Nelly Group AB (publ)

STO:NELLY

Earnings Call Transcript 2018-Q2

[Operator]

Good morning, ladies and gentlemen, and thank you for holding. Welcome to Qliro Group's Interim Report for the Second Quarter 2018 Conference Call. [Operator Instructions] Today's conference is being recorded. I will now hand the call over to Marcus Lindqvist, Chief Executive Officer, Qliro Group; who is joined by Mathias Pedersen, Chief Financial Officer.

[Marcus Lindqvist, CEO & President]

Thank you, operator. Good morning, everyone, and welcome to this conference call regarding our Q2 report, following our announcement with a new strategic direction at the beginning of June, where we are set up to operate our businesses fully independent from the group and each other. We -- now we'll go through our interim report and focus more on the businesses as separate entities. We believe that this new strategic direction will allow for us to fully focus on what is best for each company and that this, over time, will strengthen their respective competitive position. And if we take a look at each business, starting with Qliro. Their focus is to extend its offering of financial services to consumers and merchants in the Nordics. And during the quarter, they increased their profitability and continued with their cost-efficient loan book expansion, and our loan book consequently increased with 53% versus last year. We will continue to invest in Qliro, with ambition to play a larger role in the everyday life of consumers. As for CDON, they are in a transformation from a legacy business model to become a leading Nordic online marketplace. And during the quarter, we accelerated their transformation, and external merchant sales grew with 15% versus last year. Work has also begun to evaluate potential structured transactions in order to strengthen the position as the leading Nordic marketplace. And Nelly's focus is to drive profitable growth as a leading Nordic online fashion brand. During the quarter, we are very pleased to see that Nelly returned back to profitable growth with a revenue growth of 11%, exceeding our financial targets under a new management. Also for Nelly, work has begun to evaluate a potential listing or divestment to strengthen Nelly's position and realize underlying shareholder values. Looking at our businesses, we will start with Qliro Financial Services. In Qliro, we are building a digital financial offering that is leveraging on low customer acquisition costs. And during the quarter, Qliro increased their total operating income with 36% to SEK 71.2 million, while total operating expenses grew with 27% to SEK 62.4 million. This resulted in an operating profit before depreciations of SEK 5.7 million, which is an improvement compared to the same period last year. It should be worth noticing that when you look at the operating profit of the business, which also improved versus last year, we have increased our depreciations with SEK 2 million as a result of the rollout of the technology platform that Qliro is building. For Qliro, we can also see that they are growing their independency from the group as external merchants grew faster than internal. And now external merchants account for more than 40% of total business orders. And it's pleasing to see that we now have 33 retailers live on the Qliro platform. Over the last 12 months, they created 4.7 million transactions with approximately 1.8 million active customers. If we turn to the next slide, we can see the development of the loan book and our financing. As mentioned, in the quarter, our loan book grew with 53% to SEK 1.2 billion. And these were fueled by our personal loans that, at the end of the quarter, amounted to SEK 187 million, and this is up from SEK 109 million at the end of the first quarter. Our interest costs to finance our loan book amounted to about SEK 4 million, and the financing was done through savings accounts and a secured credit facility. On the income side, our interest revenue from the loan book amounted to SEK 68 million, reflecting a positive interest rate spread and the high profitability of our loan book. If we look a little bit closer to the development of our personal loans that we launched as late as September last year, we can see that we have a very cost-efficient way to acquire new customers. All brand-building and customer interaction are done through our proprietary channels and touch points, such like our app, our website. And with the platform that we have built, we can see that we are scaling as we now adopt a data-driven approach in marketing, customer support, product development, application flows as well as credit decisions. And we convert this low-cost engine to competitive prices and interest rates for our customers, and we can see that the majority of the loans issued for our personal loans is for debt consolidation purposes. Our net loan book, SEK 187 million as mentioned, is built with an accumulated marketing spend of 0.7%. And we have already had an existing relation with more than 95% of all loan customers. If we move to the next slide, we can see the development of CDON Marketplace. In CDON, we have, during the quarter, accelerated our transformation, and I will show the transformation on the next slide in more detail, to become a pure marketplace. This resulted in external gross merchandise value increase of 15%. So that is the amount of revenue that external merchants do through the CDON platform. While our total gross merchandise value, which is the combination of external merchant sales as well as our own net sales, declined with 8%, driven by a rather steep decline in our own net sales of 13%. Our operating profit as well as the profit before depreciation has increased somewhat versus last year. And you can see a decline in depreciations in CDON versus last year. As mentioned, during the quarter, CDON increased its transformation. And own sales, that is own inventory product sales, was phased out, and we focused on products with lower margins, so typically home electronics and home electronics products. And this gave an increase of 2 percentage points when it comes to gross margin and, of course, as already mentioned, lower net sales. This transformation, we believe that it is expected to continue for the next coming quarters and it will restrain the overall growth, still delivering on the external sales growth well above our financial target. But we see it as necessary in order to meet our long-term target of growth and profitability. We're also happy to say that our inventory levels have decreased with SEK 78 million since year-end. We're still at higher levels when we close the second quarter compared to last year, but on more healthy levels in comparison to the first quarter. Our plan is, of course, to continue to decrease our inventory levels as we continue to phase out discontinued categories, our unprofitable categories. And you can see then on the next slide how that work is transformed. As you can see, almost 50% of CDON sales are now in the marketplace or drop-shipment business model. 56% of sales were inventory-led. And this transformation is really important as it shows that our new business model is appreciated by our customers, showing growth, and it also allow for higher product margins with less capital allocation in the future. And it should be noted that both the marketplace model and the drop-shipment business models allow for a decrease in working capital since customer payments are typically received day 1, and we have longer payment terms with our vendors. So we are excited to see the forthcoming transformation for CDON for the next coming quarters. Moving over to Nelly. And following a weak quarter, we are very happy to see that Nelly returned back to profitable growth during the second quarter. And in the quarter, our net sales increased with 11% to just about SEK 400 million for the quarter. Our EBITDA ended up at SEK 28.6 million, equivalent to about 7% in EBITDA margin. And this is, of course then, as you can see, significantly below last year. It should be worth to remember that when we released our interim report in Q2 last year, we clearly stated that this was a very, very strong result, driven by very favorable inventory levels at the beginning of Q2 last year. Also, some of the offset versus last year is driven by the fact that we continue to invest in Nelly when it comes to organization as well as that we have increased our marketing spend. And this, in the quarter, resulted in an increase in the number of visits with 8%, the number of orders with 14%, and we also increased the number of customers with 11%. We're also happy to say that we now, following a Q1 with higher returns than expected, that we see that our return levels have stabilized during the quarter in comparison to Q1. We're still significantly higher when it comes to returns in Q2 than Q2 last year, but the increase has stabilized versus the first quarter, giving us good foundation for the future. Sweden and Norway is Nelly's largest markets. But looking at the business outside those 2 countries, we can see that the fastest-growing market today is Netherlands, where we increased our growth efforts at the start of 2018, and the business grew with 62% in Netherlands during the quarter. And this shows that our brand and offering are attractive in several markets and not only our core market. As mentioned, in order to deliver growth above our financial targets, we have increased our marketing costs in the quarter with SEK 12 million compared to last year. And that corresponds to 11% of sales, which still is on fair levels compared to industry peers. Moving over to the next slide. I want to give you an overview of Nelly's earnings development over the last years and how this correlated to the development of our share of own brands, the NLY brand, and product margins. And you can see that our own brand sales and the increase of that are the key driver for our product margin improvements since 2016, in combination with a more restrictive approach to inventory buildup and management. At the same time, we believe that we have reached the right balance between own and external brands on Nelly.com, and we believe that we can continue to drive increased sales going forward with sustained margins. Furthermore, obviously, our margin improvements have and will enable us to further invest in our business going forward. That was my comments on the business. So I would now like to hand over the call to our CFO, Mathias Pedersen.

[Mathias Pedersen, Chief Financial Officer]

Thank you, Marcus. Having been through each subsidiary, we now turn back to the overall group view for a look at the consolidated income statement. As we have made clear, future focus will, of course, be on each of our subsidiaries independently, yet we're still joined as a listed group. So group sales increased marginally as growth within Nelly and Qliro Financial Services were offset by the declining net sales in CDON, where the inventory-based sales began being phased out in certain categories. Also, net sales were slightly boosted by exchange rate fluctuations. We note that during the quarter, we had some events that lowered the overall results, which warrant commenting. First, following the ruling of the Helsinki Administrative Court regarding CDON Alandia's taxation for the fiscal year 2012, we incurred a cost of SEK 70 million, of which SEK 13 million was reported as interest cost, interest expense and SEK 57 million as additional tax expense. Please note, however, that there were no effect on cash flow as these amounts were previously paid in full during 2017 or earlier. Secondly, during the quarter, we had a management change in Nelly, which led to increased costs of about SEK 3 million. Thirdly, to meet regulatory requirements in the upcoming consolidated situation surrounding Qliro Financial Services, the old long-term incentive programs for executive management in the parent company were dismantled at a cost of SEK 6 million. Moving on to the next slide for a look at the group's cash flow, that is the group excluding Qliro Financial Services. So second quarter cash flow was positive as working capital decreased to low levels. Inventory levels came down both in Nelly and CDON as did other operating receivables, while the operating liabilities increased. We spent SEK 8 million on capital expenditures during the quarter, most of it related to investments in further automation in CDON. Furthermore, we invested another SEK 40 million into Qliro Financial Services as equity to support its continued expansion. Final payment for previously sold businesses brought us another SEK 19 million, and we ended the quarter with SEK 639 million in liquid funds within our nonfinancial business. Moving forward for a look at the balance sheet, and once again, this is for the nonfinancial businesses only. It's a strong balance sheet with well-funded business, where the net cash position amounted to SEK 389 million at the end of the quarter. Notably, our net working capital was negative at the end of the quarter, reflecting a seasonal pattern but also the attractiveness of the business model, as Marcus told us about before, and it's especially the transformation of CDON to more drop shipment and marketplace, which will enable growth with less inventory buildup in the future. However, we should still expect a seasonal inventory increase during the fall before Black Friday this year. Now turning to Qliro Financial Services for a look at its balance sheet. On the asset side, we increased net lending to more than SEK 1.2 billion as both personal loans and sales finance credits grew. Furthermore, we held liquidity reserves to meet obligations to holders of savings accounts, which included municipal bonds and commercial papers amounting to SEK 165 million. On the financing side, the Swedish loan book was mainly funded by public deposits of SEK 750 million, while our bank credit facility, as before, was used to finance the loan book denominated in other Nordic currencies to limit currency risks. About 60% of public deposits had a variable interest rate, and 40% had a fixed interest rate, which reflect a slight shift to more fixed rates. We also have a secured credit facility, which includes an additional SEK 356 million in undrawn commitments to be utilized if needed. And now to regulatory requirements. The assets of Qliro Financial Services translates into risk-weighted assets risk exposure amount of SEK 1.2 billion. And the equity of the company translates into a capital base, our own funds, which amounted to SEK 240 million, all of which was common equity Tier 1 capital. And the corresponding capital adequacy ratio was 19.4%, which is well above the requirements. As before, Qliro Financial Services remain well positioned for further loan book growth, supported by savings accounts, unused credit facility commitments, excess capital and a well-funded parent company who could supply more capital when needed. A final comment on consolidated situation. We should note that given the present size of the balance sheet of Qliro Financial Services relative to the overall group balance sheet, we will now enter into what is called a consolidated situation. This means that certain rules that apply to Qliro Financial Services will also apply to the parent company of the group. And we have consequently notified the Swedish financial services authorities, Finansinspektionen, of this fact. And with that, over to you, Marcus.

[Marcus Lindqvist, CEO & President]

Thank you, Mathias. Then just a final slide to summarize the second quarter and the focus going forward. So in the second quarter, first of all, we announced a new strategic direction for the group, focusing on 3 fully independent companies. In the quarter, we have started the work to assess a potential listing or a trade sale of Nelly and structural deals for CDON. And we also, in the quarter, strengthened our financial flexibility as group cash amounted to almost SEK 650 million at the end of the quarter. Our focus going forward for Qliro is to continue its loan book expansion and increase the geographical reach in the Nordics, focusing particularly on merchant procurement. For CDON Marketplace, the focus is to continue its transformation and rollout of their technical platform and -- in order for us to allow for growth as well as profitability within CDON. And Nelly will focus on to further strengthen its NLY brand and launch new services and concepts, such like beauty, to their customers. We're very excited about the opportunity for our businesses as e-commerce continue to grow and the strong position that we have in the ecosystem. And the team will continue to work hard to create shareholder value going forward. So with that, we are now ready to answer any questions. So operator, do we have any questions on the call?

[Operator]

We do. [Operator Instructions] We will take our first question from Mikael Holm from Danske Bank.

[Mikael Holm, Analyst]

Mikael at Danske. First, a question on your OpEx. You mentioned in the report that employees has been stable year-to-date, and I guess that basically implies that employees has been stable since Q3 last year. But still, operating expenses are up, I mean, 13% if you can compare the current level compared to Q4 and 34% since Q3 last year. So what's the reason for costs continuing to increase without adding employees? And looking ahead, I mean, now you're basically entering a situation where employees are flat year-on-year. What kind of cost inflation should we think about now when you stated that the business should be more scalable?

[Mathias Pedersen, Chief Financial Officer]

Well -- Mathias here. One thing that will move along with the business volume is, of course, customer services costs. [indiscernible]

[Marcus Lindqvist, CEO & President]

Yes. And going to the kind of -- if you look at the personnel and the development of personnel, it is, of course, true that we are up versus last year if you compare Q2 versus Q2. But the development is, when it comes to employees, flat over the first 3 quarters. So you should see that kind of -- the same kind of leverage that we have now on the organization versus growth of income going forward as well. So that's the kind of trajectory that we want to see, that clearly, business volumes and income increased much faster than costs. And you have then on that a seasonality where we are going to meet the amount of employees that we have today at the end of the year. So you will see the kind of cost development flattening out at that point of time.

[Mikael Holm, Analyst]

And just also -- I mean, when you came up with the targets for QFS, 2019 was quite far away. I mean, now it's only 6 months into that year. And I mean, trailing -- I mean, operating income before depreciation is around SEK 20 million today, so it should increase by SEK 130 million to reach the targets there. I mean, what kind of -- I mean, this seems like a significant -- I mean, it all looks like a hockey stick year that should happen in 2019. Or when will we see these, I mean, significant earnings improvements on a quarterly basis?

[Marcus Lindqvist, CEO & President]

I mean, it's true that it is a challenging target versus where we are today. And as you see, the income and results are clearly done in a need of that hockey stick effect, but that's also a part of our loan book development going forward and that continue to mature. And basically coming down to the ability to meet our financial target for '19 it's all about continue to scale on the organization and the cost as well as adding new merchants and new volumes. And we're still 1.5 years away from when we are expected to deliver on the guidance. In that sense, it's hard to kind of, today, say that we are very far off or very close. Having said that, of course, given the new strategic direction, we will, of course, now also take a look at what is best for the company when it comes to targets and strategy going forward. Looking at the business that should be self-sufficient and be a company that is expected to stand on their own 2 feet, it is always good to take a look at the strategy. And we -- in combination with that, we will always take a look at our targets, but that work needs to be done and concluded before we can communicate on that.

[Mikael Holm, Analyst]

Yes. Because I mean, just adding SEK 130 million to earnings, I mean, the total plan is SEK 260 million today. So I mean, that's 50% almost, and you're growing like 36% in the quarter.

[Marcus Lindqvist, CEO & President]

Well, we expect the growth to ramp up going forward, of course. That's part of the quarterly equation.

[Mikael Holm, Analyst]

But we see that -- I mean, loan book growth is -- I mean, that's accelerating, but it doesn't -- I mean, we don't see the -- on the total operating income as I guess, it's -- I mean, loans with a lower-than-average interest rates that you're now issuing. Isn't that correct?

[Marcus Lindqvist, CEO & President]

Well, the interest rates are now -- consumer loans are lower than on the payoff to deliver a service, that is true. But you have the kind of saturation on the -- of the loan book that then itself gives an exponential income increase over time. So if we can continue to grow our loan book in the range of 50 and upwards, that will in itself then create income out of that. But it's exponentially higher than it is at the day when you issue the loan [ price ]. So it's part of the saturation of the loan book that will give you an exponential lift of income. Having said that, we are going to look into the strategy ahead and see what is best for the company. And with that, we will also, of course, look into our financial targets.

[Mikael Holm, Analyst]

Okay. On the CDON strategy, trailing 12 months, losses are close to SEK 50 million, and we see that the top line is weakening. I mean, do you -- I mean, when do you believe it's -- you need to be more -- I mean, looking at the cost side of the business, I guess, I mean, on current volumes, I guess it could be profitable or why else would you invest so much in a business with that track record that it has?

[Marcus Lindqvist, CEO & President]

I mean, that's true. So the thing here that we need to get to work is -- to start with, is the gross margins of the business, which is, on current volumes and current organization, too low. And that is why we have started up on efforts to transform our business and basically phasing out unprofitable business. And that unprofitable business is, of course, not unprofitable on gross margin levels, but it becomes unprofitable further down in the P&L. So by taking out those volumes, we can, of course, also adjust the organization. And given that, we will now continue with that over the next coming quarters, which we state in the report. And that will hamper growth on a total level, where we will focus on growth on drop shipment and external merchants. If we can continue that journey, as we started out now to accelerate in Q2, we believe we have good foundations to be profitable in the next year or so. That's the kind of clear target that we have to transform that business into that. Having said that, it should also be worth remembering that over the entire time when CDON have been growing, as well as them being unprofitable, of course, they have also fueled and created opportunity to build Qliro Financial Services. So should be worth noticing that. And now when we see that Qliro can stand on their own 2 feet, it is also the time to do the right financial decisions when it comes to CDON because it's not going to impact Qliro on the same level as it did when Qliro was solely dependent on CDON volumes in order to build the business. And while we now see that the business of Qliro is getting from kind of low levels to 40% plus of volumes from external merchants, and we see that, that journey will continue up, we can now start to adjust the business of CDON, what is more best for them. And that's also the beauty of the new strategy, where we say that all businesses should stand on their own 2 feet, and we should take the right financial and strategic decisions on behalf of that business itself. So it's all kind of linked together. So it's not the easiest kind of look at CDON from an isolated perspective in the history, but now we can see that we can start to do that as Qliro is more independent when it comes to volumes. So that's why you see this transformation happening at the time being as well as the communicated strategic direction where we clearly say that we will do what is best for CDON. And that is to take down net sales on unprofitable volumes that might have been profitable on Qliro. So it's kind of linked together. Does that address [indiscernible] Mikael?

[Mikael Holm, Analyst]

Yes, yes.

[Operator]

[Operator Instructions] We'll take our next question from Erik Pettersson from SEB.

[Erik Pettersson-Golrang]

It's kind of the same question. I have a question regarding CDON phasing out the sales in low-margin consumer electronics and the transition of the marketplace, which led to a negative impact on net sales, decreasing 13% this quarter. So what should we expect of this transition of marketplace to have for effects in the third and fourth quarter? Will the net sales continue to decrease? And for how long? If you would like to -- yes, continue with that question?

[Marcus Lindqvist, CEO & President]

Yes, sure. Yes, we clearly tried to kind of state that in the report as well. So you should, for sure, expect net sales to decline also in Q3 and Q4 versus last year. And you should expect on the other side that we continue to expand our external merchant sales on higher levels than historically. So you should see that happening. It's hard to say exactly how long you will see this decline, but we would expect that to be something that will take us 2 to 3 quarters at least on that level. And it's also hard to say if it is 8% or 13%. It depends on the kind of campaign activity. And as you know, the second half of the year is very intense when it comes to sales when you have Black Friday and all of that. So -- but you should expect this to continue at least 2 to 3 quarters, but it will build a more sound business with higher margins and therefore allow for profitability.

[Operator]

We will now move to Rikard Braaten from ABG Sundal Collier.

[Rikard Magnus Braaten, Lead Analyst]

I actually have 2 completely different types of questions primarily regarding your balance sheet. The strong cash position you have, particularly in the e-commerce business, is that completely unrestricted?

[Mathias Pedersen, Chief Financial Officer]

Well, the net cash position is certainly unrestricted. We do have an outstanding bond of SEK 250 million, which prevents us from dividend or buybacks at this point in time.

[Rikard Magnus Braaten, Lead Analyst]

Okay, but -- yes, the cash position of -- in e-commerce business is SEK 639 million. That is totally unrestricted, yes? That's free, available cash?

[Mathias Pedersen, Chief Financial Officer]

That's freely available cash as long as we live up to the -- as I said, the constraints from having the bond there. So you cannot -- the dividend, you cannot put a dividend on those.

[Rikard Magnus Braaten, Lead Analyst]

Okay. So there is an additional requirement in terms of group liquidity, et cetera, after you now have this kind of consolidated situation regarding QFS?

[Mathias Pedersen, Chief Financial Officer]

There will be -- the liquidity requirements for Qliro Financial Services will extend to the parent company of the group. But given that we don't really have any savings accounts in the parent company, that doesn't really change very much in terms of how much liquidity we need to hold. So the liquidity reserves held by Qliro Financial Services will cover that as well. On the capital side, there will be increased capital requirements for the assets held in the parent company balance sheet. But having looked at those numbers, we are very well capitalized to meet those marginally extra capital requirements that the consolidated situation will create.

[Rikard Magnus Braaten, Lead Analyst]

Okay. And my second question is -- actually, you mentioned your outstanding senior unsecured bond. Given the strong balance sheet and the strong cash position and also in -- with regards to the new strategy that you announced during Q2, what should bondholders think going forward? Obviously, you have a 2-year horizon for that potential divestment of Nelly and CDON. But what should bondholders think about the future? Is it likely that it will run until maturity? Or should there be some early redemption? Have you -- is it possible to give any flavor on that?

[Mathias Pedersen, Chief Financial Officer]

Well, I think it's in the cards that we at least would need to concentrate redeeming it earlier than the full period. And that's a question that we will look into, together with the board, of course, going forward given the new strategy. And if and when we decide so, of course, we will communicate that. As of now, we're happy to have it where it is.

[Operator]

[Operator Instructions] We will take our next question from Mikael Holm from Danske Bank.

[Mikael Holm, Analyst]

Yes. I also have a few follow-up questions on Nelly. First, on the return ratio, do you see that -- I mean, it has obviously increased over the latest year or so. But do you see it stabilizing at these levels? Or is it continuing to increase?

[Marcus Lindqvist, CEO & President]

No. Well, it is true that it has increased. So last year in Q2, the return ratio was 34%, and this quarter, we ended up at 37%. The important note there is that it is stabilizing compared to Q1. And already at the end of last year then, we saw an increase of return levels. So we believe that we will meet that level coming at the end of the quarter, and we don't foresee now that we should have a large uptick on return ratios more than meeting the kind of higher levels that started all around during autumn and winter last year. It's just kind of stabilizing, that's the kind of short answer to that.

[Mikael Holm, Analyst]

Okay. And just on sales growth, the closing inventory is up 30%. I mean, is this going to reflect inventory ahead of Q3, potentially then, I mean, driving good sales growth? Or -- yes, if you could say something about the composition of that.

[Marcus Lindqvist, CEO & President]

What -- if you look at the quarter, we had a 14% increase on the number of orders, and actually, ordered volume was up 18% compared to last year. So very, very strong sales. And in order to kind of sustain that level of growth, we, of course, need to increase our inventory. So that's why you see an inventory buildup. And then of course, quite a lot of that 18% was consumed by the increase of returns compared to last year. Having said that, if we can continue to sustain that level of growth when it comes to ordered and ordered volume and when we start to meet the higher level of return, you will see that transforming into even higher then net sales. Yes, so that's the kind of view on it, but we [ have to win ] with the closing inventory level because it's needed to fuel and drive and sustain growth going into the second half of the year.

[Mikael Holm, Analyst]

And in terms of how do you look at comps for Nelly for Q3 and Q4? I mean, do you see them as challenging or more normal quarters?

[Marcus Lindqvist, CEO & President]

Well, if you look at -- kind of from top of mind, I remember that our Q4 were rather disappointing, right? If I'm not entirely wrong, we were growing only 2% in Q4 last year, which is typically the strongest quarter in the second half. And for me, that's not a tough comparison, [indiscernible] to beat. Q2 was somewhat better, but overall, it is not as challenging as actually, Q2 was rather good last year. I think the growth was about 9% or something.

[Operator]

[Operator Instructions] As there are no further questions remaining in the queue, that will conclude today's question-and-answer session. I would now like to turn the conference back to Mr. Marcus Lindqvist for any additional or closing remarks.

[Marcus Lindqvist, CEO & President]

Thank you, operator, and thank you all for participating in today's call and for your interest in Qliro Group. We look forward to seeing you all and speaking to you all again soon. And may I also remind you that our Q2 -- Q3, sorry, report will be announced on October 19. And with that, I would also like to take the opportunity to wish you all a wonderful and terrific summer. Thank you.

[Operator]

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen.