Turtle Beach - Earnings Call - Q1 2025
May 8, 2025
Transcript
Operator (participant)
All participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Jacques Cornet, in Investor Relations. Thank you, Mr. Kearney. You may begin.
Jacques Cornet (Partner)
Thank you, Operator. On today's call, we'll be referring to the press release filed this afternoon that details the company's first quarter 2025 results, which is available on the Press Releases pages of the company's Investor Relations website, corp.turtlebeach.com, where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available on the Events and Presentation section of the company's Investor Relations website later today. Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the federal securities laws, statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate, and similar expressions constitute forward-looking statements.
These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach Corporation's results to differ materially from management's current expectations. While the company believes that its expectations are based upon reasonable assumptions, numerous factors may affect actual results and may cause results to differ materially, so the company encourages you to review the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including without limitation, its annual report on Form 10-K and other periodic reports which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this conference call. The company also notes that on this call, it will be discussing non-GAAP financial information.
The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the U.S. or GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation. Hosting the call today are Cris Keirn, Chief Executive Officer, and Mark Weinswig, Chief Financial Officer. With that, I'll turn the call over to Cris. Cris.
Cris Keirn (CEO)
Thanks, Jacques. Good afternoon, everyone, and welcome to our first quarter 2025 earnings call. Our Q1 results and strong year-on-year growth reflect the focused execution of our entire organization in the face of external challenges. In the first quarter and going forward, we are realizing the combined benefits of our March 2024 acquisition of PDP and continued progress on our margin improvement initiatives. First quarter revenue grew by 14% year-over-year to $63.9 million, and adjusted EBITDA increased to $4.1 million, up from $1.4 million a year ago. Our accretive M&A execution and expanded portfolio of next-generation gaming accessories have resulted in growth for both our revenue and profitability. Notably, we grew revenue despite a 16% year-over-year decline in the U.S. gaming accessories markets in Q1, according to Circana, and our gross margins improved substantially by nearly 470 basis points year-on-year, to 36.6%.
Our continued improvements in business performance are driven by several key factors. First, this quarter included a full quarter of PDP contribution compared to just two weeks in the prior year. We also lowered our promotional spend as a percentage of revenue for the first quarter on the continued strength of our next-generation headset product introductions in 2024. This disciplined promotional approach has improved our profitability profile. Finally, those same next-generation models, including our top-selling Stealth wireless headsets, are platformed on the latest chipsets that provide significant performance and cost benefits over our previous generation of products. While our business performance for Q1 reflects the comprehensive improvements in our fundamentals, the broader economic environment has shifted significantly, introducing some lack of visibility for the full year. The evolving external landscape, particularly the challenges posed by tariffs, has added complexities that we must and will navigate successfully.
We remain committed to addressing these challenges head-on, and we are confident we will manage through them with minimal long-term effects on our positive trajectory and growth. To start the year, we proactively increased our inventory levels in anticipation of possible tariffs, which will provide near-term benefits to margins and has enabled us to accelerate our adjustments when tariffs were recently announced. With the quick and decisive actions of our team, less than 10% of our U.S. supply will be produced in China after Q1. For the rest of 2025, products for the U.S. market will be primarily produced in Vietnam. Within this dynamic environment, we are assessing further supply chain diversification. Our production capabilities in China are primarily dedicated to producing goods for non-U.S. shipments that are not impacted by the tariffs.
As part of our comprehensive mitigation activities, we are also evaluating pricing across all our product lines and selectively making necessary adjustments. In addition to the tariff issues, it was noted last week that the Grand Theft Auto VI release has been moved out to the spring of 2026, which we expect will delay the anticipated increased demand for new accessories. However, even without the launch of GTA 6 in 2025, we project that market comps to 2024 will progressively improve throughout the year, accelerated by growth drivers like the introduction of the Nintendo Switch 2 and a full slate of new games. Pre-orders on Switch 2 were widely reported to have sold out in hours, a proof point for the resiliency of gaming customers even in these economic conditions.
While full-year gaming accessories markets may remain down for 2025, we expect to return to robust growth in 2026 and beyond, fueled by the strong underlying fundamentals of a growing gamer base and expanding engagement with next-generation systems and game releases. With the expected benefit of ongoing demand for Switch 2 accessories and a spring 2026 launch for GTA 6 and other exciting titles like Battlefield, we anticipate a return to growth for the gaming accessories space. To that end, we're focusing on the key growth drivers within our control. From a cost and opex perspective, we are mitigating the impacts these external changes will have on our business. While this is a dynamic situation, our updated guidance considers all of these known factors.
Our focus remains on expanding our industry-leading gaming accessories portfolio to propel our success over the long run and capitalize on industry growth drivers, including the upcoming launch of the Nintendo Switch 2. This past week, we announced new products set to roll out this spring, including a new wave of officially licensed Nintendo Switch headsets and controllers, as well as new accessories designed specifically for Xbox. We remain dedicated to expanding our market leadership and enhancing value for our shareholders with sustainable growth and long-term success. Another demonstration of this commitment was our execution of the largest share repurchase program in our history over the last year, repurchasing nearly $30 million worth of stock. During the first quarter, we were limited in our ability to maintain the same pace we had over the past three quarters due to covenants on our debt. Mark will touch on this more.
Share repurchases will continue to be a part of our capital allocation plans as they underscore our unwavering confidence in Turtle Beach's future and our dedication to returning capital to shareholders while making strategic investments to grow the company. As such, we've announced today that the company has authorized a new share repurchase program of up to $75 million over the next two years. Moving forward, we will maintain a sharp focus on capital allocation, ensuring that our financial strategies align with our goal of delivering sustained value and growth. Mark will now take us through the financials. Mark?
Mark Weinswig (CFO)
Thank you, Chris. Good afternoon, everyone. As Chris mentioned, our first quarter 2025 revenue was $63.9 million, up 14% from the prior year, driven by a full quarter of revenue from the PDP acquisition, which closed on March 13, 2024. In addition to the strong revenue performance, we continue to drive efficiencies and operational improvements, leading to gross margin expansion. Our gross margin for the first quarter improved by 470 basis points over the prior year to 36.6%. Operating expenses of $21.8 million were 34% of revenue, compared to 42% in the prior year. We continue to focus on expanding our operating leverage, so as we grow in the future, we will generate higher levels of income. During the quarter, we realized a $3.4 million insurance recovery related to the inventory loss in transit from the fourth quarter, offsetting the prior quarter's loss.
Our revenue growth, combined with cost efficiencies, resulted in a significant improvement in adjusted EBITDA over the prior year. Our first quarter of 2025 adjusted EBITDA of $4.1 million increased 180% from the prior year's adjusted EBITDA of $1.4 million, illustrating the strong operating leverage in our business model. Turning to our balance sheet, as of March 31, net debt was $43.6 million, comprised of $55.2 million of outstanding debt and $11.7 million of cash. The debt balance includes $6.6 million outstanding under our revolving credit line and $48.6 million outstanding on the term loan. In the first quarter, we made some investments in inventory, which will provide short-term benefits to our margins in the current environment. One highlight of this quarter was our strong cash flow generation. During the first quarter, our cash flow from operations grew by nearly 50% year over year to over $40 million.
This was one of the highest cash flow-generating quarters in the company's history and points to the strength of our business. Moving to our capital allocation activities, during the first quarter, we returned another $1.8 million to shareholders through our share repurchase program. Over the past year, the company has repurchased nearly $30 million in stock, the largest buyback in its history. In addition, as noted in today's release, we also announced a new stock repurchase authorization of up to $75 million over the next two years, marking another record for the company. Now turning to guidance. As Chris mentioned, the evolving landscape and macroeconomic environment requires a revision in our 2025 financial outlook. The range of outcomes is wider given the macroeconomic uncertainties. As a result, we are revising full-year 2025 revenue to be in the range of $340 million-$360 million.
We expect our full-year 2025 adjusted EBITDA to now be in the range of $47-$53 million. Our updated outlook reflects the information as of today. The environment continues to be dynamic, which raises the possibility of additional market updates that could further impact our expected results. In terms of seasonality, it's important to note that we typically see the majority of our revenues in the second half of the year coinciding with the holiday season. We believe the second half of this year we will see an even larger portion of revenues than prior years due to the anticipated launch of Nintendo Switch 2 and the current consumer environment. As such, we expect the second quarter to account for approximately 16%-17% of full-year revenues and for 2/3 of our full-year revenue to occur in the second half of the year.
Overall, we are happy with our performance in the first quarter. Our team's quick actions and strong execution has Turtle Beach well-positioned to be successful within this dynamic environment. With that, I will turn the call back to Chris. Chris?
Cris Keirn (CEO)
Thanks, Mark. As we discuss our outlook, we believe it is important to provide our shareholders with our best views of guidance based on all available data at this time. As such, we're providing updated guidance and reaffirming that our profitability profile and cash flow model remain robust thanks to the transformation of the company over the past year and our rapid response to the recent tariff risks. We are energized by our Q1 results and our comprehensive strategy for continued innovation, execution, and growth. While the macroeconomic environment remains challenging, our agile and proactive work so far puts us in a position with low exposure to China tariff risk. This may prove to be a competitive advantage and provide potential upsides in a dynamic environment. As always, I'd like to recognize and thank our amazing team at Turtle Beach for their dedication and contributions to our success.
We are eager to capitalize on the many opportunities that the gaming industry and our leading position in accessories will provide. With that, Operator, we can open the call for Q&A.
Operator (participant)
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question comes from the line of Anthony Stoss with Craig-Hallum. Please go ahead.
Anthony Stoss (Senior Analyst)
Good afternoon, guys. A couple of questions. Maybe if you could help shed a little bit more light on the $50 million reduction in revenues, how much of that is kind of slated from the GTA 6 push-out versus tariff and macro? Mark, maybe you can comment on expectations for gross margins, maybe the June quarters and the remainder of the year. Thanks.
Cris Keirn (CEO)
Hey, Tony. Thanks for the question, and great to have you here. The revised guidance is really a function of our adjusted views on what the accessories markets are going to do for the full year. There's several factors in there. GTA 6 is part of them, but it's really a combination of factors. Let me talk you through those a little bit. When we issued our initial guidance, we believed Q1 would be down kind of mid-single digits year over year from a market perspective in the U.S. What we've seen is the broader accessories market's down 16% for Q1. Headsets and third-party controllers are actually down more than 20% through Q1.
When we think about starting from that basis on Q1 going forward, remember, we guided prior to the tariffs hitting, prior to a lot of the consumer sentiment data that's come out, and we think that those challenges have to be considered as we look at the full year. That being said, we do think the market's going to improve as we go through the year from a comp perspective. If you look at how the model is built, we think that Q2's comps will improve to being down sort of in the mid-teens year over year on accessories, and that's going to be driven by Nintendo Switch 2 launching in June.
When you look at the back half of the year, Q3, Q4, we've got that model now of being down mid-single digits on a percentage basis versus up mid-single digits on a percentage basis year over year. When you put all those quarters together, it puts the year down about 10%-12% for the gaming accessories markets that we play in here in the U.S. That is about a 15% difference from what we had planned of being up kind of low to mid-single digits from a market perspective in 2025. That is the driver in that $50 million, the set of drivers that are combining to make that. That being said, we feel great about 2026. When you look ahead to what is happening in the gaming market, you're going to have the full effect of Switch 2. It'll be rolling at that point.
You're going to have games like Battlefield and GTA 6 coming in in the spring of next year. This isn't any kind of a long-term, this is more of a delay in what that demand lift is going to look like, but it does impact 2025, and that's why you see the adjustment in the numbers. I'll turn it over to Mark here for comments on the gross margin.
Mark Weinswig (CFO)
Gross margins in the first quarter were very strong. We came in at over 36%. Looking forward to the rest of the year, we put out our long-term financial targets saying that our goal was to be at mid to high 30s. We still expect those levels. In the second quarter, there will be a little bit of pressure as we see lower revenue. We do expect to see some impact from tariffs. In addition, there will be some one-time costs or some additional investments associated with the moves that we mentioned today. One really important note is that we moved very, very quickly once everything happened on tariff day. We have executed extremely well to put us in a great position to be able to recover on the margin side throughout the rest of this year.
Anthony Stoss (Senior Analyst)
Mark, does that put June at like 34%, 33%, 35%? What are you guys targeting?
Mark Weinswig (CFO)
Yeah. We should be down to the low 30s in the second quarter with us being able to build up from there through Q3 and Q4.
Anthony Stoss (Senior Analyst)
Got it. Lastly, is the company taking any further cost controls or cost cuts given kind of the renewed look at 2025?
Cris Keirn (CEO)
Yeah. We've been executing on that strategy for some time now. We do think there's more opportunities. When we did the acquisition of PDP last year, we were able to recognize synergies above our original projections. I really have to give credit to our team of really finding those opportunities to drive cost synergies. As we look forward, it is a very dynamic environment with the transfers that we're making in our production. We believe that there's going to be opportunities there as we make those moves to really find more reductions. We factor that into our guidance, but we'll continue down that same path.
Mark Weinswig (CFO)
Two items to note, which is we do expect strong growth for 2026, so we want to make sure that we have the team and the investments there. Second of all, is that in the second quarter, based on the actions that we've taken, there will be a little bit of investment in Q2 as we finish up the plans to migrate some of the manufacturing and make sure that we're set up to be able to execute for the second half of the year.
Anthony Stoss (Senior Analyst)
Very good, guys. Best of luck.
Mark Weinswig (CFO)
Thanks, Tony.
Operator (participant)
Thank you. Next question comes from the line of Sean McGowan with Roth Capital Partners. Please go ahead.
Sean McGowan (Equity Research Analyst)
Hi, guys. Thanks. Yeah, I want to focus on a couple of things too on the guidance reduction. Some of these things that are affecting your outlook, I'm sure, are not only out of your control, but there's no way they're reversing. GTA 6 isn't coming back into this year. The impact of tariffs and the related impact on consumer sentiment, that could be fluid. The question is, to what extent are you able to kind of recover with production and shipments if there is a positive switch to some of those factors? At some point, you can't make it anymore. What kind of flexibility do you have to rebound if there's a change?
Cris Keirn (CEO)
Hi, Sean. Great question. We are ready to go should that happen. We mentioned that we stocked up on some inventory, so we're in a very strong inventory position right now if anything happens short-term, because at any day, there could be a tariff announcement that provides some relief. We wanted to give you the color on our assumptions on the market being down 10%-12% for accessories for the full year in the categories that we play. If it does improve, clearly we'll be recovering some of that adjustment in the guidance. At this point, without that visibility, we felt that we wanted to give you the assumptions behind the change. As we go through the year and we see those adjustments, we'd be ready to go.
As far as a supply demand increase coming in from markets improving, we would be completely ready to go for that should that occur.
Sean McGowan (Equity Research Analyst)
Okay. That's helpful. As you map out your planning, and I appreciate how difficult this is when any day there could be a switch. What is the tariff assumption for Vietnam that you are baking into your own projections at this point? Is it anything like what has been proposed, or are you assuming something different?
Cris Keirn (CEO)
Great question. It's exactly what we have today. What's in the guidance are today's tariff conditions. That includes what we're seeing in Taiwan right now and the exemptions that are in place in Taiwan right now. If that were to change, we stand ready with our mitigation plans ready to go. We know exactly the actions we would take should those decrease or increase. That's one of those that once the tariff is concluded, I guess the negotiations are concluded, we stand ready to go to make those adjustments.
Sean McGowan (Equity Research Analyst)
Okay. You're not assuming the rate that was originally thrown out there in that voodoo math. You're assuming what's actually in place?
Cris Keirn (CEO)
It's what we have today. That's correct. When we look at the relative risk between Vietnam and China, we feel like we're in a strong position taking that approach that we're executing to now. If it were to go back up at a higher rate, we stand ready to go with our mitigation plans there.
Sean McGowan (Equity Research Analyst)
Okay. That's helpful. One other question. Was PDP up during the quarter on a pro forma basis?
Cris Keirn (CEO)
On a pro forma basis, they were pretty much along the lines of the market, right? The market, as we mentioned, was down over 20% for those key categories that PDP products were playing in, particularly controllers. Third-party controllers were down over 20%. They were right in line with the performance of the market.
Sean McGowan (Equity Research Analyst)
Okay. Thank you very much. Appreciate it.
Cris Keirn (CEO)
Thanks, Sean.
Operator (participant)
Thank you. Next question comes from the line of Martin Yang with Oppenheimer & Co. Please go ahead.
Martin Yang (Executive Director)
All right. Thank you for taking my question. Some of my questions regarding tariffs have been answered, so I ask about pricing. Does the current revised guidance imply any potential pricing adjustments throughout the year?
Cris Keirn (CEO)
Hi, Martin. Thanks for the question. It does include the pricing adjustments that we've already gone out and communicated with our partners. We've took quick action on that, and there will be some pricing adjustments going into place to mitigate the tariffs that are currently in place. That is why you do not see really from a margin standpoint and from an EBITDA perspective, it is pretty much in line with the revenue drop, taking into consideration our fixed cost leverage. There are no real changes from what we announced in our initial guidance to the impact of the tariffs for us. That is a combination of the cost reduction activities that the team's taking in addition to these pricing adjustments. Those pricing adjustments are already in the guidance. If there are changes to the current tariff situation, we will be taking additional actions on price to address those.
Martin Yang (Executive Director)
Got it. Can you share with us sort of the range of pricing adjustments you have communicated?
Cris Keirn (CEO)
Yeah. It's really we hate raising prices. This is not a situation that we want to be in, but unfortunately, we're really left with no choice. It really varies category by category, and we look at it holistically. There is not really a range I can give you. As it does vary, there are some products where we're absorbing the entirety of the hit, and there are other products where we have to share some of that impact from the tariff. It really varies by category.
Martin Yang (Executive Director)
Got it. Thank you. Another question on supply chain. You talk about the swift transition to Vietnam shifting to the U.S. as potentially a competitive advantage. Can you broadly talk about what goes into your swift decision and execution and how others may not be able to do so?
Cris Keirn (CEO)
Sure. Yeah, I can speak for Turtle Beach. We've been really tracking this for years. The first administration, we took many steps five or six years ago to diversify our supply chain, particularly to Vietnam. As we saw the potential for tariffs coming late last year, we started to put into place some additional purchases to make sure that we had a sufficient stock if we needed to bridge any transitions. That turned out to be a very good decision and a great action by the team to do that. Immediately when the sort of liberation day tariffs went into effect, we took the decision to then go ahead and action the mitigation plans that we had in place to shift those products and to move that production.
That is why really starting with the end of Q1, if you look at our go-forward purchases, less than 10% is coming from China for the U.S. this year. I think I have seen some of the other numbers out there. I am not sure anyone else is able to move that quickly. This is one great thing about our team here. We are a global team, but we are still a fairly small team. We can move very, very quickly and make those decisions and action them. I am just so proud of what the team has been able to do here to put us in that position.
Martin Yang (Executive Director)
Thank you, Chris. That's it for me.
Cris Keirn (CEO)
Thanks, Martin.
Operator (participant)
Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Jack Vander Aarde with Maxim Group LLC. Please go ahead.
Jack Codera (Research Analyst)
Hi, this is Jack Codera calling in for Jack Vander Aarde. Thanks for taking my questions. Can you guys provide any additional color on what you're expecting in terms of the scope of the one-time costs? I think you mentioned you guys have already transitioned, so if my memory is correct, less than 10% of products are going to be produced in China. Can you give any color on that existing chunk? Is that chunk going to have any lasting impact on gross margin? Thank you.
Cris Keirn (CEO)
Sure. Yeah, the one-time costs, there's some transition costs in there. We do have some tariff impact, as we mentioned in the call in Q1 or Q4 call, is that there's several million dollars of tariff impact that we're continuing to carry. It's 150 basis points or so kind of hit there that you'll see in the numbers. Those are really the extent of those charges. Can you repeat the second part of your question, Jack?
Jack Codera (Research Analyst)
Yeah. So I guess the remaining part of products that I don't know if you just haven't transitioned them out of China or you expect that they'll stay in there. Do you expect any lasting impact on gross margin from those products?
Cris Keirn (CEO)
Sure. It depends on how the tariff situation plays out, obviously. That is about 6% of our total purchases globally now is kind of what that works out to. It is a very small portion of our portfolio. I do not anticipate that there would be any long-lasting impacts if the tariffs were to remain there. Those are in categories that I believe competitively there is going to be a lot of folks that are in that same boat. No, I do not anticipate any long-term gross margin impacts from that remaining 10% or under 10% production in China for the U.S.
Jack Codera (Research Analyst)
Okay. That's helpful. One more question. You mentioned kind of back half-loaded seasonality. Given that we're already a bit through Q2, do you have any view qualitatively how consumer dynamics are changing? Are they being more cautious? Are they buying to avoid increased costs? Any color there would be helpful.
Cris Keirn (CEO)
Sure. Seasonality-wise, I do believe it's going to look more like last year. We started initially looking at the year prior to the tariff announcements, prior to what we've seen in Q1. We kind of looked at this as something that would be more like a 2019 pre-pandemic seasonality, but with some acceleration in the back half of the year. What we're seeing looks much more like last year. I do think we'll see some lift, and that's why we're saying we think the market is going to improve each quarter this year because of Switch 2 and what that's going to bring to gaming and the other game releases that are going to be coming out here this year. That should continue to improve.
I think seasonality-wise, I would look to last year, and that's roughly what we're assuming we're going to see with some benefit in the back half. As far as consumer behavior, we haven't really seen, as you can see from the Q1 numbers, not really seeing a lot of folks buying ahead. Those are before the tariff purchases, of course, or the tariff announcements, rather. When you look at April, we haven't really seen a lot of behavior either from consumers or retailers sort of buying ahead of tariffs at this point.
Jack Codera (Research Analyst)
Okay. That's helpful. Thank you.
Cris Keirn (CEO)
Thanks, Jack.
Operator (participant)
Thank you. Next question comes from the line of Sean McGowan with Roth Capital Partners. Please go ahead.
Sean McGowan (Equity Research Analyst)
Hey, I'm back. Yeah. I wanted to talk a little bit about your comments regarding, I think you said, taking some product in kind of in anticipation of the tariffs or just the general comment you've made about being ready to move quickly if there is a change in the outlook. How do I square that with the fact that your inventory is really not up that much year over year? That's one of the ways you're able to generate so much cash. Is there inventory sitting with suppliers that's not on your books? How can you have that flexibility if you don't have the inventory?
Cris Keirn (CEO)
Now, a key factor, Sean, and it's a great point, is that a lot of the inventory we had last year was directly after the PDP acquisition. A lot of that inventory was product that we're no longer selling. There were some slow-moving goods. Anytime you do an acquisition like that, you end up clearing through a good portion of that inventory that's not really a replenishment good. We've done a lot of that work over the last year. How I would characterize it is the inventory we have now is, by and large, highly replenishment-based inventory. We do not have a lot of that slow-moving really left with us. We've cleared a lot of that in the past year.
The quality of inventory we have at this point and the categories that we leaned into, knowing what the situation might look like if we needed to move, that's where we've leaned into from an inventory purchases standpoint. I would say that the product mix of that inventory is much more favorable for us at this point.
Sean McGowan (Equity Research Analyst)
That makes a lot of sense. I'll find that, Cris.
Cris Keirn (CEO)
Thanks, Sean.
Operator (participant)
Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to turn the floor over to Cris Keirn for closing comments.
Cris Keirn (CEO)
Thank you, everyone, for joining our call today. We appreciate your interest in the company and have a great day.
Operator (participant)
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.