Corp
In the latest earnings call, Neogen Corporation reported fourth-quarter revenues of $237 million, marking a year-over-year decline impacted by lower order fulfillment rates and foreign currency fluctuations. Core revenue growth, which excludes the effects of these factors, was around 2%. Notably, the Food Safety segment, representing $167 million in revenue, saw a slight decline of 1% compared to the previous year. However, when looking at core growth, it increased over 4%, primarily driven by strong sales in the Petrifilm product line within the indicator testing category.
The Animal Safety segment posted revenues of $70 million, reflecting a core revenue decrease of 3%. This decline was attributed to dynamics within specific product categories, particularly in Genomics that are currently navigating challenges in the U.S. market. Despite this, the company showcased strong growth in some segments, such as the Vet Instruments and Disposables within Animal Care, indicating a diverse performance across its product line.
Geographically, Neogen thrives in Latin America, achieving well into double-digit growth, while Europe showed low single-digit growth. However, both the U.S. and Canada regions faced challenges, registering core revenue declines in the mid-single-digit range, impacted by shipping delays. This paints a mixed picture, emphasizing the necessity for Neogen to capture growth in its underrepresented regions.
The gross margin for the quarter stood at 47.9%, down from 50.9% year-over-year, showing a decline attributed to costs associated with stabilizing distribution and logistics, alongside higher-than-usual inventory write-downs. Furthermore, adjusted EBITDA for the fourth quarter was recorded at $53 million, translating to a margin of 22.4%, lower than the previous year by 370 basis points. The call highlighted that the adjusted net income decreased to $22 million, down from $30 million in Q4 of the prior year.
Looking ahead, Neogen anticipates core revenue growth in the mid-single-digit range for fiscal year 2025, with total revenue expected between $925 million and $955 million. The first half of the fiscal year is projected to be more subdued than usual due to prior shipment constraints, while the adjusted EBITDA is forecasted between $215 million and $235 million, reflecting a margin expansion of approximately 100 basis points.
On the innovative front, the recent selection of Neogen's Molecular Detection System (MDS) as the USDA's primary screening method for Salmonella and Listeria significantly enhances its prospects in pathogen detection. This accomplishment bolsters the company's growth potential in food safety testing, a market expected to see increasing demand. Moreover, the launch of the automated Petrifilm reader, designed for high-volume labs, is expected to broaden their customer base and increase efficiency.
As Neogen progresses through its integration phase, the CEO emphasized ongoing opportunities to leverage the 'One Neogen' strategy aimed at capturing market share across various regions. The belief in recapturing sales lost to supply constraints remains strong, projecting more robust growth in the latter half of fiscal 2025. Looking at the bigger picture, Neogen expects growth to compound as operational improvements streamline costs and enhance productivity.
The company concluded the quarter with a gross debt of $900 million, with 67% of this amount at a fixed interest rate, and a cash position of $171 million. Looking forward, Neogen anticipates capital expenditures to significantly decrease to approximately $85 million, primarily related to integration expenses, setting the stage for improved cash flow dynamics.
Despite facing some short-term headwinds, Neogen's stable revenue growth, exciting innovations, and a comprehensive strategy to enhance operational efficiency position it strongly for future growth. The focus on restoring market share and improving product offerings underlines a solid path forward, ultimately aiming for long-term value creation for its shareholders.
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Good morning, ladies and gentlemen, and welcome to the Neogen Corporation Fourth Quarter 2024 Earnings Call. [Operator Instructions] This call is being recorded on Tuesday, July 30, 2024.
I would now like to turn the conference over to Bill Waelke. Please go ahead.
Thank you for joining us this morning for the discussion of the fourth quarter of our 2024 fiscal year. I'll briefly cover the non-GAAP and forward-looking language before passing the call over to our CEO, John Adent, who will be followed by our CFO, Dave Naemura. Before the market opened today, we published our fourth quarter results as well as the presentation with both documents available in the Investor Relations section of our website.
On our call this morning, we will refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. Reconciliations of historical non-GAAP financial measures are included in our earnings release and the presentation, Slide 2 of which provides a reminder that our remarks will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed in or implied by such forward-looking statements.
These risks include, among others, matters that we have described in our most recent annual report on Form 10-K and in other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements.
With that, I'll turn things over to John.
Thanks, Bill. Good morning, everyone, and welcome to the earnings call for the fourth quarter of our 2024 fiscal year. After crossing multiple significant integration milestones in the third quarter, progress continued on multiple fronts in the fourth quarter. We finished relocating the former 3M sample handling product lines in our facility in Lexington, Kentucky and are now in the process of ramping up to full production levels, which we expect to be at the end of next month. We also saw improvement throughout the fourth quarter in our shipping performance and this progress has allowed our commercial teams to return their focus to what they do best, demand generation.
Food production volumes remained mostly down on a year-over-year basis as customers continue to be under pressure, but the end market environment was stable in the fourth quarter. With the belief that food inflation in particular will continue to ease, food production volumes are generally expected to slowly improve over the course of our 2025 fiscal year. Along with the improving end market backdrop, our commercial teams are leveraging the broadest product portfolio in the industry and our reputation for consultative customer service to drive demand.
Now for our results for the quarter. Total food safety core revenue grew in the mid-single-digit range, following solid growth in the fourth quarter of fiscal 2023. In Animal Safety, channel inventory levels and end user demand for our product categories remain roughly stable compared to the prior quarter. Our lower quarterly sales in this segment are due primarily to our Genomics business in the U.S. and were otherwise flat on a core basis.
In our Genomics business globally, core revenue was still down on a year-over-year basis. In the first quarter, we began to round-trip most of the impact of the strategic shift towards larger production animals, which has primarily impacted the U.S. business. We are focusing our efforts on driving growth in the direct to producer beef and dairy business as well as managing through a mostly flat companion animal market by expanding our direct-to-the-consumer genetic testing offerings.
With respect to product technology, we've seen notable developments recently related to two of our priority growth areas, pathogen detection and Petrifilm. In early June, the USDA's Food Safety Inspection Service, named the Neogen Molecular Detection System or MDS, as its primary screening method for Salmonella and Listeria in meat, eggs and poultry. Salmonella and Listeria represent the majority of pathogen testing in these food categories. And this selection by the USDA further validates the effectiveness, reliability and ease of use of our MDS testing platform. We believe we have a significant opportunity for growth in pathogen detection and plan to leverage the core capabilities of the MDS platform as a key part of our product development and initiatives in this area.
The USDA announcement was followed in late June by the launch of our Petrifilm automated reader, which automates the loading of Petrifilm plates. The automated reader is specifically designed for high-volume labs and allows users to automatically feed and enumerate up to 300 Petrifilm plates, while integrating with existing lab workflows and systems. This level of automation removes the need for lab technicians to manually load individual plates into the reader, reducing labor and providing more capacity for data analysis.
We expect the growth of this product to take some time to ramp up, but allows us to more effectively target the market opportunity for high-volume testing environments. Those labs typically running over 100,000 such tests annually. We believe Petrifilm is a clear market leader in indicated testing and are planning continued investment to maintain its market leadership and unlock additional opportunities.
On our last earnings call, we committed to resolve the distribution inefficiencies stemming from our SAP and our new warehouse management system by the end of the first quarter. Although the fourth quarter was impacted by these issues, they have now effectively been resolved and our commercial efforts are squarely focused on winning back the sales that were impacted.
With respect to the integration, we still work ahead of us. But the vast majority involves the completion and outfitting of our new Petrifilm production facility, which we do not expect will affect the rest of our operations.
Now I'll turn the call over to Dave for some more insights into our results for the quarter.
Thank you, John, and welcome to everyone on the call today. Jumping into the results. Our fourth quarter revenues were $237 million. Core revenue, which excludes the impact of foreign currency, acquisitions and discontinued product lines grew 2% for the quarter, while foreign currency was a headwind of 420 basis points compared to the prior year. Although we made significant progress during the quarter, our total revenue was impacted by our lower order fulfillment rates.
Moving to the segment level. Revenues in our Food Safety segment were $167 million in the quarter, a decrease of 1% compared to the prior year, including core growth of over 4%. The core growth was led by the indicator testing, culture media and other product category, which benefited from double-digit growth in our Petrifilm product line as well as solid growth in culture media and food quality nutritional analysis.
The bacterial and general sanitation product categories saw growth in pathogens and general sanitation partially offset by a slight decline in microbiology due primarily to a higher level of equipment sales in prior year period. Within the natural toxins and allergens category, modest growth in allergens was offset by a decline in natural toxins due mainly to reduced product availability.
Quarterly revenues in the Animal Safety segment were $70 million, which includes a core revenue decline of 3% compared to the prior year quarter. Overall, inventory levels in the channel remained largely stable with our decline in core revenue being driven by a couple of specific product category dynamics. The Vet Instruments and Disposables product line had another quarter of solid core growth.
In the Animal care and other product category, core growth was led by higher sales of our vitamin injectables and Biologics products. Within our portfolio of biosecurity products, strong growth in insect control was offset by declines in cleaners and disinfectants and rodent control due primarily to a compare challenge on strong growth in the prior year quarter and timing of current year shipments.
Worldwide genomics revenue was down mid-single digits on a core basis. Solid growth in beef markets in EMEA and Latin America was offset by the shift away from small production animals in the U.S., the impact of which we expect to decrease as we exit the first quarter.
From a regional perspective, core revenue growth in the fourth quarter was mixed. Growth was led by Latin America, which saw growth well into the double digits with a strong performance across most key product categories. The growth was driven by progress on back order fulfillment, some level of distributor restocking and additional business at key food producers. Our business in Europe grew low single digits on a core basis with strength in culture media, Petrifilm, general sanitation and sample handling partially offset by a decline in Biosecurity products.
Asia Pacific core revenue grew mid-single digits on a year-over-year basis with strong growth in Petrifilm and general sanitation offset by declines in pathogen and sample handling. Our U.S. and Canada region saw the largest impact in the quarter from the shipment delays in our main distribution center, with core revenue down in the mid-single-digit range. Despite the impact, Petrifilm did see a modest level of growth which was offset by declines in most other food safety product categories.
In the Animal Safety segment, performance was mixed with Vet Instruments in Animal Care, offset by declines in biosecurity and genomics.
Gross margin in the quarter was 47.9%, representing a decrease of 300 basis points from 50.9% in the same quarter a year ago. Adjusting for transaction and integration-related costs, the gross margin decline in Q4 was about 210 basis points. The decline was driven primarily by costs related to stabilization of our distribution and logistics operations and a higher-than-usual level of inventory adjustments.
Adjusted EBITDA was $53 million in the fourth quarter, representing an adjusted EBITDA margin of 22.4%, a year-over-year decline of 370 basis points. The decline in adjusted EBITDA margin resulted primarily from the decline in gross margin with some additional negative impact of transaction FX. Overall, the adjusted EBITDA margin came in below what we believe is our underlying run rate, this level of revenue by approximately 100 basis points as a result of some higher charges in the quarter that should not recur.
Fourth quarter adjusted net income and adjusted earnings per share were $22 million and $0.10, respectively, compared to $30 million and $0.14 in the prior year quarter. The declines in the current year Q4 were driven primarily by the lower adjusted EBITDA.
We ended the quarter with gross debt of $900 million, 67% of which remains at a fixed rate and a total cash position of $171 million. Compared to the third quarter, cash was roughly flat with outflows for capital expenditures, offset by operating cash inflows.
Moving to our outlook for the fiscal year '25. We are expecting core revenue growth in the mid-single-digit range on the back of an end market environment, we expect to slowly improve as the year progresses with total revenue anticipated between $925 million and $955 million. We expect the first half of fiscal '25 to be a little wider than its usual seasonality of around 48% as we continue our focus on winning back sales following the shipment constraints we experienced in the second half of fiscal '24.
Adjusted EBITDA for the full year is expected to be between $215 million and $235 million reflecting margin expansion of approximately 100 basis points and an incremental margin of over 70% at the midpoint. We expect this margin expansion to be driven by improvements in gross margin and operating expense efficiency and aligned with revenue growth throughout the year.
With respect to capital expenditures, we are anticipating a sizable decrease as we move past the peak integration spend of fiscal '24. For fiscal '25, we expect capital expenditures of approximately $85 million with approximately $55 million, specifically related to integration items. We believe higher adjusted EBITDA combined with lower CapEx and the 3M working capital load in, not repeating, will result in free cash flow being well into positive territory.
I'll now hand the call back to John for some closing thoughts.
Thanks, Dave. The last couple of quarters have seen a tremendous amount of integration progress as we extricated ourselves from the services previously provided by our transition partner. This progress came with the inefficiencies in our distribution center that we discussed and have now resolved.
Fiscal 2024 represented the peak of cash outflows for the integration, in terms of both capital expenditures and working capital investment. Outside of the new facility we're building, the 3M food safety operations have now been combined with Neogen and we're able to shift a significant portion of our operational focus towards driving improvements in these combined operations. Commercially, we're excited to see a continued trend of improvement in our end markets and look forward to operating in a much more normal environment in which we're able to bring the combined power of One Neogen to demand generation on an unconstrained basis.
As demonstrated by some of our recent product launches, innovation remains a top priority. We are continuing to invest behind our key technology platforms where we believe we have a meaningful opportunity to drive growth, particularly in regions where we are underrepresented today. Simultaneously, we're exploring a number of new technologies that can improve the quality and ease of food safety testing and strengthen our leadership position in the industry.
While we have a significant amount of work that's behind us, we understand and are committed to executing on the opportunities ahead of us to continue to position the business for long-term growth.
Speaking of work, all of the progress we've made would not have been possible without the dedication and sacrifices made by our team members around the world. I'm proud of what they've achieved to date, and I want to thank them all again for their continued efforts.
Now I'll turn things over to the operator to begin the Q&A.
[Operator Instructions] Your first question comes from David Westenberg with Piper Sandler.
Congrats on a good end of the year, right, big beat numbers. All right. And guidance in line. So let's go with the Petrifilm. Let me ask just a bunch on Petrifilm on, it's kind of 1 question because I think that is a pretty important business. So as we look at the retrospective on Petrifilm, can you give us some sort of rate of customers that you've won back? Customers that are still ready to come back? And then can you talk about how that new automated Petrifilm reader can maybe drive business to that Petrifilm?
And of course, you talked about the high-volume customers. Can you give us a distribution of what percent of your customers are high-volume customers versus low-volume customer? Just would love to just figure out how much of your customers would actually be able to convert to that system. So that was a lot. Apologies.
That's all right. I got it. If I missed something, David, let me know. Thanks for the question. So, yes. Regarding Petrifilm, I mean, I think you saw we had a nice quarter in the fourth quarter. We saw Petrifilm in the -- grew double digits in the low teens. We thought that was a nice growth for us. I think you saw what we did in Japan where we lost customers. We were able to claw that back, and Japan actually had growth for the year. We see that kind of continuing. It's a great opportunity for us.
The end markets are still a little soft. I mean, we still see that they're at low single-digit decline. So that's a little bit challenging for us in the food production segment. And we think that's going to continue with gradually improving in our next fiscal year, kind of in the back half is where we think we're going to see some change there.
Regarding the reader. Yes, I mean, look, we're excited to have that because today, you manually feed that in and now we can do 300-plus stacked to have a read in. It's really focusing, David, on the food safety, high throughput labs. And when we talk about our market share at 20%, a portion of those -- of the remaining 80% is in those high throughput labs, right? And that's really what we see where we're going to target that growth.
It's going to be an opportunity for us, though, longer term to approach nonfood producing labs in an ancillary market with that same type of equipment. Now that's going to take us a little bit longer because we're developing products today that we're going to use to address those markets. But we can't really produce those until we have manufacturing in our house because we can't expand the SKU line coming out of 3M. So we're excited about having the reader. We think it's going to be an opportunity to really address those high-throughput food-producing labs that we currently work with. These are labs that do over 100,000 tests. Those are the ones that we're really targeting with that. And then it's going to open a broader opportunity for a new market for us probably in the next couple of years as we develop SKUs to meet those markets.
Got it. No, that's helpful. Just maybe if I can dive in a little bit. So it does sound like those high-volume customers do represent a pretty high percentage of the revenue in Petrifilm. Did I catch that right? And -- anyway...
It's a lower number -- David, it's a lower number of customers, but they do more volume. So I don't -- I wouldn't say it's -- of that remaining 80%, I wouldn't say it's the higher piece. I'd say it's less than half, but it's more targeted because they do a lot of volume, but it's a handful of customers.
Got it. No, perfect. And then you have another analyst on there, so I'll just keep it to 2. So can you talk -- this one's for Dave. I want to -- you talked about the gross margins. You cited the distribution and inventory. I think you said more than 200 basis points of headwind there. That does sound like it would be pretty temporary. So as we're doing our model into next year, should we think about that rolling off pretty quickly or should we have that as a couple of quarter drag? And just as we think about modeling, if you can cite any other year-over-year to compare to think about as we're modeling out our 2025 fiscal year? And I'll stop there.
Yes. Thanks, David. I think the fourth quarter gross margin fundamentally came in lighter than where we think the business is running. It's a function of some higher inventory write-down, which again, we're working on stabilizing our distribution and logistics footprint. And ultimately, as we've worked through that over a -- it's amounted to a 2.5 quarter period. It's resulted in some higher level of inventory write-down as well as some continued inefficiency.
So I think if you step back from the quarter, net-net, probably a couple of hundred basis points of inefficiency on the gross margin side. A little lower OpEx than I think, representative of the run rate. So I think at the EBITDA margin line, probably around 100 basis points, light, I think we see the gross margin, some of those efficiencies come back over time. I think hopefully, second half, we see some of that recovery.
As you know, gross margin is also reasonably volume-dependent, given our higher incrementals, so I think you'll see improvement ratably at both the gross margin line and accruing down to the EBITDA margin line as 2025 progresses. But thank you for the question.
Your next question comes from Brandon Vazquez with William Blair.
Maybe on a high level, first, can we just start. John, can you just talk about, as you look at the organization now, most of the integration of the business is done here, what are the opportunities? And then even the risks as you look at, call it, the next 1 to 2 years from a commercial perspective? And then maybe, Dave, can you also frame from the P&L side, same kind of discussion of like what are the remaining risks and opportunities here in the next 1 to 2 years?
Yes. Thanks, Brandon. Look, the growth opportunities in the next 1 to 2 years are now that we have substantially everything except Petrifilm in house is to take the one Neogen portfolio to our customers and drive share growth, right? And doing that across multiple regions. As we've talked about in the past, we feel that we're still underpenetrated. In Asia, we're underpenetrated. In Europe, we're underpenetrated. LatAm, heck, we're underpenetrated in the U.S. So we still have a 20% share opportunities to continue to grow in these core markets. So that's number one.
Secondarily, you see what we're doing with MDS. You saw that in MDS. We had an opportunity where we saw that the USDA chose our molecular detection system as the choice for Salmonella testing and Listeria testing in poultry, eggs and meat. I don't know if you saw yesterday, they also said that now they're going to start requiring Salmonella testing and all poultry products. So when we were asked, what does that do? Well, just to get the USDA contract really isn't that big of a revenue deal. But now as they continue to move testing further and push it along that we are the testing of choice, really helps us as they continue to drive this throughout the industry.
So big opportunities to continue in new product development like we saw with our MDS and pathogen testing. As we talked about, David, the reader is going to open up the opportunity in the high throughput labs. First, starting with the food, high-throughput labs, but that opportunity really past 2 years to look at commercial labs in general that are using Petrifilm. I was talking to the group. I don't ask for a lot. The only thing I'm asking for is everybody that uses Petri dishes in the world to be using Petrifilm, that's not a lot to ask for. So I think that's something that we're going to aspire to as a group.
I think if you think about the risk side, our biggest risk is still bringing in the new Petrifilm manufacturing [indiscernible]. Now the team was in Taiwan. The equipment is up, it's running. We performance tested it in Taiwan. We were very pleased with the results. So we've approved, signed off. So we're breaking down the equipment, and it's going to be sent over to the U.S. So we're right on track to where we need to be kind of on that progress.
But to me, that's the number one. And then secondarily, I'd just like to -- I'd like to see our customers get back to some growth. The unprecedented inflation that we've had has really had an impact on the market that I haven't seen in 7 years here. And you still see it. I mean I don't know if you saw McDonald's comments, but when you've got people revolting that fast food prices are too high, it's tough. It's tough out there.
So I'd like to see some of that ease. We think that could help a little bit in the second half, which is and Dave will kind of take you through kind of the quarters, but we see second half is going to be stronger for us as that eases a little bit. But I'd like to see the markets improve a little bit. And as we talked about, we're kind of going to be in the trough for Animal Safety. The good news is it's a smaller part of our business, but that business is not going to be growing as fast as next fiscal year because of the kind of the economics right now in the production animal segment.
Brandon, just to follow up on the second part of your question, I'd say, maybe in the near term and then the longer term. I'd say, in the near term, we need a year where we're not faced with a sizable integration challenge in '23, we have the supply side constraint from 3M. And then, of course, in '24, we did the shipping, logistics, order to cash integration, which resulted in constrained on our capacity shift. And some of that impact now flows through, particularly into the first half of fiscal '25.
So you know from being around here that we typically see the first half is a little lighter than the second half. I think historically, in the kind of 48-52 type range. I think what we'll see in '25, again, in the near term, is a little lighter first half and then a little better second half with better growth rates in the second half on what amounts to an easier compare. We've got some share to recapture as a result of some of the shipping constraints. We'll see that mostly impact Q1, which historically is always our lowest quarter from both revenue and an EBITDA margin perspective. So it will put pressure earlier in the year. But as we work through that, like we did following the supply constraint of Petrifilm in '23, we should see that recover.
I think in the intermediate to longer term, we've talked about the integration thesis remaining intact, and I think it really does. We've always talked about the P&L performance here. Yes, there's always this or that this put or that take. But at the end of the day, this is going to -- P&L performance will come down to volume. So getting back to unconstrained growth, being able to tackle the markets as John elaborated on is what really unlocks the opportunity for the P&L. I'll stop there.
Okay. And maybe to follow up on what you were talking about at the end there. If I look at guidance for the year at the midpoint, let's call it, a $75 million delta towards EBITDA to get to that $300 million pro forma goal you guys previously put out there, without kind of going into timing of getting there, I think you guys want to take things a year at a time, which I understand. But talk about what the bridge is, how do you get that incremental $75 million in EBITDA? What are the drivers that get you from like a fiscal '25 EBITDA number up to eventually in an undisclosed time frame, a $300 million EBITDA number?
Yes. Well, I appreciate that. I think the levers are -- first, obviously, growth. We've stated that the $300 million EBITDA numbers associated with over $1 billion in revenue. We need to move into that territory to do that. I also think as we move through years of significant integration activities, then we're able to also drive better fall-through and efficiency as we continue to work the P&L.
It was a noisy year, but underlying that is a lot of operational improvements throughout the organization and bringing some new perspectives to the teams that I think were going to accrue benefits over time. So it's really the combination of those 2 factors and the strong incrementals that the company can do on that growth, including the 3M products, which have shown in particular, Petrifilm, to have very strong fall-through.
So market timing aside, integration activities aside, we still think that's in play. To your point, we're only guiding one year at a time, but we believe that the post integration thesis, financial thesis remains intact. It's just a function of time, and that's a function of -- and that will drive the growth.
Okay. And maybe one last one for me. Dave, again, can you talk a little bit about what is baked into the high and the low end of the revenue and EBITDA guidance ranges?
Sure. First of all, look, we talked -- John said in his remarks, I elaborated on it a little bit. We constrained supply to our customers for the better part of 2.5 quarters, and there's implications for that. And I think we'll see that in the first half of the year. The shape at which we recover that is meaningful to the shape of the year. So I would say we've contemplated at least a couple of points impact from that in the midpoint of the guide. But obviously, that's a tough number to estimate, even with the data that we have.
So that fundamentally could be better or worse. As we look at our customers, their production levels, we think we're in a reasonably soft spot in the food safety end market kind of -- through the cycle, it's not flat. And we think right now, we're in a more difficult part of the cycle. We're planning on reasonably slow recovery. But that, again, could be better or worse. And we're also assuming that we remain in the lower part of the -- a little more cyclical animal safety market. So there's market implications. I think there's share and share recapture implications here. And I think those would be the big influencers, plus or minus the midpoint, Brandon.
There are no further questions at this time. I will now turn the call over to John Adent for closing remarks.
Great. Well, thanks, everyone. Appreciate you joining us today, and we look forward to updating you again on our first quarter call in October. So have a good summer. Thank you.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.