Alpha Teknova Inc

NASDAQ:TKNO

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the Teknova's Second Quarter 2024 Financial Results. [Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Henry, Senior Vice President of Marketing. Please go ahead.

[Jennifer Henry, executive]

Thank you, operator. Welcome to Teknova's Second Quarter 2024 Earnings Conference Call. With me on today's call. With me on today's call are Stephen Gunstream, Teknova's President and Chief Executive Officer; and Matt Lowell, Teknova's Chief Financial Officer, who will make prepared remarks and then take your questions.

As a reminder, the forward-looking statements that we make during this call, including those starting business goals and expectations for the financial performance of the company are subject to risks and uncertainties that may cause actual events or results to differ. Additional information concerning these risk factors is included in the press release the company issued earlier today and they are more fully described in the company's various filings with the SEC. Today's comments reflect the company's current views, which could change as a result of new information, future events or other factors, and the company does not obligate or commit itself to update its forward-looking statements, except as required by law.

The company's management believes that in addition to GAAP results, non-GAAP financial measures can provide meaningful insight when evaluating the company's financial performance and the effectiveness of its business strategies. We will therefore use non-GAAP financial measures of certain of our results during this call. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is posted on both Teknova's and the SEC's website.

Non-GAAP financial measures should always be considered only as a supplement to as a substitute for or as superior to financial measures prepared in accordance with GAAP. The non-GAAP financial measures in this presentation may differ from similarly named non-GAAP financial measures used by other companies. Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks. It can be accessed on the Investor Relations section of Teknova's website and on today's webcast. And now, I will turn the call over to Stephen.

[Stephen Gunstream, executive]

Thank you, Jen. Good afternoon, and thank you, everyone, for joining us for our second quarter 2024 earnings call. As we enter the second half of 2024, I am increasingly confident in our future. I believe the combination of positive signals from leading indicators, capable internal execution and our recent [indiscernible] in a strong position to deliver on our long-term goal of sustainable above-market growth.

Let me start by sharing some thoughts about the market, which has not changed substantially since our first quarter 2024 earnings call. We continue to see a stabilization in what has been a very challenging biotech environment [indiscernible] years. Recent biotech funding increases, combined with positive internal leading indicators such as increased engagement by customers previously focused on preserving capital, support a more optimistic outlook going forward. Given that we typically see about a 4-quarter lag between changes in industry funding levels and their impact on our revenue, we think these indicators point toward a more supportive market environment in 2025.

We now supply more than 43 active clinical customers, up from 34 at the end of 2023 and 25 at the end of 2022. Of the 43 active clinical customers, 39 are biopharma-related, 23 of which operate in the cell and gene therapy market segment. Our ability to acquire these customers despite the challenging biotech environment, is a testament to the capabilities we have built over the past couple of years. We believe we are in a great position to support these customers as they progress their therapies towards commercialization.

Today, we introduced 2 new offerings that we believe will accelerate the introduction of novel therapies. First, we launched a new manufacturing grade called RUO+. This new grade enables a seamless and cost-effective transition from reagents used in early-stage research and process development to GMP-grade reagents used in clinical trials. With RUO+, we manufacture our customers' products utilizing the same facilities, equipment and processes as in GMP-grade production. This bridge between research and clinical grade is an ideal solution for those customers working towards a clinical trial, but who are not quite ready for the change control, documentation and expense associated with GMP-grade reagents.

We also launched Express-Tek production expedited service offering this quarter. Teknova is already a leader in turnaround time for customer agents. Most [indiscernible] expedited manufacturing and delivery for critical products. For these customers, Express-Tek allows customers to have their custom products enter production in days instead of weeks. We expect the combination of these offerings to not only generate new high-margin revenue for the business but also to address some key customer pain points.

Following our strong start to the first quarter, we again delivered on revenue, adjusted EBITDA and cash outflow in the second quarter of 2024. From a revenue perspective, we saw a sequential improvement of 3% compared to the first quarter of 2024.

While our second quarter revenue was down 17% compared to the prior year, when excluding the one large Clinical Solutions order we delivered in the second quarter of 2023, the resulting year-over-year revenue increase was 9%. Importantly, this underlying growth was driven by a diverse customer base with no direct customer representing more than 10% of revenue.

Assuming a stable market through the second half of the year, we remain confident in our $35 million to $38 million full year revenue guidance for 2024. The midpoint of our full year guidance implies a return to double-digit growth in the second half of 2024 when compared to the second half of 2023. In addition to solid performance on our top line, we are executing to plan from a cost management perspective.

Matt will provide more details on our operating and capital expenditures, but at a high level, we have now realized a full quarter of the benefits from the cost control measures we carried out during the first quarter of 2024. Our second quarter adjusted EBITDA was a sequential $1.2 million improvement over Q1.

Finally, in the first half of July, we closed on a $15.4 million capital raise supported by Telegraph Hill Partners, our largest shareholder and Teknova management. I would like to take a moment here to thank Telegraph Hill Partners for their continued confidence in our growth strategy and in our ability to execute on our long-term plan. We believe this additional capital provides us a bridge to profitability without the need for more external funding.

In summary, we've enjoyed a strong first half of the year. We are pleased with the advances we made in executing our strategy and believe we are well positioned for long-term success. I will now hand the call over to Matt to talk through the financials.

[Matthew Lowell, executive]

Thanks, Stephen, and good afternoon, everyone. Results for the second quarter of 2024 from a revenue perspective were down 17% from the same quarter prior year. However, as Stephen mentioned, when excluding revenue from a single large clinical solutions order during the second quarter of 2023, total revenue was up 9%. Overall, we delivered solid financial results for the second quarter 2024. Total revenue for the second quarter of 2024 was $9.6 million, a 17% decrease from $11.5 million for the second quarter of 2023.

Lab Essentials products are targeted at the research use only or RUO market and include both catalog and custom products. Lab Essentials revenue was $7.6 million in each of the second quarters of 2024 and 2023. Lab Essential's revenue was flat because the increase in the number of customers was offset by a similar decline in average revenue per customer.

As in the first quarter, we continued to see a sequential increase in the number of Lab Essentials customers during the second quarter. As disclosed in our pre-release, we recorded an increase in the number of lab Essentials customers from 2,829 during 2023 to 2,913 for the year ended June 30, 2024. Clinical Solutions products are made according to good practices or GMP quality standards and are primarily used by our customers as components or inputs in the development and manufacture of diagnostic and therapeutic products. Clinical Solutions revenue was $1.6 million in the second quarter of 2024, a 57% decrease from $3.7 million in the second quarter of 2023. However, when excluding revenue from a single large order delivered during the second quarter of 2023, Clinical Solutions revenue was up 66%.

The decrease in Clinical Solutions revenue was attributable to a lower average revenue per customer, partially offset by an increased number of our customers. Consistent with the first quarter, we continued to see an increase in the number of Clinical Solutions customers during the second quarter. As disclosed in our pre-release, we recorded an increase in the number of Clinical Solutions customers from 34 during 2023 to 43 for the year ended June 30, 2024. We expect revenue per customer to increase over time as customers ramp up their purchase volumes. However, this metric can be affected by the mix of newer clinical customers who typically order less.

Just as a reminder, due to the larger average order size in Clinical Solutions compared to Lab Essentials, there can be quarter-to-quarter revenue working in this category. As a case in point, during the second quarter of 2023, we delivered a large GMP order to a diagnostics customer with no comparable activity in the second quarter of 2024. On to the income statement. Gross profit for the second quarter of 2024 was $2.8 million compared to $5.1 million in the second quarter of 2023. Gross margin was 29.2% in the second quarter of 2024, which is down from 43.9% in the second quarter of 2023.

The decrease in gross profit percentage was primarily driven by lower Clinical Solutions revenue and increased overhead costs, largely depreciation expense following the completion of our new manufacturing facility in the prior year. partially offset by reduced headcount. Operating expenses for the second quarter of 2024 were $7.9 million compared to $12.1 million for the second quarter of 2023. Excluding the nonrecurring charges of $2.2 million related to certain long-lived assets recorded in the second quarter of 2023, operating expenses were down $2.0 million. The decrease was driven primarily by reduced headcount and spending in particular in professional fees.

Operating expenses in the second quarter of 2024 were at their lowest level since our IPO in the second quarter of 2021. Net loss for the second quarter of 2024 was $5.4 million or $0.13 per diluted share compared to a net loss of $7.2 million or $0.25 per diluted share for the second quarter of 2023.

On to cash flow and balance sheet. Capital expenditures for the second quarter of 2024 were $0.1 million compared to $2.3 million for the second quarter of 2023. In 2023, we completed our large investments in production capacity. In 2024, we are focusing our capital expenditures on projects with a shorter payback period. Although our capital expenditures have been de minimis the last 2 quarters, we expect to increase our investment activity in the second half of 2024. Free cash outflow, a non-GAAP measure that we define as cash used in operating activities plus purchases of property, plant and equipment was $3.0 million for the second quarter of 2024 compared to $6.2 million for the second quarter of 2023. This decrease compared to the prior quarter was due to lower amounts of cash using operating activity and significantly reduced capital expenditures.

Free cash outflow in the second quarter of 2024 was at its lowest level since our IPO in the second quarter of 2021. Turning to the balance sheet. As of June 30, 2024, we had $18.6 million in cash and cash equivalents and $12.1 million in gross debt. Plus, as Stephen described, in July, we raised $15.4 million of equity capital through a private placement offering, strengthening our balance sheet.

Turning to the 2024 outlook. We reiterate our 2024 total revenue guidance of $35 million to $38 million, which suggests a second half of 2024 similar to the first half of 2024. At the midpoint, this implies revenue for the year approximately flat when compared to 2023. However, based on the midpoint of guidance, we expect second half of 2024 revenue growth to be double digits compared to second half of 2023. With respect to product categories, we now expect approximately 5% growth in Lab Essentials revenue for 2024, with the double digit total revenue dollars coming from Clinical Solutions.

The company continues to expect a free cash outflow of less than $18 million for the full year 2024. The company has continued to manage expenses aggressively while preserving the critical investments we believe will allow us to achieve our long-term growth targets. The company posted second quarter operating expenses, excluding nonrecurring charges of $7.8 million, below our $8.0 million target, reflecting the full impact of the cost measures announced in the first quarter of 2024.

We finished the second quarter of 2024 with 169 associates, down 27% from a year ago and down more than 40% compared to the peak in the second quarter of 2022. Following our capital raise a month ago, we believe that we now have sufficient liquidity from cash on hand and the availability under our revolver to take us to cash flow positive.

This belief relies on the following 5 key financial assumptions. First, revenue grows at an -- on average at a minimum 13% over the next few years. This is the actual compounded annual growth rate of total revenue between 2019 to 2023, excluding the impact of a single large order delivered in 2023. This is also similar to the total revenue CAGR from 2009 to 2019.

Number two, revenue growth upside will be possible over the next few years as some of our growing number of Clinical Solutions customers move through later clinical trial phases and ultimately into commercialization. Third, additional revenue in 2025 and beyond drops through an approximately 70% margin due to the high fixed cost nature of our business.

Fourth, limited operating expense increases as the business grows. And fifth, capital expenditures of $2 million per year on average. Relying on these assumptions, we also believe that the company can achieve adjusted EBITDA breakeven we get to $50 million to $55 million in annualized revenue and will become cash flow positive shortly thereafter.

In summary, we are excited about the future and the company's competitive position in a market with attractive long-term fundamentals.

With that, I will turn the call back to Stephen.

[Stephen Gunstream, executive]

Thanks, Matt. Overall, we were pleased with our performance in the [indiscernible] 2024. We believe the long-term outlook for our end markets remains positive, and we are committed to executing on our strategy to help our customers accelerate the introduction of novel therapies, diagnostics and other products that improve human health.

We will now take your questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Mark Massaro from BTIG.

[Mark Massaro, analyst]

Congrats on a good quarter, and thank you for all the financial long-term metrics that you provided, that was helpful. Maybe just the first one on the new product launches, the RUO+ and the Express-Tek. I heard you guys talk about Express-Tek being high margin. It wasn't clear if that is high margin for your customers are high margin for you. I guess can you just clarify if those new products will be gross margin accretive for you in the near term? Or will that require some time to achieve some scale?

[Stephen Gunstream, executive]

The Express-Tek offering is really a way for customers to get your product into production faster than we would normally get into production. So that allows them to order today and say, "Hey, I want this particular custom product, but I need it very quickly." We would then pull all the strings to make that happen. And for that, there is an additional fee. So yes, it will be gross margin accretive for us. And in this case, we're actually solving some of the customer pain points in that many times, this happens where they're in the middle of the clinical trial and the build doesn't go as they want and they need something very, very quickly. And so in order to rearrange our manufacturing and our production line, then we can offer the service and charge them additional fees.

[Mark Massaro, analyst]

Okay. That's super helpful. You've said some sort of positive statements about the improved backdrop in biotech funding and that you're cautiously optimistic around the timing of a further market recovery I would say that, that language is probably a little more positive than language we've seen from other companies on average. So I wonder if there is something perhaps unique about your business. I know that you cited that the majority of your new clinical customers are in biopharma and many are in cell and gene therapy. So I wonder if you can just maybe speak to perhaps some of your optimism about the end markets and funding. And maybe just clarify what you're seeing.

[Stephen Gunstream, executive]

Yes. I mean I would say, first, we are seeing, as most are the biotech funding environment improve. That hasn't totally translated to orders yet, but the conversations we've had with customers, many of which really held back capital spending last year and purchases with us and are starting to come back and request quotes and plan builds for 2025. So I think that's generally what we're seeing. It is cell and gene therapy. But as you saw, we have 43 clinical customers, 39 are biopharma and about half of that is cell and gene therapy of '23. So there's actually quite a few other biopharma-related customers in there and generally have seen a pickup. I wouldn't say, if you remember, we're guiding towards still 35, 38, which implies essentially 36.5 at the midpoint. And so we're not seeing a pickup yet, but even that midpoint is double-digit growth from a year-on-year perspective when you compare the back half of both of these 2024 and 2023.

[Mark Massaro, analyst]

Okay. Great. Maybe one last one for me. Next year, you will go up against at least 2 quarters of easy comps, or maybe 3 quarters of easy comps depending on how you describe easy, but going up against negative 17 and then a plus 2 from Q1. So as we think about the second half of this year, you guys talked about that being about a double-digit return to growth in the second half of the year. Assuming trends stay constant in terms of biotech funding, is it reasonable to think or are there any reasons why you think achieving double-digit top line growth in '25 would be unreasonable?

[Stephen Gunstream, executive]

Yes. So I would just say, obviously, we're not giving guidance on '25 yet. And we don't tend to think anything has been easy at the moment, but that said, we do look at it. And as Matt said, if you take a look at 2019 and 2023, which is sort of the book ends of the pandemic and the biotech funding, our average annual growth there was 13% and actually go all the way back to 2009, this business has averaged about 13% since then. So I don't think it's unreasonable to expect that going forward. But of course, we have to be very careful watching the market and we've been through a lot these last couple of years, and we're glad to see that we think it's stabilized, but I don't -- I wouldn't say it's necessarily picking up from what it had been historically.

[Operator]

Our next question will come from the line of Jacob Johnson from Stephens.

[Jacob Johnson, analyst]

Congrats on the quarter. I guess I've got a couple of follow-ups on that last line of questioning from Mark. I guess, first, just on AAV-Tek and some of the new product launches, is there any way to quantify how much those have contributed in recent quarters? Or how much of those could contribute over the next year or two as we think about kind of that 13% historical growth and then layering in new product introductions?

[Stephen Gunstream, executive]

Yes. Jacob, I would say that AAV-Tek and some of the new products we've launched in the last year or 2 are not a significant impact in that 13%. I would say what they've been the biggest contributor to is us getting in and talking to some of these customers and onboarding them. There are actual purchases of the AAV-Tek stuff so far. It's pretty small in dollar amount, but of course, should those go forward and become into commercialization -- commercialized therapies, we'd expect those to be more. But like I said, I think it's showing in the fact that we're bringing on these customers and they're buying a lot more from us just generally overall. So I wouldn't -- they're not -- if you're looking at that 13%, it's not built into that 13% between '19 and '23.

[Jacob Johnson, analyst]

Got it. And then I guess kind of I appreciate the quantification of kind of the historical growth rates. But I guess, Stephen, from kind of a qualitative perspective and at a higher level, in 2021, you embarked on this growth strategy. And then obviously, the macro kind of rolled over. With the macro stabilizing and your cost control efforts over the last year or so, I guess, how do you think about the growth opportunities in front of you at Teknova today versus your expectations a couple of years ago?

[Stephen Gunstream, executive]

Okay. So I would say this. I'm still very confident in the long-term outcome of this business. I still think we can get into that 20-plus percent growth range that we laid out and we took the company public. The timing of that is really the question, right? We're in a situation where we did onboard a lot of customers in early phases, preclinical Phase I type of trials, many of those trials have been rationalized. And so we're, of course, building this customer base, but it takes time to get through clinical trials, and there's a certain amount of success and often very binary results that come from that. But to put it in perspective, if some of these trials get to commercialization in maybe 2 or 3 years, the hundreds of thousands of dollars that they spend with us today, we expect to be in the millions of dollars, right? And that can be a huge impact to the overall growth of the business.

In the meantime, obviously, continue to acquire these customers, but also run this rest of the business, the catalog business, which says 70%-or-so of the business, right? We need to run that well as the foundation as we keep onboarding these customers and helping the ones that we do have get through clinical trials.

[Operator]

Our next question will come from the line of Steven Mah from TD Cowen.

[Poon Mah, analyst]

I just have a couple of follow-up questions. So first, on Express-Tek. Can you comment on the premium you're charging for Express-Tek products? And is it a variable premium like Uber or is it really just faster delivery at a fixed price?

[Stephen Gunstream, executive]

Yes, we're not going to comment on the exact fee, but -- and it varies by customer. It's really -- it's going to be likely to be 1% of the total order to move it forward because the dollars represent the amount of work essentially that we have to do to put in production. But you can say it's in 20% to 40% and something in that range, right? It's not demand-based pricing though. It's not like if we get a bunch of Express-Tek request that the price is going to go up. And I don't think we're going to use it on orders necessarily every day. These are big orders and customers need RUO+ or GMP products really, really quickly to get into -- keep their clinical trials going?

[Poon Mah, analyst]

Okay. Got it. And are other companies offering this? And do you have the capacity to meet the express demand if this takes off?

[Stephen Gunstream, executive]

I'm not aware of any other companies offering this. I will say that our normal turnaround time is still dramatically faster than many of the others, particularly around the custom product side. But we have had a number of customers, say, in the first couple of quarters, you see, that have been in this situation where they've really needed something quickly. I do not expect to run out of capacity in order to do this. And we have ability to scale up capacity really quickly. And so we'd love to have a great problem like that to go solve.

[Poon Mah, analyst]

All right. Super helpful. And then my last question is on RUO+. A similar question, is there anyone else offering this product? Or is it unique to you guys? And then -- given that it's made under GMP conditions and just not documented it, is that going to be more expensive from a COGS perspective?

[Stephen Gunstream, executive]

Yes. So RUO+, there are a number of companies out there that maybe not in the reagent side that we're doing here that offer somewhere between this research use only and GMP for a lot of the reasons that we laid out in the call here. This would be an increased price over RUO. A lot of the customers that want the service would buy but they really want it made in our new facility and under the controls that we have there. And it really helps them go from RUO+ than to GMP. So that was a lot more managing the change control, the documentation, and we really lock in that process, and it makes that transition much smoother. So the costs will likely increase a little bit when they go to RUO+. Obviously, the cost increase even more when you go to GMP, but we'll be recovering those costs through additional pricing when they choose RUO+ over RUO.

[Operator]

Our next question will come from the line of Matt Larew from William Blair.

Our next question will come from the line of Paul Knight from KeyBanc.

[Paul Knight, analyst]

Stephen, we've seen GA meaning Sigma-Aldrich and Avantor and their related business lines show sequential improvement similar to yours. When do you think you'll have more leverage to this rebound with your marketing strategy, your speed to market. What are your thoughts relative to this competition that also correlates to your improvement?

[Stephen Gunstream, executive]

Yes, I think it's very much related to access to money to spend on the regions and get these trials going. I think when -- as that ramps, and in fact, if you look at our historical growth even through the biotech funding era of 2019, '20, '21. But even prior to that, you can actually track our sales directly to that funding with about a 4-quarter lag. So we're optimistic that 2025 is when we start to see some of that funding come through. It does seem to be a little bit different. It's not every single biotech gets a certain amount of money.

So it may change the dynamics of that, but I do think that's a great leading indicator for us because we're so broad-based, even in our catalog business as well. So that's probably the time I think we'll be looking in the Q1, Q2 time next year to see some of those funds flow through. And certainly, the investments we've made in the commercial organization, like you said, and our new facility will help us bring on those customers and support them.

[Paul Knight, analyst]

Do you still believe that the Hollister capacity gives you $200 million of revenue capacity.

[Stephen Gunstream, executive]

Yes. We've been running our new facility daily. And yes, when you do the math, obviously, it depends on mix of orders and things like that and the complexity of those, but it does work out that with the new facility, we can we could scale to around that 200-plus range.

[Operator]

[Operator Instructions] And our next question will come from the line of Matt Larew from William Blair.

[Matthew Larew, analyst]

I wanted to ask on new customer traction. Obviously, a nice number in the quarter itself, but even sort of back over the last 12, 15 months, just curious if there's any sort of consistent point of traction, whether it's the new products you referenced, obviously, the new facility, I presume is part of it. But any sort of theme to the new customer traction that you mentioned here?

[Stephen Gunstream, executive]

Yes. Thanks, Matt. We've talked for a while about the time it takes to get a customer onboarded and it's usually 12 to 18 months. And getting this new facility, as you mentioned, is a critical factor once we can get them out, we walk them through, they meet the quality team. They see how we make products here. It's actually pretty straightforward to get them onboard and then start ordering. However, of course, depending on the macro environment changes has changed some of that timing, but I would say, definitely, the facility has been a part of it. The commercial side has also been the other part, right? Getting in front of the right customers and having the conversations about the capabilities we have and how we can support them certainly helps. So I would think the combination of the commercial and the new facility is really what's driving that customer growth.

[Matthew Larew, analyst]

You referenced green shoots in the script and I think alluded to improved customer engagement. Curious if there are any metrics you can share to sort of support what you're seeing, whether that's inbounds or POs or customer audits of your facilities. Anything to kind of add some teeth to the sort of generic green shoots commentary.

[Stephen Gunstream, executive]

Yes. And I think there's a couple of things here, Matt. One is, the conversation's actually with other CMOs now, ordering -- they used to order a lot from us and then, of course, when the biotech funding environment change they had, they're seeing a lot of capacity. They seem to be more engaged than they were in the past, which means many of the customers of these other therapies are coming to them. So that's a very positive sign. So they're starting to think about ramping up.

Obviously, the types of customers. I wouldn't say that the number of audits has necessarily increased, but we went through a whole lot of our customers early on, but now we're getting new customers. Obviously, you have audits of existing customers. We're now starting to get some new customers coming through.

And then I would just say, generally, you're looking at the number of customers, which I know we talked about we have 43 clinical customers. Well, there's a wide variety in spend, but there's still a lot that are just starting out, right? And so you think as those customers start to do their trials and stuff, they will ramp up and spend quite a bit, and again, all this is predicated on the fact that biotech funding remains stable. And then, of course, that there is a little bit of a lag here between the time that they're onboarded to the time they actually start spending a larger dollar amounts.

[Matthew Larew, analyst]

Okay. My last one would be the updated guidance is consistent, but now incorporate, I think, 5%, 5% of interest growth versus 10%. I realize that's been compensated for by Clinical Solutions growth, but sort of amidst all the discussion of stable end markets, green shoots. Just curious what it is that's sort of taking down the growth guide?

[Stephen Gunstream, executive]

Yes, absolutely. So we look at it, Lab Essentials, Clinical Solutions. Remember, Lab Essentials does include a number of these preclinical customers. So we have a little bit of year-on-year comparison difficulty, but I also say there are some large pharmas that are not growing as fast as they were before. And it's still pretty early for us to call that out. Again, we still feel confident about our long-term position and how those rebound and our 13% growth that laid out for getting to profitability. But that's one that we're watching and engaging with those customers on right now even on -- it's very much on the discovery side, but again, it's a handful. And so we want to see this play out before we did change that. But I do think, over the long run, we're in a good spot.

[Operator]

And I'm not showing further questions in the queue. With that, I'll go ahead and close the call. This concludes -- thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.