Barnes & Noble Education Inc. (BNED) Q2 2023 Earnings Call Transcript

Barnes & Noble Education Inc. (NYSE: BNED) Q2 2023 earnings call dated Dec. 06, 2022

Corporate Participants:

Hunter Blankenbaker — Vice President of Investor Relations

Michael P. Huseby — Chief Executive Officer

Thomas D. Donohue — Executive Vice President and Chief Financial Officer

Jonathan Shar — Executive Vice President, BNED Retail and President, Barnes & Noble College

Analysts:

Ryan MacDonald — Needham & Company — Analyst

Alex Fuhrman — Craig-Hallum Capital Group — Analyst

Presentation:

Operator

Hello, and welcome to today’s Barnes & Noble Education Fiscal 2023 Second Quarter Earnings Conference call. My name is Bailey and I’ll be the moderator for today’s call. [Operator Instructions]

I would now like to pass the call over to today’s host, Hunter Blankenbaker, Vice President of Investor Relations. Hunter, please go ahead.

Hunter Blankenbaker — Vice President of Investor Relations

Good morning, and welcome to our fiscal 2023 second quarter earnings call. Joining us today are Mike Huseby, CEO; Tom Donohue, CFO; Jonathan Shar, Executive Vice President, BNED Retail and President, Barnes & Noble College; and David Henderson, President of MBS.

Before we begin the call, I’d like to remind you that statements we make on today’s call are covered by the Safe Harbor disclaimer contained in our press release and public documents. The contents of this call are the property of Barnes & Noble Education and are not for rebroadcast or use by any another party without prior written consent of Barnes & Noble Education.

During this call, we will make forward-looking statements with predictions, projections and other statements about future events. These statements are based upon current expectations and assumptions, that are subject to risks and uncertainties, including those contained in our press release and public filings with the Securities and Exchange Commission. The company disclaims any obligation to update any forward-looking statements that may be made or discussed during this call.

And now, I’ll turn the call over to Mike Huseby.

Michael P. Huseby — Chief Executive Officer

Thanks, Hunter, and good morning, everyone. As evidenced by our second quarter results, the higher ed industry continues to evolve at a rapid pace and we continue to adapt our offerings to ensure that both BNED and our customers are on a path for mutual success.

Given the rapidly evolving market, I’d like to focus my comments today on three areas. First, we’ll provide an overview of our second quarter financial results. During the quarter, our key strategic areas of First Day Complete or FDC and general merchandise performed well. However, the traditional a la carte course material model declined at a faster pace than we anticipated.

Second, we’ll discuss the significant cost reduction initiatives that we are implementing across our organization. These initiatives involve streamlining our operational structure and aligning our capital allocation decisions to our highest return opportunities that accelerate growth and drive operating efficiencies.

Finally, we outlined decisive actions we are taking to accelerate our transition to the FDC model, which removes barriers for students by providing greater access, affordability, convenience and ultimately, greater academic success. It also helps colleges and universities meet and exceed their highest priority goals. And for BNED, it provides more predictable, higher-margin revenue.

With that, let’s take a closer look at the second quarter. Our teams continue to navigate the ongoing challenges in the higher ed space, particularly the continued negative enrollment trends as well as unprecedented increases in operating and financing costs. The most profound insight we learned acutely from our second quarter results is that even though our First Day Complete model grew significantly, the traditional a la carte course model declined at a faster pace than we anticipated. Factors contributing to this decline included faculty assigning fewer course materials for class and many students electing not to purchase course materials at all.

Despite these headwinds, consolidated revenue and adjusted EBITDA were essentially flat versus last year, primarily due to the growth of our higher-margin FDC and logo general merchandise businesses. Nonetheless, our expectations entering the second quarter were higher than what we realized, given that this is our first operating rush in two and a half years without the cloud of a material pandemic outbreak hanging over it.

The engine that drives our overall business is our retail physical and virtual stores and websites as reported in our retail segment. Total retail revenue of $598.6 million was down 1.7% year-over-year. Gross comparable course material revenue, including product sales and rental income was down 4.6% and the primary contributor to the overall revenue decline. Mitigating but not completely offsetting the decline in a la carte course material sales was the success of our First Day model. The First Day model includes FDC, which includes both physical and digital courseware and First Day by course, which is primarily digital.

Second quarter FDC revenue grew 97% to $89.9 million and 111 of our campus stores utilized FDC for the fall term, representing undergraduate enrollment of approximately 545,000 students. The FDC equitable access program removes barriers for students by providing greater access, affordability, convenience and ultimately, greater academic success. This differentiated strategy is increasingly resonating with institutions. Our pipeline of schools considering FDC is very robust and seven more stores are launching FDC this upcoming spring rush, including the University of Memphis and University of Connecticut, bringing total undergraduate enrollment for spring to approximately 588,000 students.

Moving on to general merchandise. Total GM sales were up 4.5% on a gross comparable basis. Logo and emblematic, which accounts for approximately 60% of general merchandise revenues, saw continued strength, while supply products, which includes bigger ticket items like laptops and tablets saw some softness. While a relatively small contributor to total GM revenue, supply products revenue is most directly correlated to the broader retail industry headwinds. Within GM, we see many opportunities to improve our execution and customer experience, including additional upside from our partnership with Fanatics and Lids as our integration with their capabilities matures.

DSS revenues increased 2.3% to $8.5 million. The lower-than-anticipated increase in revenue was primarily driven by product offering mix as well as lower-than-expected web traffic. DSS is comprised of Student Brands and bartleby products. Since our August 2017 acquisition of Student Brands, it has generated steady free cash flow, which has been used to finance the growth of bartleby suite of digital learning and study tools. DSS grew significantly through the pandemic, including more than 30% year-over-year revenue growth in fiscal ’22 and in recent years, we have made significant investments to support this growth. That said, with our focus on our highest return initiatives, we are shifting our priorities within DSS to maximize our past investments and existing assets with a more rigorous approach to profitability.

Moving on to Wholesale, revenue declined 2.5% during the quarter, while EBITDA increased by $0.4 million. Wholesale continued to be impacted by supply constraints and the lack of used book inventory, lower overall demand due to declined enrollment and the transition to digital course materials.

As we concluded the second quarter, we did not see the anticipated improvements to the operating environment and recognize the need to take swift and decisive action. We started with a deep analysis of all products and offerings as well as our markets, customer needs, operations, investment requirements and expected returns. This work has provided clarity on where we need to create efficiency and strategically invest to deliver on our mission, deepen our strategic moat and drive our long-term growth and profitability. The first part of our plan involves aligning our overall expenses and resources with current market trends. We are taking actions across the company to drive efficiencies, simplify organizational structure and further reduce nonessential costs. For example, within DSS, we are taking a much more rigorous approach to profitability. We are refining and optimizing marketing and content spend, streamlining data infrastructure and processes while continuing to test pricing, positioning and features for increased subscriber conversions and engagement. These actions may impact short-term growth, but we will be on a stronger foundation for fiscal year ’24 and beyond. We expect to achieve free cash flow breakeven in our DSS segment in fiscal year ’24.

Within wholesale, we are rationalizing the workforce to aligning costs with the declining revenue base and the industry headwinds I mentioned earlier. MBS remains a valuable part of our FDC fulfillment engine. Also, MBS’ experienced and dedicated team plays the lead role in managing our retail virtual bookstore operations and relationships as well as all retail customer care. MBS’ initial efforts to transition our retail virtual bookstores to FDC are encouraging and will continue. We see a long tail in physical courseware demand and MBS’ wholesale capabilities are proving to be and will continue to be a key competitive differentiator for BNED.

Within retail, we are significantly adjusting staffing and related costs as well as sales expectations for the remainder of this fiscal year to align with our analysis of retail’s second quarter sales levels and trends. These cost reductions required difficult decisions and included many valued long-tenured colleagues. We want to underscore how grateful we are for the hard work and contributions of all the impacted employees by these actions, which are necessary to rightsize our organization and enable us to invest in our highest conviction growth opportunities. We expect annual run rate savings of USD30 million to USD35 million from these cost reduction activities once fully implemented.

In the current fiscal year ’23, we expect to save USD10 million to USD15 million from these cost actions. We intend to reinvest most, if not all, of these savings back into the business in a very targeted manner to fund the advancement of our strategic priorities.

Our highest and certainly most exciting priority initiative is the acceleration of the market transition to the FDC sales model. We’ve led the market change to equitable access over the past five years. And in that time, we’ve invested in advanced proprietary software such as our adoption and insights portal to provide seamless integration with an institution’s systems like registration and single sign-on and personalized mobile optimized student-facing solutions. These investments have allowed us to differentiate and be the clear marketplace leader in equitable access. They also provide the confidence that we can execute on serving a significant number of new FDC accounts with near-flawless execution at higher scale.

Based on the positive outcomes that FDC provides our college and university partners, their students, content providers and BNED, we are moving quickly and decisively to accelerate FDC adoptions. We have developed a surgical approach and implementation plan to engage with and transition many more institutions to FDC. For many of our institutional partners, it will be the only model we offer and we expect the vast majority of our institutional partners and their students to implement the FDC model over the next two fiscal years.

We have a substantial pipeline of additional schools seriously considering transitioning to FDC for the fall ’23 term and we will engage with all of our schools in some fashion in this discussion as we execute our plan over the next several months. To accelerate the transition to this model, we are investing in additional sales, marketing, operational support resources and technology to further streamline the FDC customer experience.

We will continue to invest in our service and expand our strategic moat as we help facilitate the student academic journey and support improved student well-being and academic success. As we transition from offering great products to making a meaningful impact on the highest priority goals at the colleges and universities we serve, our value to the industry will increase and strengthen retention and improve customer lifetime value.

We see the inclusive and equitable access offerings becoming the de facto model of the industry. The access, achievement, mental health and affordability benefits to students are clear. The economic benefits the institutions received are compelling, and a much more predictable higher-margin revenue growth is a critical part of BNED’s successful path forward with our institutional partners whose success and ours are truly shared.

In closing, BNED is one of the very few strategic assets in the higher ed industry that already has the scale, unique asset mix and competitive positioning to truly meet both the digital and physical demand of the higher ed institutions and students we serve. Whether it’s facilitating a better student academic journey, delivering superior customer experiences, we’re building lifetime relationships with parents, friends and alumni.

Our unique approach and set of proprietary assets allow us to support our partners in a more relevant and highly differentiated manner. We are operating with urgency and decisive action to accelerate market adoption of the FDC model. We’re streamlining the company structure and we’re taking cost out to allocate capital to our highest priority businesses. We have a clear path forward and we are confident in our ability to create durable growth and shareholder value.

And now I’ll turn the call over to Tom to discuss our Q2 financials in more detail as well as our updated guidance.

Thomas D. Donohue — Executive Vice President and Chief Financial Officer

Thanks, Mike. Please note that the second quarter of fiscal 2023 consisting of 13 weeks ended on October 29, 2022. All comparisons will be to the second quarter of fiscal 2022, unless otherwise noted.

Total sales for the quarter were $617.1 million compared with $627 million in the prior year. The decline of $9.9 million or 1.6% was comprised of the $10.3 million decrease from the retail segment, a $0.6 million decrease in the wholesale segment and a $0.2 million increase from the DSS segment.

Retail gross comparable store sales decreased 2.2% during the quarter. Gross comparable course material sales were down 4.6% as the broader industry headwinds were mitigated by the rapid growth of our First Day offerings. BNC’s Inclusive and equitable access programs increased revenue by 49% to $143.2 million during the quarter as compared to $96 million in the prior year period. Within this, FDC revenues increased 97% to $89.9 million. Gross comparable general merchandise sales increased 4.5%. Our general merchandise business benefited from strength in logo and emblematic sales, offset by softness in more expensive items like laptops and tablets.

Net sales for the wholesale segment decreased $0.6 million or 2.5% to $21.1 million. The decrease was primarily due to lower gross sales impacted by supply constraints resulting from the lack of textbook purchasing opportunities during the prior fiscal year, the continued shift from physical textbooks to digital products and lower demand from other third-party clients, partially offset by lower returns and allowances.

DSS sales grew $0.2 million or 2.3% to $8.5 million. The second quarter consolidated gross margin rate was 23.5% compared to 23.2% in the prior year period. This was primarily due to higher retail gross margins, which benefited from a favorable sales mix of higher-margin general merchandise sales.

Our selling and administrative expenses were down $0.8 million to $107.1 million. The decrease was primarily due to lower incentive plan compensation cost, offset by higher payroll on corporate and new and closed stores.

As Mike discussed, we recently began taking actions to optimize our cost structure and streamline our operations. We expect to achieve USD30 million to USD35 million in annualized run rate savings once fully implemented and USD10 million to USD15 million in FY 2023. Savings will be in both cost of sales and S&A with most, if not all, of the savings reinvested into the business. We expect to recognize a charge of approximately USD5 million to USD6 million primarily related to severance and other termination benefits during the third quarter of fiscal 2023.

Moving onto the balance sheet, our cash balance was $19.1 million at the end of the quarter with outstanding borrowings of $252 million, as compared to borrowings of $183.3 million in the prior year period. This increase is mostly due to cash use and the timing of receivables associated with the significant growth of our First Day offerings. Schools generally remit payment for students enrolled in First Day courses after their student drop/add dates. Maintaining our balance sheet strength and flexibility is one of our top financial priorities. With the strategic actions and cost reduction initiatives we have implemented, we have a clear path to EBITDA growth in fiscal 2023 and fiscal 2024.

Capex for the quarter was $10.8 million, an increase from $9.9 million in the prior period. Currently our retail segment operates 1,399 college, university and K-12 school bookstores, comprised of 793 physical bookstores and their ecommerce sites, as well as 606 virtual bookstores.

Moving to guidance, given our results to date and our expectations for the second half, we now expect FY23 adjusted EBITDA of $20 million to $30 million. This represents non-GAAP adjusted EBITDA growth of $25 million to $35 million compared to fiscal year-end 2022. The company’s retail segment will be the primary driver of non-GAAP adjusted EBITDA growth driven by new First Day Complete implementations, growth within our general merchandise business, and new business wins.

With that, we will open the call for questions. Operator, please provide instructions for those interested in asking a question.

Questions and Answers:

Operator

[Operator Instructions] The first question today comes from the line of Ryan MacDonald from Needham. Please go ahead. Your line is now open.

Ryan MacDonald — Needham & Company — Analyst

Hi, Mike and Tom. Thanks for taking my questions. Maybe a first one on the go-forward plan here. Obviously great to hear about the cost saving initiatives that are going into place, but it sounds like you’re going to be reinvesting a lot of those cost savings and really accelerating the adoption of First Day Complete here. One, can you talk about how you drive that accelerated adoption? Do you have to do anything around incentivization from a pricing perspective with the pipeline of university partners that you have; and two, as you think about accelerating that adoption and getting that adoption two years from now, can you remind us of what the unit economics on First Day Complete are and the confidence you have that this accelerated plan will get us to profitability levels that are above pre-pandemic levels, where they were at? Thanks.

Michael P. Huseby — Chief Executive Officer

Ryan, it’s Mike. I’ll make some general comments on that first, and then Jon Shar, who is our President of Retail, can make some additional comments. Just one thing I would say about the unit economics is that in connection with our fiscal year ’22 earnings release, we did post a fairly detailed review of the economics and how they compare. We can talk more about it.

But I think the main answer to your question is that it’s very, very clear to us that the best model for us to offer to our market for courseware delivery is First Day Complete. And we’ve made a decision that based on the scale we’ve achieved, the conversations we have with the schools that we serve, both First Day Complete and others that we have to lead the industry towards that model so that we are presenting the best model to customers.

We’re not doing this to customers, we’re doing it with them. And whenever you have a transition and this is — First Day Complete is essentially a subscription model in many respects in terms of how it’s offered and how it’s bundled for student benefit.

When you have that type of a model, you have a responsibility. We have a responsibility as a leader in this industry in terms of serving schools and procuring courseware and the best general merchandise to make sure that we’re doing everything we can to accelerate that model, and that’s what we’re doing.

It’s been a very detailed school-by-school analysis of how we go about doing this. Jon and his team have done a great job working with someone outside party to really dive into this and come up with a very detailed plan. We’re already starting to talk to schools, and that will broaden that communication in the very, very near future.

So I’ll ask Jon to comment on anything further.

Jonathan Shar — Executive Vice President, BNED Retail and President, Barnes & Noble College

Yeah, thanks, Mike and Ryan. Thank you for the question on First Day Complete. And just also — just stepping back, our fall term that we’re about to conclude is really the first term of significant scale that where we’ve executed First Day Complete. 111 of our stores representing almost 550,000 of undergraduate enrollment and really now strong references of institutions across all higher ed sectors – four-year private, four-year public, two-year public, large enrollment, small enrollment, liberal arts-based, technical-based and everywhere in between, and we’re seeing significant success really ultimately in student outcomes at those schools. We have implemented research where students are saying their more prepared. This is a model that supports their wellbeing and ultimately their academic success, and it’s based on this, that we feel the impact is going to be even more significant and will continue to accelerate.

Only four years ago, we only had four institutions representing almost, I think, 16,000 in undergraduate enrollments, so we’ve been able to scale this in a significant way. We’re also investing and have invested significantly in technology to create a seamless experience and transition to this. We’ve leveraged an institution’s single sign-on system, registration system, student information systems to have a personalized experience, and now we’re investing in more sales, as we said in the remarks, sales, marketing, operational support in addition to technology to allow us to scale, and really it’s allowed us to scale the number of individual conversations we have with institutions to understand how we meet their needs and how we make a bigger impact on the goals that are most important to them, whether that’s driving the four and/or six-year graduation rate, attacking student wellbeing or any other goal. We think we can accomplish that and have the team, the focus and the resources now to really execute that, drive First Day Complete growth for next term, and then the vast majority of our institutions in two years.

Michael P. Huseby — Chief Executive Officer

And then Ryan, it’s Mike. One more comment. I think the flip side of not doing this is evident in the second quarter. It’s not just its impact on our results. It is impact on the students and the schools because the schools share in our economics. And the fact that the a la carte model is declining, it tells us that there are many students, and we know this from our research and conversations, many students just aren’t purchasing the course where they need to be successful. And this model puts the curriculum back in the hands — the control of that curriculum back in the hands of the schools and the faculty as opposed to just letting the market cause kind of the chaos. It’s going to do as digital increases in terms of its market share. So this is a way to have a contract relationship with the school that actually means something to them as well as to us and helps the students.

Ryan MacDonald — Needham & Company — Analyst

That’s helpful color. Appreciate that. Maybe on the cost optimization. Tom, you mentioned that it’s going to be a mix of sort of savings in cost of sales and then S&A. As you look across Retail Wholesale, DSS, can you maybe just help us out and give us a sense of the magnitude of sort of where you’re making the cuts across those 3 segments as we think about the P&L moving forward?

Thomas D. Donohue — Executive Vice President and Chief Financial Officer

Yeah, thanks, Ryan. I haven’t necessarily broken it out. We’re in the process of doing it. It’s a lot of people, it would be people in all three segments, and when you think more on the cost side as opposed to just the people, it’s really switching to the FDC model, both in terms of service and support and really trying to refocus the capital investment in that area. So as we look across it, it will certainly be people, but it also gets down to the retail level at the store level in terms of store labor and the effects that it has there.

Michael P. Huseby — Chief Executive Officer

Yeah, Ryan, it’s Mike. I guess the way I would answer the question without giving the numbers that comprise the total is that we talked about each of the business units in the script. And from a relative perspective, the employees impacted are probably more significant on a relative basis at DSS and MBS because — and there’s some in corporate. But we’re trying to, as we said, as Jon just said, really focus our investment on our highest return, our core business and drive our inclusive access model.

So while there are reductions across the business, the weighting of that really emphasizes focusing the savings in those business was where we have to really get more rigorous on profitability and then also having savings when we say reinvested, we really mean to drive our core business where it’s got the highest ROI.

Ryan MacDonald — Needham & Company — Analyst

Makes sense. Okay. And maybe just one more from me. Mike, you had talked about in one of your comments about that students are just — increasing number of students not purchasing the course materials they need. I would think that structurally that would be a bit of a tailwind for the DSS business and the bartleby business. Just curious what you’re seeing there and maybe what’s causing the slowdown? And are you seeing any improvements in the pipeline here of sort of the school associated bartleby adoption deals? Thanks.

Michael P. Huseby — Chief Executive Officer

Yeah, thanks. In terms of the pipeline for what we’re calling institutional where we have several schools now signed up, that is continuing. As we said, though, the main emphasis on DSS is really focusing on more rigorous profitability, getting that DSS segment to cash flow breakeven.

Within DSS, as you know, they’re really from two businesses, the Student Brands business, which is growing; and then the bartleby business, where we tried a lot of things in the fall in terms of new pricing and some new approaches. Some worked well, and some didn’t work as well as we thought they would have — with some of which have to do with the environment we’re in currently.

But we learned a lot in the fall. And we’re making some significant changes to, I guess, I would say, take advantage of the competitive differentiation we have and the ability to offer a different price point, in particular, and also leveraging our footprint in a more zealous way in-store and on web than we probably did in the fall. So we’re reining in the capex by not taking as broad questions from international sources, really focusing more on the U.S. and our footprint and becoming much more focused on bartleby in terms of rationalizing the business to fit the current circumstances and our need to go to focus on profitability.

What’s — it’s been really set up over the last six months to a year in terms of the activities and intentionally to develop an asset for longer-term growth. And with our financial capacity and the focus on really the core business, we’re reining that in a bit, still have great people working there, and I think we have great opportunity to set a foundation that positions us for more growth going forward. But the visitors to the sites were down, and that’s an industry phenomenon.

We employ an outside company that tells us about our sites and those that we relatively compete with in this area. And traffic was down across the board. So that’s something we need to work on and have ideas as to how to do it.

Very proud of Student Brands also in terms of their turnaround over the last 18 months or so being led by [Indecipherable] and his group, experts in SEO and machine learning. That’s a real gem of an asset that we have within DSS that can complement what we’re doing in bartleby and eventually downstream into our core business. So yes, we’re focused on the big change in bartleby and the approach just in the very near term for spring and hope to see better results. We can’t guarantee that, but we’re focused on it.

Ryan MacDonald — Needham & Company — Analyst

Thanks for taking my questions. I’ll hop back in the queue.

Operator

[Operator Instructions] The next question today comes from the line of Alex Fuhrman from Craig-Hallum Capital Group. Please go ahead. Your line is now open.

Alex Fuhrman — Craig-Hallum Capital Group — Analyst

Hey guys, good to talk to you. I wanted to ask about the cost reduction initiative, it sounds like after the $10 million to $15 million you’re expecting to realize, for the remainder of this year, there’s another $20 million that you expect to realize long term. How long do you think it’s going to expect to realize that? Do you think you’re going to see the bulk of that incremental $20 million in fiscal ’24. And then Tom, I think, you mentioned it’s your intention to reinvest most of these savings into other initiatives. So, how should we think about the impact to the P&L of those cost savings?

Thomas D. Donohue — Executive Vice President and Chief Financial Officer

Yeah, thanks, Alex. I think the way to think of it is given that we’re through, at this point, six months as we reported and then obviously, through seven months if you count the month of November, the $10 million to $15 million is really the rest of the run rate basis for FY ’23. And when you annualize that, you get closer to that $30 million to $35 million. So the steps and initiatives are being implemented as we speak. Some has been done. Some will continue to be done. And that’s really what our expectation is, and you would expect that the full annualized effect of that $30 million to $35 million would be in the ’24 numbers for sure.

Michael P. Huseby — Chief Executive Officer

Yeah, Alex, one more comment I would make is that having been through the pandemic and having taken out substantial costs in our shared services and retail right before the pandemic and actually bled into the pandemic in terms of people, we had a work back [Phonetic] on the spring of 2020 where 70 people accepted that. The point is, it’s given us more flexibility in terms of fixed versus variable costs in our labor force, so that we can move more quickly now than we could have pre-pandemic. So, that’s why we’re confident in the numbers and getting the benefit now, and then the annualized savings.

We also have other areas of improvement that we’re looking at that are just costs — the margin, etc. I don’t want to get into those today that we’re working on. We are not quantifying any benefits, but we’re not standing still with these actions and these numbers. We are going to continue to look at ways to protect and improve the margin of what we offer as well.

Thomas D. Donohue — Executive Vice President and Chief Financial Officer

Yeah. And Alex, in terms of reinvesting, it’s really to support the initiatives, with the highest priority being the conversion of schools to First Day Complete.

Alex Fuhrman — Craig-Hallum Capital Group — Analyst

Okay. That’s really helpful. Thank you both.

Operator

[Operator Instructions] There are no additional questions waiting at this time. So I’d like to pass the conference back over to Hunter Blankenbaker for any closing remarks. Please go ahead.

Hunter Blankenbaker — Vice President of Investor Relations

Great. Thank you, Bailey, and thanks, everyone, for joining us today and for your continued interest in BNED. As a reminder, our fiscal third quarter earnings will be in early March. Thanks, everyone, for joining.

Operator

[Operator Closing Remarks]