PetMed Express, inc (PETS) Q2 2021 Earnings Call Transcript

PetMed Express, Inc  (NASDAQ: PETS) Q2 2021 earnings call dated Oct. 25, 2021

Corporate Participants:

Bruce S. Rosenbloom — Chief Financial Officer

Matt Hulett — President and Chief Executive Officer

Analysts:

Anthony Lebiedzinski — Sidoti — Analyst

Steph Wissink — Jefferies — Analyst

Ben Rose — Battle Road Research — Analyst

Presentation:

Operator

Welcome to the PetMed’s Conference Call to review the Financial Results for the Second Fiscal Quarter ended on September 30, 2021. [Operator Instructions]

Founded in 1996 PetMeds is become America’s most trusted pet pharmacy delivering prescription and non-prescription pet medications and other health products for the dogs, cats and horses direct to the customer. PetMed’s markets its products through national advertising campaigns with direct customers to order by phone or on the Internet to increase the recognition of the PetMed’s branding. PetMed’s provides an attractive alternative for obtaining pet medications in terms of convenience, price and ease of ordering and rapid home delivery.

At this time, I would like to turn the call over to the Company’s Chief Financial Officer, Mr. Bruce Rosenbloom.

Bruce S. Rosenbloom — Chief Financial Officer

I would like to welcome everybody here today. I would like to remind everyone that the first portion of this conference call will be listen only until the question-and-answer session, which will be later in the call. Also, certain information that will be included in this press conference may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 or the Securities and Exchange Commission that may involve a number of risks and uncertainties. These statements are based on our beliefs as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties and assumptions. Actual future results may vary significantly based on a number of factors that may cause the actual results or events to be materially different from future results, performance or achievements expressed or implied by these statements.

We have identified various risk factors associated with our operations in our most recent Annual Report and other filings with the Securities and Exchange Commission. Let me now introduce our newly appointed CEO and President, Matt Hulett. Matt?

Matt Hulett — President and Chief Executive Officer

Thanks, Bruce. Good morning and thank you for joining us. My name is Matt Hulett, I’m the new CEO PetMed. I’m incredibly honored and enthusiastic to join this iconic company and I’m excited to be on this earnings call today. I would like to begin by thanking Bruce Rosenbloom for acting as Interim Chief Executive Officer prior to my arrival. Before we update you on our progress in Q2, I would like to first share my personal thoughts and motivations regarding why I’m so optimistic about PetMeds in our future.

First, I’d like to introduce you to my dog, Harry, who was featured on this slide. He is the latest addition to our family and he is also a puppy. In fact, Harry’s is the first thought to my family. Our family had no idea what we are getting ourselves into. It’s like having a new newborn again and as many of you fellow pet parents now, parties can be challenging. We also can’t imagine not having Harry in our lives, and we think of him as a member of our family.

Personally, it is fulfilling to be involved in an organization where you can spend your time and energy on a business that has positive social impacts on society while you’re focused on generating returns for shareholders. Now that we’ve established my personal connection to the business, I’d like to spend some time walking through the rationale as to why I believe PetMeds is a great long-term investment. Having a large addressable market is important. It enables us more optionality for new brands and products to be developed. It provides more opportunity to develop a myriad of go-to-market strategies, target at different cohorts of customer segments. This also means that there is room for more market participants and for those market participants to co-exist and flourish.

The pet industry’s total addressable market is very large and it is growing. Currently, it is over $100 billion and the service addressable pet medication market, where we participated today is approximately $10 billion. We are one of the leading pet pharmacies today and as such, I see a future where we can extend our already sizable customer reach combined with our widely respected and known brand into additional segments of the total pet care market as our future vision comes fully into focus.

In addition to the benefits of participating in a large market, the market timing is also considerably favorable. Pet ownership has always been high in the United States, but we have seen an increase in pet ownership especially due to the macro effects of COVID-19. Pet ownership has surged to record heights, and now 7 out of 10 US households own a pet. Those new and existing pet parents will need more pet medications and other related healthcare services for their pet family members. As we have seen in other digital e-commerce verticals, the adoption curve of the digitization of retail is a favorable tailwind. This pull forward of digital-based retail experiences has now given customers a taste of the future and has created new buying habits of purchasing more products and services online. Today, our addressable market is largely dominated by offline sales and we see the trend to purchase online is clearly very favorable to us.

Pet parents see their pets as an extension of their own family and they are increasingly demanding more healthy pet care options for their furry friends. We see this as a positive trend for PetMeds and an opportunity. For example, we have increased the number of products that we carry and have started to include specialty dog food and higher end wellness products, which we believe have contributed to the increase in our average customer order value.

Lastly, just like we’ve seen in the human healthcare market, COVID-19 accelerated the increasing trend for the digitization of healthcare. In fact, in the pet market, for the first time, regulations related to in-person veterinary visits and prescription fulfillment were temporarily waived and moved online in unprecedented ways. We think this opens the door to the acceleration of digital-based telehealth services.

As I look at the business, there are several key competitive advantages that we can leverage in the future. First, our brand is widely known and trusted. Having a strong brand takes years to develop and our customers look to PetMeds as their trusted pharmacy and as their pet medication experts. Second, we have strong operational and quality efficiency as a pharmacy. Our customer care integration with our pharmacy is world class, which ensures that customers get their products delivered quickly, but also accurately and our vet partners receive high quality fulfillment and service delivered through our vet platform.

Our deep experience with the vet community is a latent competitive advantage. We currently have one of the largest direct-to-consumer vet networks in the online retail space. PetMeds has a large network of over 70,000 veterinarians that we have worked with over the Company’s history. Our online vet portal currently has 17,000 veterinarians and vet clinics. This is a core capability and asset because it enables us to expand our fulfillment capability as we scale our business. Our prescription medication authorization rates are the highest they have ever been, which speaks volumes, the level of veterinary and cooperation we receive. Our pet pharmaceutical category expertise is something that I view as a unique strength. Being a differentiated provider allows PetMeds to focus our offering, especially if the market continues to get even more competitive. Again, more to come on where we see our brand and business growing in the coming months.

PetMeds has long enjoyed close bonds with many of our supplier partners. Those relationships have developed over time to become even more strategic. Today, we have direct relationships with all of our major suppliers and we partner with them to market their products to our customer base. Our customer service and overall customer centricity, ethos permeates our culture and our team. I personally sat in on hours of phone calls between our customers and our service agents and I’ve never experienced such a tightly integrated and empathetic customer-centric organization in my entire career. We don’t just have a transactional interaction with our customers, we have built trusted relationships.

Before we comment on our earnings performance, I would like to reiterate several compelling reasons to invest and to continue to invest in PetMeds. PetMeds has several core fundamentals that are compelling, including a strong balance sheet. We do not have debt, we have over $100 million in cash and we are cash flow positive. We have a long history of providing shareholder returns throughout a dividend and a strong return on equity that has been historically over 30%. We have started to build a recurring subscription base to our customers with a program, which we just recently launched in July of this year. Through our new Autoship & Save program, where we are building higher lifetime value and recurring relationships with our customers.

In September, approximately 20% of our customers signed up in order via our Autoship & Save subscription program and that number continues to rise. Our customers responded very positively and enrollment in Autoship & Save has increased steadily throughout the quarter. We expect many of our reorder sales to eventually transition to Autoship & Save by the end of our fiscal year, which will only continue to strengthen our relationship with our customers. We also continue to have a large a base of returning customers, which is an indication of the quality of service and the value that we deliver to our customers.

So to sum up the core Company’s strengths, we have over 25 years of experience as a pure-play pet pharmacy fully licensed in 50 states, delivering fantastic service and value, which is recognized by our customers and continues to be rewarded with their loyalty. Our NPS score is over 80, which puts us in the upper quartile along with some of the most beloved brands in the world. We are a direct to consumer brand with a rapidly growing addressable market and we have successfully serviced more than 2 million active customers over the last two years.

Now, I would like to have Bruce Rosenbloom, our Chief Financial Officer to review our financials for the quarter.

Bruce S. Rosenbloom — Chief Financial Officer

Thanks, Matt. Now, we’ll review the financial results. We will compare our second fiscal quarter ended on September 30, 2021 to last year’s quarter ended on September 30, 2020. And in some cases, we’ll refer back to September 30, 2019. Similar to the quarter ended June 30, 2021, we faced a unique situation comparing two totally different environments between 2020 pandemic and 2021 post-pandemic. We were coming off a strong September quarter last year, which was primarily driven by increased e-commerce demand as a result of the pandemic, which caused many retail stores to close and many veterinarians to be unavailable. However, during the most recent quarter, while the pandemic was abating and retail stores and veterinarians were open for business, the advertising market continue to surge with increased demand, dramatically driving up CPC and CPM rates by more than 30%. As a result, we spent approximately 33% less in advertising due to these cost increases.

For the second fiscal quarter ended on September 30, 2021, sales were $67.4 million compared to sales of $75.4 million for the same period, the prior year, a decrease of 10.7%. But sales were only down 3.6% versus the quarter ended September 30, 2019, prior to the pandemic. The decrease in sales was due to decreases in both new order and reorder sales. Our sales were negatively impacted by a much more competitive market and credit advertising space with substantially higher costs compared to the same quarter last year. In addition, during the past six months, there was a dramatic increase in veterinary visits by both pet owners who were unable to visit their veterinarian during the pandemic.

We believe the increase in veterinary visits was primarily due to pet owners needing to visit their veterinarians for their pet exams and to renew their prescriptions. Since some pet owners purchase medications directly from their vets, during the visit, the Company believes that has negatively impacted sales and especially reorder sales during the quarter. We were disappointed with our sales results during the quarter, however, sales were trending more positive in the month of August and September 2021 when you compare them to August and September 2019. Reorder sales decreased by 8.5% to $62 million for the quarter compared to reorder sales of $67.8 million for the same quarter last year, while for the quarter ended September 30, 2019, our reorder sales were $61.9 million. Encouragingly, reorder sales in the most recent quarter was down versus a year ago, were up slightly compared to 2019 pre-pandemic. We would expect to see stronger reorder sales in the back half of fiscal 2022 as we anticipate more prescriptions being renewed.

A positive trend to highlight for the quarter was the continued increase in our average order size. Our average order value was approximately $92 for the quarter compared to $87 for the same quarter last year and $85 for the quarter ended September 30, 2019. The increase in AOV can be attributed to a shift in our product mix to more prescription items and less over-the-counter items with prescription items having a higher gross margin profile in comparison to over-the-counter items. As I mentioned earlier, during the quarter ended September 30, 2021, the advertising market was extremely competitive and this increased demand drove our bad prices dramatically. As a result, our advertising spending was less efficient than usual and delivered fewer impressions than in prior years. Because of this, we believe our advertising spending was less effective in the most recent quarter and its ability to attract new customers.

New order sales decreased by 30% to $5.4 million for the quarter compared to $37.7 million for the same quarter of the prior year. We acquired approximately 65,000 new customers in our second fiscal quarter compared to 96,000 for the same period the prior year. However, we anticipate that advertising prices should revert back to more normal levels as the pandemic further subsidies, which should help increase the efficiency and effectiveness of our media spending and thereby continue to help us gain more new customers in the future. We are also in the process of reevaluating many of our current marketing relationships, which has resulted in changing some of our marketing partners with the expectation of improved marketing efficiency and results.

For the second fiscal quarter, net income was $6.3 million or $0.31 diluted per share compared to $8.4 million or $0.42 diluted per share for the same quarter last year, a decrease to net income of 25%. For the second fiscal quarter, our gross profit as a percentage of sales was 28.5% compared to 30.5% for the same period a year ago. The percentage decrease for the quarter can be attributed to some of the major manufacturers shifting their funding from discounting product costs to cooperative marketing rebates. There may be an opportunity to improve gross margins in the second half of fiscal year 2022 if the shift to prescription medications continue.

We had $106.6 million in cash and cash equivalents and $90.7 [Phonetic] million in inventory with no debt as of September 30, 2021. The Board of Directors also declared a quarterly dividend of $0.30 per share on the Company’s common stock. The dividend will be payable on November 19, 2021 to shareholders of record at the close of business on November 8, 2021. The Company continues to be committed to returning capital to our stockholders. However, the declaration and payment of future dividends is discretionary and will be subject to a determination by the Board of Directors each quarter following its review of the Company’s financial performance.

This ends the financial review. Operator, we are now ready to take questions.

Questions and Answers:

Operator

We will be conducting a question-and-answer session. [Operator Instructions] And our first question is from Anthony Lebiedzinski from Sidoti. Please proceed with your questions.

Anthony Lebiedzinski — Sidoti — Analyst

Yes. Good afternoon and thank you for taking the questions. So welcome, Matt. Welcome back, Bruce. So, as far as new order sales, I mean obviously you guys did have certainly felt the impact of the advertising market being lower, but kind of what gives you confidence that things will bounce back in the back half of the fiscal year? Just curious as to what’s driving that ad? Maybe perhaps, are you seeing some good results — better results so far in the current quarter. Just wondering about your confidence level, about your ability to bounce back with the new order sales.

Matt Hulett — President and Chief Executive Officer

Anthony, this is Matt, and thanks for the question. Great to hear from you, again. And then Bruce, feel free to chime in. A couple of things about that. One is, I would say, that we’re taking a small bites too fast approach to looking at our new customer acquisition. We basically have re-wired our entire marketing partnerships and agencies in the last, I would say, I’ve been here two months so we’ve done that in the last four weeks. And now, we’ll be rolling out very soon. So, we’re looking at our capital allocation spend to where we spend. I think we’ve been spending too aggressively in some channels where we haven’t seen the return and we haven’t been taking advantage of new sources of traffic, where we actually think we have a lot of advantage. That’s one.

Two is we’re spending a lot more time rewiring our system and databases around tracking our customers better and really focusing on re-engagement. And for rates in general, we are seeing some changes to the rates out there. I think some of the channels like Facebook have obviously got more expensive due to the loss of first party data due to the Apple’s IDFA decisions. So, those are some channels that obviously I think are just still getting hotter in terms of increased CPMs and CPCs. But in others, we’re seeing favorable trends. So, it depends on the channel, but for us, we’re really looking at each channel and seeing how we get the incrementality of each channel which is different than what we did in the past.

Anthony Lebiedzinski — Sidoti — Analyst

Okay. Got it. Okay. And then in terms of your gross margins, now you did mention that you have been shipping more items like specialty dog which obviously is much heavier than typical pet medications. So, as we look to refine our models here, like, how should we think about as you — on the one hand, it sounds like you’re doing a good job of increasing your AOV but how is the margin — gross margin impact going to be because of that?

Bruce S. Rosenbloom — Chief Financial Officer

Yeah, Anthony, I’m going to take that question if you don’t mind. As far as our margins for the past quarter, we have as we may be spoken offline before, but our vendors shifted funding to our co-op marketing in lieu of discounting products. And this negatively impacted our gross margins during the quarter and it will probably be like that going forward, where instead of getting price discounts off the price of the items or the inventory, these rebates and these promotions are going to be below the line as they are in the advertising line item.

So as far as moving forward with gross margins, you’ll see that — that’s an overriding factor, but however as we’ve also seen our shift moving back to more prescription than OTC, we do expect a positive trend of margins moving forward because of that going back to some semblance of normalcy pandemic versus post-pandemic when it comes to our mix shift of items.

Anthony Lebiedzinski — Sidoti — Analyst

Okay. Got it. And then in terms of the capital allocation, just curious to get your thoughts, Matt as far as looking at pets for years, the Company has been a company with a lot of cash and growing the dividend and sort of maintaining a very healthy cash position. Just wanted to get your thoughts about that — how should think about that, especially the dividend. What are your thoughts there?

Matt Hulett — President and Chief Executive Officer

Yeah. I think there are several things to unpack there. It’s a great question and I’ve been a long listener of pets earnings calls as well. So, I’ll try to give a slightly different answer. I would say with the dividend, we’re always looking at that and it’s always subject to change but we’ve been pretty consistent with the dividend and nothing to announce here obviously.

But to your cash question, with over $100 million in cash with interest rates being so low there — I think there’s a lot of opportunities in this space to deploy cash and allocate capital more efficiently to get higher returns. There is also a lot of businesses in the pet ecosystem that fortunately in this market different than other verticals, there’s a lot of ways to partner, a lot of ways to look at M&A as well. So, we’re certainly going to be looking at those in the future since we do have such a large cash position.

And lastly, it’s a little early for me to articulate the strategy. I’ve been around for two months. I think the first four weeks felt like six months because there was a lot to do and learn and now I’m kind of selling in and feeling better about things. But yeah, I think there’s a lot of opportunity to deploy capital differently, especially given the tailwinds in pet ownership. So, that’s kind of a non-answer answer, Anthony, other than I think we’re taking a fresher look at that and I would expect that we will make some decisions in the coming quarters that we’ll obviously update everyone on.

Anthony Lebiedzinski — Sidoti — Analyst

Got it. Okay. Well thanks, and best of luck going forward.

Matt Hulett — President and Chief Executive Officer

Thanks, Anthony.

Operator

And our next question is from Steph Wissink with Jefferies. Please proceed with your questions.

Steph Wissink — Jefferies — Analyst

Hi, everybody. Thanks for taking our questions. And the first is I wanted to just go back to some of the comments in your prepared remarks around vet visits. And I think I head you correctly that there is an inverse correlation meaning when vet visits go up, you tend to see vets sell prescription and OTC directly and so your business feels that impact. Is that the right way to think about it or is there a net second derivative, wherein follow-up to those primary prescriptions, you’ll start to see some of the secondary prescription refills in your business?

Bruce S. Rosenbloom — Chief Financial Officer

Hi, Steph. This is Bruce. Now let me address that question. Really the vet visits inform, there really to try to give an understanding of what we were seeing last year versus this year. Last year, during the pandemic, virtually all the vet offices were closed and there really wasn’t many alternatives where our pet owners can turn to for medications and many were trying online pet medications for the first time. And so, that was definitely something that we welcomed last year. This year, all those clinics were open for business and they’re making up for lost time. So, they’re making sure, if they haven’t seen that pet in a 12-month period, they’re enforcing and making sure that pet owner is coming into their clinic. So, it’s almost a resetting of the prescription cycle and many of the pet owners are going to vet, buying there, and then we’re in line for the refill and we can sort of through our data, we know when it’s time for a reorder and we’ll go ahead and market for that reorder — subsequent reorder and we expect to see that in the second half of this fiscal year is what I was referring to earlier in the call.

Steph Wissink — Jefferies — Analyst

Okay. Got it. And then my second question is on ad spend. I think you mentioned both, that you expect advertising prices to revert. I’m curious if you could just give us a sense of, do you expect them to go back to pre-pandemic levels on a purchasing price basis or do you still expect there to be a bit of inflation post-pandemic? And related to that, I think you also used the word — words less efficient. Can you maybe talk a little bit about what you’re doing to tweak your marketing mix or your marketing plans out over the next couple of quarters to try to improve some of the efficiency even if the costs remain a little bit elevated?

Matt Hulett — President and Chief Executive Officer

Yeah. And I’ll take your second question first. A couple of things. I would say, overall, the way in which we’ve been purchasing media is going to change significantly. We’re looking at new and have actually implemented new marketing partners to help us with that, that specialize in specific areas of media. I won’t get into the channels themselves, but obviously Google, Facebook, Connected TV, there is a lot of options out there and I think the way we’ve configured media spend to date needed a fresh pair of eyes, so that’s one.

Two is, just adding more data around the decisions that we’re making around our media buys with another, I would say, quick-win that we’ve implemented. And then lastly to your first question, media rates have been dancing around quite a bit. I was in the language learning space prior to this with Rosetta Stone and we took advantage of favorable rate during the pandemic because advertisers were leaving things like brand advertising to performance. I would say going into the holiday season, it’s too early to tell since it’s a very competitive time to be buying advertising. But I would say that I’m a little bit more optimistic about rates than I was when I started two months ago.

Steph Wissink — Jefferies — Analyst

Okay. That’s great. Thank you for the help.

Matt Hulett — President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Our next question is from Ben Rose with Battle Road Research. Please proceed with your question.

Ben Rose — Battle Road Research — Analyst

Yes. Good afternoon. And I know we haven’t had a chance to meet, Matt, but I look forward to meeting you post-call. A couple of questions with regard to pet health advice. On your slides, Matt, you talked about the growth in the telehealth market and I was just curious to know what thoughts you have with regard to the Ask the Vet service that you offer now and whether you envision that being expanded in some way or perhaps being monetized in some way in the future?

Matt Hulett — President and Chief Executive Officer

Hey, Ben, and looking forward to catching up in subsequent conversations. Yeah, I’m really excited about the pet telehealth space. There has been a lot of innovation in this space. There is a lot of different start-ups that I had talked to personally in the space to get some advice. I think the way I’d start is, I always try to evaluate businesses not only on the TAM and the timing and the kind of the fundamentals but also the customer relationships. An inordinate amount of our customers are wanting additional services from us, they almost — they are giving us permission to give them more advice than we are today. Because prescriptions are in a way the milk of the back of the proverbial store with the customer because they see PetMeds as the expert in pet healthcare. It just so happens as the customer is leading the store. We’re not providing a lot of expert experience yet.

And so, I see pet telehealth is us being very well positioned to add additional services that we don’t do today because customers really view as that specialty pharmacies, they’re not viewing it as the mega-retailer with lots of different services. We’re not known for selling food, we’re not selling — known for selling dog toys. We’re known for providing expert advice. And so for pet telehealth, while the market is really small, I see it as an opportunity to engage with our Autoship customers in really unique ways and then sell them additional services. So nothing to announce, but we’re certainly going to be doing a lot of testing even this quarter on this, which I hope — hopefully be able to talk to you about next time.

Ben Rose — Battle Road Research — Analyst

Okay. Great. And with regard to the Company’s relationships with the veterinarian community and vet clinics, this is the first time that I heard you quantify the number of veterinarians in clinics that you work with and find that to be an intriguing opportunity. Was curious to know plans that you have to perhaps reduce friction with the veterinarians or to improve relationships with them.

Matt Hulett — President and Chief Executive Officer

Yeah. Ben, thanks for noticing that. And it was intentional to put that in there because I was quite surprised when I first started the Company. We have a vet portal that’s used today. I’ve seen other competitors in this space quote numbers, and I think still might be surprised that we have a larger network than most.

I think our relationship with vets has been a little confrontation, to be honest, over the span of the Company when we first started, because we are the pioneers in this space. I think when we — we would go to the veterinary conferences, we are probably the least likely to be welcomed. And I think now there is other players in this space and we’ve kind of opened the door for them. And I think we’re kind of seen as a more friendly player in this space, to be honest. Our vet verification rates are as high as they’ve ever been. I think there’s a lot of things we could do in our vet portal to make the veterinarians’ life easy. We’re very sympathetic to veterinarians. They are overworked. They have some of the highest suicide rates of any profession. And I think that there is a lot we can do to be a better friend of the vet. And our vet portal, I think, has a great start but I think there’s a lot of opportunity to automate what they do in their clinics. And we’re going to be pro vet in terms of how we approach the market, our intent is not to be anti-vet.

Ben Rose — Battle Road Research — Analyst

Okay. Thank you very much.

Matt Hulett — President and Chief Executive Officer

Thanks, Ben.

Operator

And our questions and answers portion of the call has ended. I would now like to turn the call back to Matt Hulett, the Company’s CEO for his concluding remarks.

Matt Hulett — President and Chief Executive Officer

Thank you. I want to reiterate what Bruce just covered in his financial highlights section. We are disappointed with our sales results for the quarter. But after my two months on the job, I’m confident there is much we can do and will do to improve our business growth. To be clear, in a market that’s growing, PetMeds needs to be — make the necessary changes to our operating playbook to take advantage of the market trends. In my first weeks here, I’ve listened in on countless customer service calls, engaged with over 20 pet industry leaders, brief research analysts and engaged with our own main pharmaceutical partners. I’ve already seen a lot of core areas that we can and have already begun to improve in this business and these include the following. Using more data insights to acquire and retain customers, better segmentation of our customer base in order to drive more mass personalization of our offers and services, improved new customer acquisitions through a different allocation of variable marketing spend, expanded product and services that are already being demanded by our customers.

Since I’ve only been with PetMeds for a short period of time, I’m not ready on today’s call to provide a comprehensive future strategy or capital allocation plan for the business and that would be premature. However, I do have a 90-day — 180-day plan that I presented to our Board of Directors and I’ll be sharing more about our vision and strategy with you during our Q3 earnings call. But I will say this today, we firmly believe that we can take advantage of the large market tailwinds, leverage the main core strengths we highlighted today and execute on a broader strategic vision for the Company. We look forward to briefing you in the coming quarters on our strategy and our progress. Thank you for listening in. Operator, this ends the conference call.

Operator

[Operator Closing Remarks]