USANA Health Sciences Inc

NYSE:USNA

Earnings Call Analysis

Challenging Q3 Offset by Strong Balance Sheet

In a testing quarter marked by softer-than-expected results due to COVID impacts, foreign exchange rates, and market challenges, the company generated $22 million in operating cash flow and maintained a strong balance sheet with over $300 million in cash, no debt. There is optimism for strategic growth in 2024, with organizational realignment, operational efficiency initiatives, and the anticipated opening of the Indian market, expected to start modestly and grow over time. Despite geopolitical tensions and market pressures, particularly in China where sales have declined, executives expressed confidence in long-term growth opportunities in both Chinese and future markets.

Challenging Operating Environment Impacts Consumer Behavior

USANA Health Sciences faced a challenging climate in the third quarter marked by economic headwinds that affected consumer behavior across several markets. The company found it increasingly difficult to attract new customers and associates during this period, leading to results that fell short of expectations.

Robust Financial Health Despite Soft Q3 Earnings

Despite the softer-than-projected performance in Q3, USANA maintained a strong financial stance, generating $22 million in operating cash flow and holding a sturdy balance sheet with an excess of $300 million in cash reserves and no debt, positioning the company in a state of financial resilience to weather economic uncertainties.

Strategic Initiatives Focused on Growth and Expansion

Among its strategic initiatives, USANA is pivoting towards reenergizing its global sales force, commencing operations in India, introducing fresh incentives, seeking acquisition opportunities, and enhancing digital commerce. The expansion into India is particularly ambitious, targeting a launch by year-end, albeit expecting a modest start with intentions for steady growth. The company believes in-person events are vital to drive sales and customer growth, with several strategic events planned in the upcoming year designed to motivate associates and introduce new products.

Management Restructuring to Drive Customer Growth

USANA announced strategic leadership adjustments aimed at bolstering the company's drive towards customer growth. Brent Neidig has been appointed Chief Commercial Officer to oversee global sales, leveraging his expertise from managing USANA's largest market, China. Moreover, Walter Noot's role as Chief Operating Officer has been broadened to encompass research and development, marrying operational excellence with scientific innovation for future company growth.

Promotional Activities Geared Towards Sustainable Growth

USANA is intent on recalibrating its promotional activities towards sustainable growth, shifting away from merely easing product purchase towards rewarding initiatives that expand its customer base. The company has planned to continue with promotions and incentives while emphasizing on gaining more customers and consumers as part of their mission to build 'the healthiest family on earth'.

Forging the USANA Difference Through Feedback and Training

USANA is actively seeking to reinforce the 'USANA difference' — a unique proposition that combines product quality, competitive compensation, and a commitment to philanthropy as a selling point. By engaging with associates through events and leveraging feedback, the company strategizes to refine its appeal, enhance training opportunities, and spread its core values to foster community growth.

Earnings Call Transcript 2023-Q3

[Operator]

Hello, and welcome to USANA Health Sciences Third Quarter Earnings Call. My name is Valeria, and I'll be your coordinator for today's event. [Operator Instructions]

I will now hand you over to your host, Mr. Andrew Masuda to begin today's conference.

[Andrew Masuda, executive]

Thanks, Valeria, and good morning, everyone. We appreciate you joining us to review our third quarter results. Today's conference call is being broadcast live via webcast and can be accessed directly from our website at ir.usana.com. Shortly following the call, a replay will be available on our website.

As a reminder, during the course of this conference call, management will be making forward-looking statements regarding future events or the future financial performance of our company. Those statements involve risks and uncertainties that could cause actual results to differ perhaps materially from the results projected in such forward-looking statements.

Examples of these statements include those regarding our strategies and outlook for fiscal year 2023 as well as uncertainty related to the economic and operating environment around the world, our operations and financial results. We caution you that these statements should be considered in conjunction with disclosures, including specific risk factors and financial data contained in our most recent filings with the SEC.

I'm joined by our President and CEO, Jim Brown; our Chief Financial Officer, Doug Hekking; as well as other executives. Yesterday, after the market closed, we announced our third quarter results and posted our management commentary document on the company's website. We'll now hear brief remarks from Jim before opening the call for questions.

[Jim Brown, executive]

Thank you, Andrew, and good morning, everyone. We continue to face a challenging operating environment during the third quarter. The economic environment is having an impact on consumer behavior in many of our markets. Our sales force is finding it more challenging to engage and attract new customers and associates.

The cadence of our promotional activity during the quarter was lower when compared to both the prior quarter and the third quarter of 2022. This decision was delivered as part of our strategy to find the most appropriate balance of incentives, promotions and in-person events for the full year.

We continue to experience an unfavorable impact from the changes in foreign currency rates and the impact from these changes was greater than anticipated. Collectively, these factors ultimately contributed to a softer-than-expected third quarter results. Notwithstanding these challenges, we remain confident in the strength of our underlying business and our growth potential going forward.

We generated $22 million of operating cash flow during the quarter and our balance sheet remains strong with over $300 million of cash and no debt. Our key strategic initiatives include reengagement of our associate leaders around the world, expansion of our business into India, new incentive opportunities for our sales force, pursuing additional acquisition opportunities and expanding our digital commerce initiatives.

I'll briefly explain upon our progress on a few of these initiatives. During the quarter, we continued our efforts to reengage with our associate leaders around the world on a personal level, which is highlighted by our in-person Americas and Europe convention in Salt Lake City where we offered recognition and training to leaders and also launch several new products.

We believe these live events are a key component to generate momentum and have several planned over the next year. These events will continue to be tailored to specific regions and markets to have a significant impact on those areas and ultimately drive sales and customer growth. We continue to make progress towards officially commencing operations in India.

We are targeting a launch date prior to year-end, and we remain excited about this market opportunity. Notably, this is an incredibly large and complicated market for our business. Our approach to opening, operating in and growing India will continue to be intentional and will be centered on long-term sustainable growth. We anticipate that the initial sales contribution from India will be modest but grow over time.

We have a high long-term expectation for this meaningful market and the opportunity it presents to further diversify our business, geographical footprint and customer base. We look forward to providing future updates on this market once we officially launch operations. Our team will continue to focus on the factors we can control and execute on our strategies.

Before opening the line for questions, I'd like to announce some recent adjustments to the structure of our management team. As I took on the role of President and CEO, I reorganized some responsibilities amongst our management team to ensure that they are unified in executing our top goal, which continues to be active customer growth and working as efficiently as possible on capitalizing on many strengths of our talented organization.

First, Brent Neidig has assumed the role of Chief Commercial Officer. Brent has played a pivotal role in shaping and executing growth strategies as Managing Director of our largest market, China. With his experience and expertise in this area, he will now oversee sales and marketing teams globally with the responsibility of driving sales and customer growth.

Second, we have expanded Walter Noot's role as Chief Operating Officer to include our research and development department. Walter oversees our operational excellence globally and focuses on USANA's efficiency, profitability and quality across the business. Walter's operational experience will complement Dr. Rob Sinnott's scientific vision and long-term objectives for health and wellness and will be a catalyst for future innovation and excellence here at USANA.

I'm confident in our entire management team and amazing employees and believe that these changes will better position the team to execute our key strategic initiatives and position USANA to return to sustainable long-term growth.

With that, I'll now ask the operator to please open the lines for questions.

[Operator]

[Operator Instructions] Our first question is from Anthony Lebiedzinski from Sidoti.

[Anthony Lebiedzinski, analyst]

So first, I guess, when I look at the results in Malaysia, for example, you said that sales were up sequentially due to a local promotion. So with that in mind, how should we think about your outlook for promotional activity? I know you're looking to step that up in 4Q, but kind of maybe high-level thoughts beyond 4Q? Or do you find that given the current environment that maybe you will need to do more promotions to get customers to be able to buy your products? I would love to hear your thoughts on that first.

[Jim Brown, executive]

Yes. I'd go back to talking a little bit about COVID and when the things that we did from a promotional side to kind of combat the situation at point in time, we did a lot more promotions that were product and sales based and we want to get away from that.

We're looking more at promotions and incentives that grow the company and add to our active customers, not promotions specifically that make it easier to buy product and actually get a bigger wallet share. We'll continue to do those to make it exciting and the field expects those over time.

We just felt over the last year or so that we had gotten a little heavier promotions that we backed away some. But we still want to do things to motivate the field to grow and gaining more customers and consumers in the end is what we want to do to become, again, the healthiest family on earth and hit our 1 million customer and families that we're expecting to get over the next few years.

[Anthony Lebiedzinski, analyst]

Got you. Okay. And then you talked about a reengagement of your associate with more in-person meetings. So I guess in your conversations with the associate leaders, I mean what are some of the main takeaways that they have shared with you as to how you're thinking about shaping your strategy for next year?

[Jim Brown, executive]

Yes. Again, we have major events. We talk about those. We have Asia Pacific convention. We have a China convention as well as many other China events because the market is so large. And then we have Americas and Europe events. And part of that is to share our strategy.

A lot of times, we also introduce new products. But it's -- to get that motivation out, we use those events as training opportunities, but just like you're saying, a lot of it is listening to the field and trying to get an understanding from our associates, our sales force what their challenges may be and how we can combat those or make it much better.

We hear the normal stuff about competition out there and what can we do to make sure that we're offering a great product line and competitive compensation plan, and we'll continue to use that information to make changes. One of the things that we've concentrated on in the last year is what we call the USANA difference, and it's our story of what makes USANA the company that you want to join, both from products, compensation, philanthropy, everything that goes on to make us the company that someone wants to come into.

And what we felt over the years, that's one of the messages that we had that, that has been a little bit harder to tell with COVID and the environment. So we really had a strategy over the last 1.5 years to get the message out, give training aids, make sure that our associates, affiliates and even our customers through loyalty programs and sharing programs can share the story and build the family.

[G. Hekking, executive]

Yes. The other thing, Anthony, you said -- I mean Jim and many of the members of management, the sales executives, Brent included here that Jim just talked about, have been traveling on a regular basis, and they often get in these situations with smaller associate leader groups, and it really gives them a great opportunity to build the relationship and really open the lines of communication. So we can go back and be responsive and have them really [ fill ] an open environment to reaching out, let us know what they're seeing.

[Jim Brown, executive]

Yes. We have literally an incentive trip that Brent and myself and some of the management team from China will be doing in Europe starting this week. And a big part of that is training as well as meetings with each of those leaders to make sure that we understand what we could do better as a company to service them.

[Anthony Lebiedzinski, analyst]

Understood. Okay. And then you also talked a little bit about the new incentive opportunities. I know you have a fairly new affiliate program. Can you share some observations with that? And are you looking to perhaps expand that to other countries?

[G. Hekking, executive]

I think we're still in the learning mode in the markets where we've launched it. I think we're definitely open. I think we've heard a little bit of requests from the different markets in some of our larger markets about exploring different opportunities there. So it's something that we're going to continue to push on and really make sure that we're aligning that incentive to be a real reward and engage that associate base to go out and tell the story and introduce new customers and new associates down the road. So it's something we're still monitoring, and we think it definitely is something that can go back and add to our success going forward, but there's still some work to do.

[Anthony Lebiedzinski, analyst]

Got it. Okay. And my last question before I pass it on to others. So obviously, you have a strong balance sheet with plenty of cash. So how should we think about your outlook for acquisitions? And I know you did buy back some shares as well in the quarter. So maybe if you could just talk about acquisitions, what you're looking -- are you still looking at that? And then whether we should assume additional share repurchases?

[G. Hekking, executive]

Yes. We continue to be really active in evaluating opportunities. It's just tough to go back and find a good alignment there. So that will be really an ongoing part of our strategies, looking at some of these opportunities to kind of amp up that return to shareholders that we're producing on a regular basis.

As far as share buyback, typically, we don't give a whole lot of forward commentary on that. I think the reality in the short term, I think we'll be buying at a minimum shares to offset the dilutive impact of equity grants. And outside of there, I think we'll just go back and it's a discussion we'll have with the Board on a regular basis.

[Operator]

Our next question is from Linda Bolton-Weiser from D.A. Davidson.

[Linda Bolton-Weiser, analyst]

Hello. So my first question was just a small little question on the financials. You have this other income expense line that has actually been positive. I believe it's been other income. I think I'm projecting now $7 million for 2023. Can you just clarify what that line reflects and why it's been like a more positive number in 2023?

[G. Hekking, executive]

It's primarily interest income. And just given kind of our position and the strength of our balance sheet and the cash we're holding, that's the primary catalyst. There's a few other things in there, but that's the primary contributor there.

[Linda Bolton-Weiser, analyst]

Okay. So as far as -- if you keep a fairly healthy cash balance and interest rates still be pretty high or higher, then that would be -- continue to be a positive line item, I would think. Is the right thinking there?

[G. Hekking, executive]

Yes. With that assumption, and no unforeseen investment activity in the near future, I think that's a fair assumption.

[Linda Bolton-Weiser, analyst]

Okay. Got you. And then I guess with Malaysia, I guess I was just a little bit wondering because you talked about the promotion there. But the local current -- or the local currency sales were down 2% year-over-year, but the customers -- active customers were up 4%. So I'm just wondering why the revenue was down, but the customers were up. Is that they're buying less per customer or something like that?

[G. Hekking, executive]

Yes. We're seeing a couple of things. I think, one, currency, but as you look at constant currency, I think it's also the promotional activity and sometimes that stimulates smaller basket size. And as Jim kind of indicated in his introductory comments, we are seeing a little bit of impact on consumer spending relative to the economic environment that we're really seeing globally right now with kind of the pressure on inflation. But the teams are working hard, and we're seeing heavy engagement. We've got a great leadership team in that market.

[Linda Bolton-Weiser, analyst]

Okay. I think the thing that the reason maybe why your stock is down so much today, just my speculation is that the tone -- I mean things seem really different because last quarter, I remember actually raising my estimates and then this quarter, I'm really becoming more conservative with my outlook, trying to just get my numbers down.

It just seems like a real change. Like is there something you can pinpoint about like things actually getting worse for the consumer environment? Or is it a particular region? It seems like there was a weakness. I mean, all the regions were down, except for Greater China. So can you just give a little more color on what you think the consumer what's going on there?

[G. Hekking, executive]

Well, I think many of the consumers are feeling the pinch with other areas of spend kind of putting a little bit more pressure on there. And I think we've seen some pretty good continuity there in all honesty, but it is something that we hear verbally coming back from the group.

I think you always have to look at the comparable promotion periods that we've had in prior years and sequentially. Malaysia, like I said, sequentially had a small promotion there and it definitely looked sequentially as positive as a result of that.

But some of the things that we did relative to promotional cadence and Jim said, we're trying to go back and find the right balance there. I think we're committed to that type of activity. But trying to go back and do it so it's additive to sustainable customer growth. And so we had some anticipation of some of the things that we'd run a little bit earlier in the year to go back and maybe have a little bit more of a lifting factor.

And we definitely saw a lift in the short term, but maybe not the legs that we had hoped on it. And those are things that we're going to keep trying and testing and I don't think it always plays out according to plan. But I think as far as the base run rate, I think we're hanging in there. I think we just like to go back and see that just organic level of sales lift as we do some of these things and kind of propel us forward.

And so we're still going down there. And with Brent kind of taking the new appointment to oversee sales and marketing globally, I think we'll see some different things. I know he's talking with his leadership team now, and we'll see some different forward-leaning activities coming out of that as well.

[Jim Brown, executive]

Yes. I mean, this is Jim. I'm optimistic on the future and definitely for 2024. I just mentioned it a minute ago about some realignment with the organization, which is going to have a big impact. It's going to have sales and marketing more aligned as well as when we talk about Walter and his excellence and operational efficiency.

We have the top 10 priority list that we're going to be working on getting projects done throughout the year next year. And I know we'll be more efficient and more aligned to get those done. India is coming open, and we're talking about it being modest in the year, but it's an exciting market, and there's opportunities in other regional or other markets around the world from just the India opening to grow those Indian markets as well. So I think we're set up to see a good 2024 and growth in 2024. And I think the team is excited.

[Linda Bolton-Weiser, analyst]

Okay. I mean -- so that sounds encouraging that you have an optimistic outlook. Would it be something where like in 2024, we might see a sequential improvement in the year as it goes out? Like maybe it starts out weaker like it is now, and then it kind of strengthens as the year goes on. Is that what you're picturing maybe?

[G. Hekking, executive]

Yes. I mean you have to build from the base that you're at now. And that's definitely expectations. Obviously, in the first quarter, we have Chinese New Year, which has really grown to be an impactful holiday for us. But I think in general essence, that's the expectation that we would have. And you'll look for some -- maybe some future comments for us on 2024 and February as we come out with our initial outlook for the year.

[Linda Bolton-Weiser, analyst]

Okay. And then just finally, well, actually, I would like to ask a little bit more about India because I do follow Herbalife. And India is really their strongest growing market right now. They're doing really, really well there.

So it does seem like it's a vibrant market for direct selling and yet traditional business models, companies have often found it hard to penetrate their market, although more companies are going in there, it seems. But can you talk -- is there something about India that makes it easier for direct sellers to navigate the environment there that makes it attractive for you more so than other businesses? Or kind of why is that a good market to go after next?

[Jim Brown, executive]

Yes. I don't think direct selling, the business model is any easier than any other companies out there. India is a complex large market and we've been working on India more than a year to get prepared. There's all types of things that have to go from registration and different types of business registrations that have to be done.

We're excited about it. A lot of it is because of the success of some of the other markets are companies out there that are doing it. It's a large market. We're set up to do it. We actually have a great amount of interest from direct sellers that are in the market now, and we think that's going to help start that business off.

But we didn't go into India because we thought it was going to be easy. It's definitely a complicated market when it comes to logistics and operations and everything that goes on. But it's the size we have in India population in some of our markets, and they had asked us, when are we going in? And that's always a catalyst for us is when we have interest and it's more of a pull than a push, it makes sense to go into a market.

[G. Hekking, executive]

I would say that we also have a really strong management team there that we have a great deal of confidence in. And so it's been a learning experience, just as we went into China, China is heavy, heavy effort market. India is going to be a heavy effort market, which we hope the rewards will be there to support that as well.

[Linda Bolton-Weiser, analyst]

And do you think that you would look at another new market opening maybe in 2025? Or what would be your timing for that expansion further?

[Jim Brown, executive]

Historically, when we go back, we used to open a market about over 1.5 years. It's more like 2 to 2.5 years now. And it is a reflection to of the efforts from that department and the company, right, with India being complex and literally, states in India can be bigger than some of our other markets, if we do them well.

I doubt it would be that quick. But we do have an active team that's looking and evaluating market after market and we will go into other markets in the future. This will be our 25th market and we've gone into the markets that welcome direct selling and have a large population, and we have a pool to get into it.

It starts getting a little bit tougher after '25 to find those markets. But we have a list. We have a top 5, and we'll evaluate and go into something in the future. My guess is it wouldn't be in 2025 only because of the complexity and our efforts to push all the resources we can to have India start up strong and then continue to be a strong business.

[Operator]

Our next question is from Doug Lane from Water Tower Research.

[Douglas Lane, analyst]

Yes. Staying on India here. India has been terrifically successful for Herbalife as Linda mentioned. And in fact, India is more than twice as big as China these days. How long do you think it will take internally from where you stand for India to be even as big as China for USANA?

[G. Hekking, executive]

I think the way we're entering the market is quite a bit different. And we expect to go back and see progress, but I think it's going to be a different start point. But I think we're very optimistic about the market. We're just -- we're opening in a different fashion just because some of the structure and regulatory framework there and very, very confident with the way we're pursuing it, but it's definitely going to be more of a methodical systematic build, and we hope it really build some momentum. Jim?

[Jim Brown, executive]

Yes, just some more information. Just as to remember that we opened China in 2010 through an acquisition, a company called Babycare that continues to operate there. That's our arm in USANA. And what that did was it actually had a base to start with to grow off of, that was modest, but it was still there and increased the speed of growing of China.

We don't have that in India, even though we have a lot of interest. It's all about how quickly it starts and how quickly those teams can grow their organizations and customers.

[Douglas Lane, analyst]

Fair enough. That makes sense. And we're talking about China. China continues to be under pressure. I think the WFDSA just came out with -- their numbers in China was down again in 2022, it's down 8%. It's been down more than 40% since 2018, which is the recent peak. .

You might be doing a little bit better than that, but you're still probably down 30% or more since 2018. And you read about the geopolitical tensions there. Can you just update us on where you sit today on your outlook for China versus maybe 5 years ago when it seemed like an entirely different picture?

[G. Hekking, executive]

Yes, Doug, we got someone just who's incredibly qualified to answer that question in person. Brent can handle that. He's been so close to the market and manage the leadership team there, so we'll let Brent kind of give his color on it.

[Brent Neidig, executive]

Doug, great question. I agree with you that China has had -- it's been a difficult operating environment, especially during the 3 years of COVID. But as we've taken a step back and looked at the market, we're still incredibly confident in its long-term growth potential.

We believe that the strategy we have in place is the right strategy, and it will offer us a growth opportunity next year and in the coming years ahead. So yes, the environment is tricky. It's very challenging, just like India will be, but I believe we're -- we've shown through our history, we've been able to overcome those types of challenges, and we still believe that there is a long-term growth opportunity there. If you look at -- there are some of our peers who are still growing within the direct selling space, and we believe that, that is very, very likely and possible for our future.

[Douglas Lane, analyst]

Do you think the -- I mean, you mentioned growth in 2024. I think you had a fairly decent local currency quarter here in third quarter of 2023, do you have a sense that we're near the bottom there?

[Brent Neidig, executive]

Yes, that's always difficult to know. Hindsight is always the best indicator there. But as we look at the current excitement and I mean, I was just there in August and earlier in the year as well. And we have a very dedicated sales force who is very optimistic on our future.

And I'm incredibly pleased with our leadership team that we have currently. It's really the strongest leadership team that we've ever had. And the way that they're leading and guiding our teams currently and our sales leaders is the right way. And we -- I believe that it's really going to propel us into the future. So like I said, we won't know for sure in terms of the bottom, but as I see our sequential growth or our year-over-year growth, I believe that we're at a good point to start building from this space.

[Operator]

Our last question is from Ivan Feinseth from Tigress Financial Partners.

[Ivan Feinseth, analyst]

So with the expected adoption of the GLP drugs and reducing people's appetite, there's going to be a significant need to supplement nutrition and protein intake. What are your thoughts and how you're going to potentially target that with specific products maybe for that market?

[G. Hekking, executive]

Yes. I think and especially kind of given the latest round of news in that area. I think that's a good observation, Ivan. I think it's the same message that we've had, but I think many who are pursuing that avenue to go back and lose weight. I think nutrition still remains a paramount concern and how they take care of themselves.

And it really is kind of building a foundation of [ help ] going forward. And I think that's an important mindset. And I think it really becomes, as Jim said, if that story is the differentiation of reminding people how important nutrition is a part of their overall health.

[Jim Brown, executive]

Yes. And given the size of our foods line, it's not significant to our overall balance of products. But you're right, it's an opportunity, and we need to take that and move forward with it. We just literally had that discussion in the last couple of days with our Board who's in here.

They were interested in our take. And I think it's the same thing. Hopefully, those people will understand eating less and potentially the effects of it is a good reason to get better high-quality vitamins and nutrients into their system.

[Ivan Feinseth, analyst]

Well, is there an opportunity for your associates to partner with the companies or even doctors who are recommending this to their patients and therefore, monitoring their patients and they're going to as long as they take this, they're going to need to supplement nutrition because if you dramatically cut back your food intake, sadly, you cut out a lot of key nutrients.

One of the supposed side effects is muscle loss, obviously, protein -- increased protein intake to help counter that. So there is -- the patients that undergo using this are going to be under doctor's care, but they're going to need some level of nutritional advisory to, I think, very important component of it, the nutritional advisory as part of the overall process of this.

[Jim Brown, executive]

Yes. No, I would agree with you. And I would say that we do have people in our sales force who have contacts with doctors and/or our doctors, and this would be a great avenue to again help people understand exactly what you're talking about, the effects that it has on your health and that you should be looking at supplementation to counter those effects.

Honestly, we haven't put together a huge strategy and trying to move to go into that area, but it's something we need to look at. But again, the other thing that will happen is more education will get out there through magazines and other avenues and people will hopefully see that need and seek out better high-quality premium products that we sell at USANA.

[Ivan Feinseth, analyst]

And do you think that part of your thought process is creating a targeted group of your products to address people using these drugs specifically?

[Jim Brown, executive]

Yes, we can. And we have the ability, like we sell specific kits for different ages and the population itself, we could develop something specifically for that and have it out there to combat that. So again, it's a great idea, and we have that capability. So we should look at that.

[Operator]

There are no further questions. So I'll hand you back to your host to conclude today's conference.

[Andrew Masuda, executive]

Thank you, Valeria, and thanks, everyone, for your questions and for your participation on today's conference call. If you have any remaining questions, please feel free to contact Investor Relations at [phone].

[Operator]

Thank you for joining today's call. You may now disconnect.