Allison Malkin - ICR, IR Tarang Amin - Chairman & CEO John Bailey - President & CFO

Stephanie Wissink - Jefferies Erinn Murphy - Piper Jaffray Bill Chappell - SunTrust Jon Andersen - William Blair. Courtney Willson - Cowen and Company Andrea Teixeira - JPMorgan Mark Astrachan - Stifel

Greetings, and welcome to the e.l.f. Beauty Second Quarter Fiscal 2017 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Allison Malkin of ICR. Thank you. You may begin.

Good afternoon, everyone. Thank you for joining us today to discuss e.l.f.'s second quarter 2017 earnings results. A copy of today's press release is available in the Investor Relations section of elfcosmetics.com. A recording of the call will also be available for 90 days on elfcosmetics.com. As a reminder, this call contains forward-looking statements that are based on management's beliefs and assumptions, expectations, estimates and projections. These statements, including those relating to the company's fiscal year 2017 outlook, are subject to known and unknown risks and uncertainties, and therefore, actual results may differ materially. Important factors that may cause actual results to differ from those expressed or implied by such forward-looking statements are detailed in today's press release and the company's SEC filings. In addition, the company's presentation today includes information presented on a non-GAAP basis. We refer you to today's press release for a reconciliation of the differences between the non-GAAP presentation and the most directly comparable GAAP measures. With us from management today are Tarang Amin, Chairman and Chief Executive Officer; and John Bailey, President and Chief Financial Officer. For today's call, Tarang will begin with an overview of our results, and as typical for us, John and Tarang will then alternate sharing the progress we made against our growth strategies and providing additional details related to our financial performance and guidance. This will be followed by a Q&A session. It is now my pleasure to turn the call over to Tarang.

Thanks, Allison, and good afternoon, everyone. We're pleased with our progress in Q2, highlighted by revenue increasing 27%, gross margin expansion of over 700 basis points and adjusted EPS growth over 400%. We also continue to grow share. According to Nielsen, in the 52 weeks ended July 15, e.l.f.'s market share of the cosmetics category was 4.4%, up from 3.8% in the comparable period. For the full year, we continue to anticipate strong sales growth of 24% to 28%. This is ahead of our 2016 to 2019 growth algorithm of 20% compound annual sales growth. Our results reflect the team's dedication to our mission to make luxurious beauty accessible for all and execution against our four growth strategies. Our first strategy is to build a great brand. e.l.f. is a brand that makeup enthusiasts love, and we have a long track record of engaging them. During Q2, we expanded on our Beauty Scape influencer program. We brought up-and-coming influencers to Coachella and used this activation to launch our latest skin care innovation, Beauty Shield. We're able to reach a combined audience of 158 million. We also continue to build our loyalty program, Beauty Squad, which now has over 450,000 members, growing memberships 68% versus the first quarter. Beyond Beauty Scape and Beauty Squad, we entered a partnership for digital displays in and around Times Square, where we elevated brand presence and generated strong response on elfcosmetics.com. I'll now turn it over to John to discuss progress on innovation and brand penetration.

Thanks, Tarang. Our second strategy is to lead innovation. We believe our depth and breadth of high-quality innovation at an extraordinary value sets us apart from other brands. In Q2, we expanded our skin care portfolio with the launch of e.l.f. Beauty Shield, a line of 7 SKUs with antioxidants and SPF 50 to protect against the elements. Beauty Shield taps into an emerging consumer trend where our enthusiasts recognize that having good skin is the foundation for flawless makeup. e.l.f. is one of the few brands to take a holistic approach across both skin care and cosmetics. The initial response to this line is quite encouraging, and overall, we had 25 launches in the quarter, including 10 first-to-mass products. Our third strategy is to expand brand penetration. In national retailers, we completed our shelf resets at Target, and we'll now begin optimizing merchandising and assortment. We continue to see strong growth at Walmart and are delighted to report that consistent with plans heading into the year, we are expecting a 20% increase in linear footage in 2017. This expansion began in Q2, and the remainder is scheduled for the fourth quarter. Building on our early success on ulta.com, we began expanding e.l.f. into approximately 200 Ulta stores in the quarter and are optimistic about the potential for further expansion in 2018. On elfcosmetics.com, we kicked off a major replatforming of the site, which should enable a better user experience, added functionality and enhanced CRM and loyalty capabilities. We expect the replatform to be complete in early 2018. Our direct business, which includes both elfcosmetics.com and e.l.f. stores, drives growth and also generates awareness, engagement and insights. We're excited about the expansion of our international business and have now launched e.l.f. in over 200 Superdrug stores. We're pleased with the initial consumer response in this leading U.K. retailer. I'll now turn it back to Tarang to discuss our operational progress.

Thanks, John. Our fourth strategy is to drive world-class operations, which starts with world-class people. Over my career, I've been fortunate to work with thousands of great people, yet I can definitively tell you that this is the strongest team I've ever worked with. In the past three and a half years, we've hired 367 out of 390 e.l.f. employees. We handpicked almost every employee from blue chip CPG and beauty companies who have a proven track record of delivering results. We support this tremendous talent with a high-performance team culture that embraces speed and quality of execution. The result is excellence across almost every key performance indicator, including operations. For example, in Q2, our fulfillment rates were above 98% for national retailers, direct and international. In summary, we're making good progress on our strategy and goals. I'll now turn it back to John to discuss our financial progress and outlook for 2017.

Thanks, Tarang. For the second quarter, net sales increased 27% to $55.9 million. Gross margin expanded from 57% to 64% primarily as a result of margin-accretive innovation, coupled with improvements in customer terms, freight cost and the benefit of foreign exchange rate movements. On an adjusted basis, SG&A as a percentage of sales was 52%. Adjusted EBITDA was $10 million compared to $8.4 million in the second quarter of 2016. Adjusted net income was $6.2 million or $0.12 per share based on a fully diluted share count of 49.5 million. This compares to $1.2 million or $0.02 per share in Q2 2016 based on a pro forma diluted share count of 49.5 million. Year-to-date, net sales increase 20%. Gross margin expanded from 56% to 64%. Adjusted EBITDA grew from $20 million to $21.7 million, and adjusted net income grew nearly 150%. Adjusted net income per diluted share rose to $0.21 from $0.09 based on a pro forma diluted share count of 49.5 million. From a balance sheet perspective, we ended the quarter with an inventory balance of $72.3 million. We are comfortable with the level and composition relative to anticipated demand in the back half of the year. For the full year, we are reaffirming our guidance as presented in the press release. In closing, we are pleased with our progress and believe we are positioned to deliver on our objectives. I'd now like to ask the operator to open the call for questions.

Thank you. At this time we’ll be conducting the question and answer session. Please ask one single for question and one follow-up then requeue for any additional question. [Operator Instructions]. Our first question is coming from the line of Stephanie Wissink with Jefferies. Please proceed with your question.

Just a really quick question here on inventory, if you could talk a little bit more, John, about that $72 million balance. If I equate that to kind of revenues based on your gross margin run rate, that would be north of $200 million of revenue opportunity on the balance sheet. So maybe just a sense of the composition of that inventory, your comfort level with it, which you indicated you were, and how we should think about that relative to your forecast for the year in terms of total sales?

Sure, Steph. So, just a little bit of context for those who may be new to the story. Over the last few years, we had felt that we were running a bit lean on our inventory levels. And despite the fact that we've been able to keep up with some of the tremendous growth that we've seen in the business over that time, we made a strategic decision to take up the levels at the back half of the year, particularly as we came off of our warehouse move from New Jersey to California and saw some of our fill rates suffer. Where we took up our inventory levels were in some of our fastest moving items. And sitting here today, we feel quite comfortable not only with the level, but also the composition of inventory relative to what we see in the back half of the year and really a proactive decision to target a new level of weeks of supply.

Thank you. Our next question is coming from the line of Erinn Murphy with Piper Jaffray.

Great. Thanks. Good afternoon. A couple of questions for you guys. I guess first, if we could talk a bit about the category overall. It sounds like you guys are still really gaining some good share, but some of the conglomerates out of Europe have talked a little bit more about some challenges or slowing in the mass channel here in the United States. Could you just kind of speak to your perspective of what you're seeing big picture right now? And then secondly, you have a lot of really unique key retailer initiatives into the back half. Walmart was one you called out in particular. I would love to hear kind of what excites you about that opportunity as we sit here?

Sure. Hey, Erinn, Tarang. So what I'd tell you on the category is it's certainly going through a little bit of a slow spot right now. The context I'd give you on color cosmetics is over a long period of time, the category's been quite healthy. You'll get some quarters where it's a little softer, some quarters where it's a little stronger. In fact, the last time we saw this was as recent as the end of 2013. We saw the category slow up and was pretty flat the first half of 2014. It picked up pretty significantly in end of 2014. It's been quite strong throughout 2015 and most of 2016. So I'd say there are different cycles of where you'll see the category strong or soft, but we don't see anything fundamental from a consumer standpoint. In terms of what it means for e.l.f., we see it as a tremendous opportunity to continue taking share. If you take a look at our company in the 15 years we've been around, we've grown every single year regardless of the economic cycle or regardless of where the category was in any particular quarter. And the reason we've been able to grow -- and I think it's important because it really talks to our position going forward, is really three things: first, our ability to engage young, diverse makeup enthusiasts. For our consumer, makeup is not a discretionary purchase. She loves everything about it. And it better insulates us compared to some brands that may have broader consumer targets, where you may have some more fickleness in the consumer profile. Second is the business model itself. If you take a look at our ability to launch a couple of things new almost every week on elfcosmetics.com and in our stores, it gives us a tremendous arsenal from which to be able to bring our retail partners a proven and validated innovation where we're not trying to guess what the next trend or fad is going to be, but actually have products that are really performing in the marketplace. And the third, I'd say, is the tremendous white space that we have; both within existing customers as well as some of the newer customers, really gives us a lot of headroom to grow, again, regardless of where the category is, and it's one of the reasons why you've seen such strong growth from us even so far this year. And then talking to your second question on some of the unique key retailers, I would tell you that we -- our first priority is always to maximize the business in the customers we're already in, and I feel really good about what we've been able to do. And we've talked certainly on prior calls in terms of our progress at Target and them rewarding us with more space. This quarter, we're delighted to announce that Walmart, based on the strong performance of e.l.f. and the consumer profile we bring to them, has really declared kind of e.l.f. one of their key priority brands and is providing us more space, particularly as they continue to elevate beauty within the overall box. They have an initiative they call their whitewall initiative, which has much better signage, fixturing and a much more elevated beauty presentation that e.l.f. will be featured even more prominently in, so feel good about that, feel good about some of the other retailer initiatives we talked about. But it really very much ties into the overall model in terms of the consumer and the innovation that we can bring to the category.

And just on Walmart, if I can clarify. What percent of the doors that you're in have more than four linear feet right now? And what's the kind of opportunity there for you [Indiscernible] next five years?

Yes, that's it. We have less than 10% of the Walmart doors with more than four feet. So it's a tremendous opportunity for further expansion. And just for additional context there, if you look at Walmart, we entered Walmart four years after we entered Target, and they're following a pretty good trajectory similar to Target. And similar thing happened at Target, wasn't up until a couple of years ago that we had more than four feet of space in Target. And now you look at our footprint there, just how much bigger it is. We think we have a huge opportunity with Walmart similarly.

Great. And if I can sneak in one more just on gross margin, incredible performance, up 700 bps, can you just talk about how much was that sweeten-the-mix initiative? How much further do we have to go on that? And then you called out, I guess, John, both FX and freight. Can you just break out those two components of that? Thanks.

Sure, Erinn. Yes, and we're quite pleased with the gross margin expansion that's continued in the first half of this year. But more than just the financial progress, really what's been driving it -- and I think you touched on it, which is to say the single biggest component has been our innovation and sweeten-the-mix initiative. We did see some other benefit in the period from efficiencies on customer terms, FX and freight. If you take a look, FX was about 150 basis points in the period and freight was just about 200 basis points.

Thank you. Our next question is coming from the line of Bill Chappell with SunTrust. Please proceed with your questions.

Thanks. Good afternoon.

Good afternoon.

Just following up on the margin standpoint. Again, maybe for the second quarter, SG&A was also higher than expected. And so just trying to understand if that's more of the normal level we're looking at for this year or if you had made [Indiscernible] gross margin – better than expected gross margin, if you're reinvesting maybe a little bit faster than you originally anticipated?

Yes. Hey, Bill, it's John. So just kind of harkening back to comments that we've made on prior calls, this very much is and continues to be a reinvestment story. So we have talked about our 2016 to 2019 growth algorithm of 20% net sales CAGR over that period, gross margin expansion of 100 basis points per year, and then 20% adjusted EBITDA CAGR during the same period. And so our goal is to take that gross margin expansion and redeploy it back against investments that will set us up for the long term across people, infrastructure and, most notably, brand. And that's continued to be the story in the first half of 2017.

Okay. And going back to Walmart, maybe just a little more color, I’m trying to understand just because, unlike Target, where you're just in a wall, and so it's easy to understand how you get 50% more shelf space, with Walmart, you're in a combination of wall and spinners, remodeled doors and old doors. And then also trying to understand -- usually, Walmart resets everything in the first half. So trying to understand why you would see a lift in the second quarter and then again in the fourth quarter. So just maybe how that all plays out would be, helpful?

Yes, sure. So our experience with Target, it seems every other year they've made pretty big changes to the overall category, whether the category picking up more space or making big brand moves, and that very much was the case earlier this year when we picked up more than 50% more space within Target. Walmart's expansion has been more continual in nature. So their approach with e.l.f., given the priority in terms of what we're able to bring from a consumer and innovation standpoint, is every time they touch a store, e.l.f. gets better placement. So we either get put onto the wall, we get better prominent placement on the wall and now, in some places, are expanding that space as well. And so Walmart's plans within this year, their big initiative, they'll continue to update their stores. As they do remodels, as they go ahead and refresh, you'll see a pick-up in terms of what e.l.f. gets there. In addition, I referenced this thing they call their whitewall initiative. They have a new beauty fixture. If you've been into some of their newer stores, beauty is much more prominently featured, kind of both where it is in the store as well as the fixture, the lighting, the signage that they have. And that whitewall initiative, I think that it's touching somewhere in the magnitude of over 1,500 stores and -- although the timing really varies between kind of that -- Q2 was one wave and then Q4.

Got it. Thank you.

Thank you. The next question is coming from the line of Jon Andersen with William Blair. Please proceed with your questions.

Good afternoon. Thank you.

Good afternoon.

Hi, guys. I was wondering if you could talk a little bit about the composition of the growth in the quarter, and I'm referring to the sales growth in terms of kind of velocity that you're seeing in -- within existing space and then the incremental space at existing customers. And you referenced at least one new customer -- a couple of new customers in Ulta and Superdrug. Was it kind of in line with your expectations? And can you talk about kind of the components there? And as you look to the back half of the year, can you talk a little bit about that balance of that mix as well as you look to kind of like 30% growth through the back half of the year?

Yes, sure. So the great, great thing about our growth is it's quite balanced. We reported in 2016 something like three-quarters of our growth came from existing doors versus up one-quarter new doors. We'll update that specific percentage every year versus every quarter, but what I'll tell you is in the second quarter, our growth was quite balanced. And it's primarily focused on our existing doors, similar to kind of our prior history, but we did pick up some important new doors as I think of -- kind of as we've talked about Superdrug, Ulta., and our approach going into each year is some combination of what we're going to do with our existing doors, particularly through our innovation and productivity model, as well as mapping out what new doors we're going to go into. And we usually will talk about those after we get the distribution. So, the back half will again have that balance between existing doors and some new doors.

Okay. And then on -- with respect to the Target resets and the -- I guess it was a greater than 50% increase in shelf space at Target. Has all of that reset activity now completed? And is there more work kind of for you to do there now, in concert with Target, to kind of optimize the assortment for that incremental space?

Yes. So the Target resets are mainly done. I mean, I think we've done a really good job with Target, kind of setting pretty much all of those stores. The next step, which we're always part of, is optimizing those shelf sets and merchandising. And again, for context, in 2016, we did not pick up any space at Target and yet we're able to grow that business 20% through that optimization. We're able to do it given the innovation pipeline we have and our ability kind of through the various resets to be able to continue to get even greater productivity off of that space.

Okay. One more, if I could squeeze it in. On the replatforming of elfcosmetics.com, can you talk a little bit more about some of the enhancements there and the benefits of those enhancements? Thanks.

Sure. Hey, Jon, it's John. So we've had a really good solution that served us well over the last few years as we've continued to build up our site. I think right now, the replatforming is just another stage of our evolution. And for us, it's really about finding a platform that will allow us to continue augmenting our capabilities on both the functionality and consumer engagement side. So we are looking to move to a Salesforce platform, which is Demandware, and we think that will set us up much better to add on some of the functionality that we're looking to add on in future years.

Thank you. The next question is coming from the line of Oliver Chen with Cowen and Company. Please proceed with your questions.

Hey, this is Courtney Willson on for Oliver tonight. Thanks for taking questions. Just thinking about the direct business, you mentioned strong growth here. Do you have any updated thoughts on your own store count and any openings going forward? And then separately, just given solid initial consumer response with Superdrug, can you share any plans going forward on additional international expansion? Thanks.

Yes, I'll take the first and then Tarang can take the second. Hey, Courtney. So just as a refresher, our direct business is a huge opportunity for us not just to grow the business, but also in terms of the purpose it serves across consumer engagement, awareness and a lot of the testing and insights that we're able to feed into our innovation program. So we continue to be quite enthusiastic about the continued expansion of both elfcosmetics.com as well as our e.l.f. branded stores. We have spoken publicly about the cadence of store openings, which we've said is somewhere in the 5 to 15 range each year. Last year was obviously a significant year of openings for us as we launched our West Coast stores in the L.A. market. This year, we've discussed it will be on the lower end of that range. And we are still looking to open a number of stores in the back half of 2017, but it will be modest relative to where we were last year.

And then on your second question regarding international, I'll tell you our first priority is the U.S. given the tremendous amount of white space we have in our home market. Our international strategy is fairly disciplined in terms of our expansion strategy. We have three priority countries that we're starting with. We've talked on prior calls our progress in Canada and Mexico, particularly with Walmart in those markets. We're quite excited about our launch into Superdrug in the U.K. We're only in a little bit over 200 of their stores out of their chain, and so we have further to go even within Superdrug. So I'd say we -- you will see us continue to be quite disciplined in terms of what our expansion looks like, but the good news is every place we've taken the brand so far, it resonates quite strongly and we're seeing many of the same dynamics as we've seen in the U.S.

Great. Thanks for the detail.

Thank you. [Operator Instructions]. Our next question is coming from the line of Andrea Teixeira with JPMorgan. Please proceed with your questions.

Hi, good afternoon. Hi, Tarang, John, thank you and good afternoon there. So, congrats on the results and the additional shelf space. So I'm curious why you kept the guidance as is. And if you have 20-plus percent more space at Walmart and also successful rolling 200 Ulta stores, so in comps -- on top of that, comps got easier with 14 -- by 14%, so why not take up the full year guidance? That's the first question. Is that an indication that you're seeing some cannibalization on the underlying business potentially or the timing of that roll-out? And related to that, if you can talk about the breakdown. I appreciate, John, your comment about like the international and direct not being very representative, but maybe that's the reason why you outperformed what the implied Nielsen data would suggest for the second quarter. Or is there any buildup on shipping to the customer so that they can service -- especially with the timing of this new shelf space. So I was just curious to see how we bridge the second quarter sellout against the sell-in and see if -- because inventories went up also during the quarter. So if you can help me understand those puts and takes? Thank you.

Yes. Hey, Andrea, it's John. So, on the guidance, just as a refresher, whenever we set up the year and establish that guidance, we have assumptions both for what's happening within our existing accounts across productivity, space, door counts, as well as assumptions for new distribution. And obviously, we have a certain level of visibility to the year when that guidance is established. Based on where we sit here today, we look at a 24% to 28% net sales growth year and feel that that's very strong and want to keep guidance where it is.

Yes. And on your second question, I think back to the difference that you see between kind of the Nielsen, the scanner data and our data, in our case, in particular -- and this is different than many of the categories have worked. Scanner data doesn't even represent 70% of our sales. So our direct business, international and specialty accounts, as John said, are not included in scanner. And in addition to that, what I'd say is you'll continue to see a discrepancy between scanner and what our sales are. In terms of your second part of that question, which is, is there a buildup in terms of inventories to our customers, I think what you'll see is we've been quite good and aligned in terms of penetrating supply chains of our customers and are quite efficient there not only in terms of the fulfillment rates that we've had, over 98%, but just how efficient we've been with those customers. So there's no buildup in inventory at a customer level that you'll see. I mean, it really is off the strength of our overall sales.

Yes. That's very helpful. So that reads into a positive third quarter picking up as we're -- I mean, it's implied obviously in the guidance. So we're still seeing positive momentum as you enter the quarter, right?

Yes, we only guide to the annual number. And obviously, we have a couple of quarters left. So we'll talk about those when we're ready to report them.

Fair enough. Thank you.

Okay. Thanks.

Thank you. The next question is coming from the line of Mark Astrachan with Stifel. Please proceed with your questions.

Thanks and good afternoon, guys.

Good afternoon.

I wanted to ask a follow-up to the commentary on the category soft spot that you're talking about or that you're referring to going into, I guess, a little bit now. Have you seen any impact on retailer inventories as a result of that, any impact to your business overall and any change that you're seeing on your sales per door basis?

Yes. So on retail inventory, at least from our standpoint, we haven't seen a change to that -- to the earlier question. I mean, our inventory levels at our retailers are where they've been, pretty efficient. In terms of -- certainly, if there was a category that's flat or growing 5%, that's going to have an impact on us. The bigger point for me is we're not dependent on where the category is to be able to get our growth and with the fundamental building blocks we have, both with our unique consumer set in addition to the innovation program productivity as well as new doors. So could growth be 5% more in the quarter had the category been up 5%? Maybe, but it's not how we build and it hasn't really been a factor relative to our overall growth algorithm.

Got it. And just related to that, curious, could you break out how the growth has been in makeup, sort of the core business versus the new launches in skin care and just how well that's been doing since you've launched it?

Yes, we're really pleased with our skin care launch. And if you take a look, sometimes, there is this inverse relationship between color cosmetics and skin care. The last couple of years, color was very strong, skin was a little soft. Skin is really strong right now. I think we're well positioned because we're one of the few brands that have skin and colors together when you -- for example, if you go to a Target shelf set. And we have really strong innovation across both. So our -- we see -- we have great innovation across each and every one of our segments. One of the launches I'm particularly excited about that we just did online this last quarter was Beauty Shield. So -- and this is -- really ties into 7 SKUs, that was products that have antioxidants, SPF 50 but an amazing lightweight formula, and really taps into this, I think, growing consumer kind of understanding that you need great skin to have great makeup coverage. And so our ability to put those two things together, particularly in the same set, I think, gives us a real advantage. And all you have to do is go on elfcosmetics.com to see just how much innovation we have on skin care and how excited we are about it.

Okay. Thanks.

Thank you. We do have a follow-up question coming from the line of Andrea Teixeira with JPMorgan. Please proceed with your questions.

Well, thank for taking my follow-up. Just a note, what is the type of SKUs are you rolling out at the store level? Is that similar to what we see online? Or is there any major difference or more kind of curated SKUs that they see fit within the store?

Yes. So, Andrea, all of our -- all of the SKUs that you'll see in a retail setting have been first validated and tested online and in our stores. So our -- on elfcosmetics.com, we just have a much broader assortment. We're able to take kind of the bestsellers and the ones -- some of the ones that have the best reviews and take them to our retail partners. So it's -- usually, it's a subset of the SKUs that we have on elfcosmetics.com and in our stores but -- and there will be sometimes uniqueness by various retailers on things that they particularly want to highlight or run with, but our overall model is the bestseller model. We try to have people take the majority of our SKUs that are good sellers.

Okay, not limited to any tools or just as you're seeing a fit for them, okay.

No, very small.

Thank you. We do have an additional question coming from the line of Stephanie Wissink with Jefferies. Please proceed with your questions.

Thanks. Just one follow-up, guys, on the SG&A with respect to the e-comm replatforming. I'm just curious if there were any expenses in the quarter and planned in the back half related to that technology investment that's flowed through the P&L that we should be mindful of as we model out into 2018 that you might be able to anniversary some of those elevated expenses related to e-comm?

Yes. Steph, so, very modest in the second quarter. You'd start to see those investments really ramping Q3 into the early part of 2018, and a large portion of that will be capital versus actual OpEx.

Okay. Thank you.

Thank you. We have reached the end of our question-and-answer session. So I'd like to pass the floor back over to Mr. Amin for any additional concluding comments.

Great. Well, thanks again for joining us. We'll be presenting at the Barclays Conference in September, and we look forward to discussing our third quarter results with you in November. Thanks, everyone.

Thanks.

Ladies and gentlemen, this does conclude today's teleconference. Again, we thank you for your participation, and you may disconnect your lines at this time.