Gar Jackson - IR Ed Thomas - President and CEO Michael Henry - CFO

Dave King - ROTH Capital Oliver Chen - Cowen and Company Mitch Kummetz - Pivotal Research Jeff Van Sinderen - B.Riley FBR Sharon Zackfia - William Blair Janet Kloppenburg - JJK Research

Greetings and welcome to Tilly's Inc. Second Quarter 2018 Earnings Results Conference 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. I would now like to turn the conference over to your host, Gar Jackson, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone. And welcome to Tilly's fiscal 2018 second quarter earnings call. Ed Thomas, President and CEO; and Michael Henry, CFO, will discuss the Company's results and then host a Q&A session. For a copy of Tilly's earnings press release, please visit the Investor Relations section of the Company's website at tillys.com. From the same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of the call for the next 30 days. Certain forward-looking statements will be made during this call that reflect Tilly's judgment and analysis only as of today, August 29, 2018 and actual results may differ materially from current expectations based on a number of factors affecting Tilly's business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2018 second quarter earnings release, which was furnished to the SEC today on Form 8-K, as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to one hour and will include a Q&A session after our prepared remarks. I will now turn the call over to Ed.

Thanks, Gar. And good afternoon, everyone. Thank you for joining our fiscal 2018 second quarter earnings call today. Our second quarter comp sales including e-commerce increased 4.4% tying our best total comp performance since Q3 of fiscal 2016. Comp sales in stores increased 3.8% which was our strongest stores comp since Q3 of fiscal 2011 and included our seventh consecutive quarter of year-over-year store traffic growth. As we noted during our last earnings call, the trend of our e-com sales has been improving with each passing month and that trend has continued. Our e-com sales increased 8.1% for the quarter as a whole which was our strongest e-com performance since Q3 of fiscal 2016. The technical issues with our order management and website systems that we faced during the holiday season and into the beginning of this year are now largely behind us. Following the resolution of the most significant technical issues we re-launched our direct-to-consumer program to all stores in the later part of the second quarter. We are now focused on re-launching our Pick Up in Store program, which we remains in testing in a limited number of stores until we feel it's ready for chain wide release. In terms of merchandising, all departments comped positive during the second quarter with the exception of boys, which was down less than 1%. Footwear, girls and women's were particularly strong. Our tops business performed well across all apparel departments, including women's which posted its first positive comp since Q2 of last year. Turning to real estate, we opened four new stores during the quarter, including in Austin; in McAllen, Texas; in the Salt Lake City; in Seattle markets. We currently expect to open seven more new stores during the remainder of fiscal 2018 with four in the third quarter and three in the fourth quarter. This will bring the total number of new full-size store openings for fiscal 2018 to 12 which is the highest number of new stores added since fiscal 2015. We expect to close four existing stores during the third quarter and one more during the fourth quarter. We also continue to work hard on our existing lease portfolio to improve our overall occupancy structure. It is a significant challenge working through these negotiations and not all choices ultimately result in occupancy reductions, but we remain strategic in our decision-making process and have achieved some positive results so far this year. Turning to marketing, we continue to drive store traffic with in-store events, contests and co-branded promotions. For example, in the second quarter, we launched a tour sponsorship for Echosmith, an exciting young pop band from the local SoCal area. We also introduced a new augmented reality collaboration with Echosmith and social media star Shonduras. In addition, we held a number of other in-store events designed to get our customers excited about having another reason to visit our stores. We believe that these efforts continue to have a meaningful impact on driving improved store traffic and customer engagement. In closing, we delivered solid operating performance during the second quarter and believe we have our e-com business back on track. The back-to-school season has been strong for us thus far with all departments comping positively. Now, I will turn the call over to Mike to provide more details on our second quarter operating performance and to introduce our third quarter earnings outlook. Mike?

Thanks, Ed. And good afternoon, everyone. Our second quarter operating results for fiscal 2018 compared to last year's second quarter were as follows: Net sales of $157.4 million increased $18.6 million or 13.4% from $138.8 million last year. The calendar shift impact of last year's 53rd week in the retail calendar added approximately $12.3 million to this year's second quarter due to a portion of the back-to-school season falling within the second quarter this year rather than the third quarter last year. Total comparable store sales including e-commerce increased 4.4%. Stores represented 88% of our total sales for the quarter and were up 3.8% on a comparable basis. E-com represented 12% of our total sales for the quarter and was up 8.1%. We ended the quarter with 226 stores, including three RSQ-branded pop-up stores compared to 221 full-sized stores at this time last year. Gross profit of $50.1 million was an improvement of $9.2 million or 22.4% compared to last year's $40.9 million, again, significantly aided by the calendar shift impact of last year's 53rd week. Our gross margin rate of 31.8% improved 230 basis points compared to last year's 29.5%, primarily due to leveraging lower total occupancy costs on higher total sales. Product margins were flat. SG&A expenses were $37.6 million or 23.9% of net sales compared to $42.2 million or 30.4% of net sales last year. Last year's SG&A included an estimated legal provision of $6.2 million, which accounts for 450 basis points of the 650 basis point total improvement in SG&A. In addition, this year's SG&A may includes a credit of $1.5 million due to receiving final approval of the settlement terms for the same legal matter this year, which accounts for 90 basis points of the total 650 basis point improvement in total SG&A. The remaining 110 basis points of SG&A improvement was primarily due to leveraging increased store and corporate payroll costs on higher total sales. Excluding the impacts of legal matter just discussed increases in SG&A this year were primarily from three factors. First, the aforementioned calendar shift and related timing of the back-to-school season pulled certain marketing and selling expenses forward from the third quarter compared to last year. Second, store payroll increased due to higher sales volume and the impact of minimum wage increases. And third, corporate bonus accruals have increased due to improved year-to-date operations compared to last year. Operating income was $12.5 million or 7.9% of net sales, an improvement of $13.7 million compared to an operating loss of $1.2 million or 0.9% of net sales last year. Of this $13.7 million improvement in year-over-year operating income, approximately $7.6 million was attributable to the aggregate year-over-year impact of the legal matter noted previously, approximately $4.2 million was attributable to the retail calendar shift impact noted earlier, and approximately $1.9 million was attributable to increased comparable store net sales results and expense management. Income tax expense was $3.3 million or 25.3% of pretax income compared to an income tax benefit of $0.4 million or 42.8% of pretax loss last year. Net income was $9.7 million or $0.33 per diluted share compared to a net loss of $0.6 million or $0.02 per share last year. Of the $0.35 improvement in EPS for the second quarter, approximately $0.17 was attributable to the year-over-year impacts of legal matter noted earlier, approximately $0.10 was due to the retail calendar shift impact noted earlier and the remaining $0.08 was driven by stronger operating results. Weighted average diluted shares for the quarter were 29.7 million versus 28.8 million non-diluted shares last year. On a non-GAAP basis, excluding the legal matter impacts from both years, net income was $8.6 million or $0.29 per diluted share compared to net income of $3.1 million or $0.11 per diluted share last year. For detailed reconciliations of GAAP to non-GAAP items, please see the comparative disclosures provided in our second quarter earnings press release furnished to the SEC on Form 8-K this afternoon. Turning to our balance sheet which remains strong, we ended the quarter with cash and marketable securities totaling $124.2 million and no debt compared to $109.6 million and no debt at this time last year. This year included approximately $29 million in cash dividends paid to stockholders in February compared to $20 million in February last year. We finished the quarter with inventory per square foot approximately flat to the comparable week last year, marking our 11th consecutive quarter with sales comps stronger than inventory comps. Total capital expenditures for the first half of fiscal 2018 were $6.7 million compared to $7.0 million last year. Total capital expenditures for fiscal 2018 as a whole are not expected to exceed $20 million. Now, turning to our outlook for the third quarter. As a result of the calendar shift impact of last year's 53rd week in the retail calendar, we expect total sales for the third quarter to range from approximately $145 million to $151 million based on a 3% to 6% increase in comparable store net sales. This calendar shift resulted in a net decrease of approximately $13.9 million in last year's comparable sales base and approximately $0.11 of EPS for Q3 comparability to last year. This is due to a portion of the back-to-school season falling into Q2 this year versus Q3 last year. We expect third quarter operating income to range from approximately $8 million to $9.5 million and earnings per diluted share to range from $0.20 to $0.24. We expect our tax rate to be approximately 27% and weighted average shares to be approximately 30 million. We expect inventories per square foot to remain at or below last year's levels. We expect to end the third quarter with 226 total stores comprised of 223 full-size stores and three RSQ-branded pop-up stores after opening four new full-sized stores and closing four existing stores during the quarter. Finally, pursuant to the settlement terms of the previously noted legal matter, we will be issuing non-transferable discount coupon to approximately 612,000 existing Tilly’s customers in early September, which will allow for a one-time 50% discount on a single future purchase transaction of up to $1,000. Any unused coupons will expire upon the one-year anniversary of coupon issuance. We cannot reasonably estimate the number of coupons that will be utilized, the timing of any coupon usage, the average transaction value utilizing these coupons, or the potential impact of their usage on our reported comparable store net sales, product margins and earnings per share over the course of the next 12 months but the potential impact could be material and adverse. In particular, we generally expect that the usage of these coupons will have a positive impact on our comparable store net sales, a negative impact on our product margins, although we cannot reasonably estimate the magnitude of such impacts. The potential impact on our operating income will depend on a variety of factors that cannot be reasonably estimated at this time, including, but not limited to the factors described above. As a result of the uncertainty related to the potential impact of these coupons, our third quarter outlet does not contemplate any projected impacts from the future usage of these coupons. Operator, we’ll now take questions.

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Dave King with ROTH Capital. Please proceed with your question.

First, congrats on the continued traffic and improving comp momentum, sort of a question on that front. Can you share at all the cadence of the weekly or monthly comps as the quarter progressed? And then I guess how the July and August flashed back-to-school trend versus the second quarter as a whole if you can provide some of that detail? Thanks.

Sure. So each month of the quarter was pretty close to each other in terms of comp from each month we were up 5 in the month of May, 4 in the month of June and up 4.3 in the month of July. So it was pretty consistent across the quarter. And then back-to-school has been stronger than that thus far, so seeing a nice start here in August to the third quarter.

And then switching gears a bit on the Q3 guide. If we try to normalize the calendar shift, how should we think about product margins versus BDO leverage? How much should rent reductions play into that? And then I guess what I’m sort of trying to get a handle on is if I look at the Q2 and Q3 sort of non-GAAP operating margins, if you combine and it looks like they’re implied down year-on-year. Is there a reason for that conservatism at all?

As we talked about last earnings call. We see a lot of nice leverage in Q2, because of the positive impact of the calendar shift in Q3, that’s going to reverse because of the same issue. So our aggregate buying distribution occupancy costs are expected to leverage about 130 to 230 basis points depending on which end of the guidance range we are on. Product margins we’re expecting just as they were in Q2, they were flat. We expect them to be right around flat plus or minus for the third quarter. One thing that is in our model that hasn’t been for several years, and I remarked on it in the Q2 results of corporate bonus provisions being in SG&A. We haven’t had profit based bonuses in this business for several years. So Q2 had roughly about a $1 million SG&A increase relative to last year because of bonuses in Q3. At the high end could be as much as $1.5 million, $1.6 million. So that might be a couple of places where maybe you’re not seeing as much flow through as you would typically expect to see clearly because we just haven’t had profit based bonuses for some time.

And then lastly from me on the discount coupon issuance sort of high level, what are you doing to prepare it off for the ramped up discounted sales, are you increasing inventory of sort of higher margin items, or planning to focus your marketing such items, just to trying to get a sense of how you’re trying to protect against any material or adverse effects?

Yes, where there are key product categories, I am not going to mention on a live call like this. But in key product categories that we want to make sure we protect our merchant team is -- has been very much aware of this issue coming towards us and have been working hard to make sure that we remain in stock on any of the key comp drivers that we’ve had. We don't plan on doing any specific marketing in relation to this or dealing with the coupons, but certainly have been working behind the scenes to make sure that our assortment is protected.

Our next question comes from the line of Oliver Chen with Cowen and Company. Please proceed with your question.

The women's comp number was impressive. What was driving that and do you expect that momentum there to continue? It sounds like there's some nice trends in the marketplace, would love your thoughts there.

I mean our women's business has been soft actually for quite longer than we would have liked. And we did -- I think in the last couple of calls we did say that the merchant team saw some fresh trends happening and they did an excellent job of interpreting those trends, which really led to the positive results. And I do expect that to continue going forward for sure. There's a lot more newness in the market than what we've seen in a long time and so I see no reason why it would really slow down.

Okay. You’ve made some progress as well regarding your e-commerce channel. As you ramp up for holiday, the holiday period can be very high volume. What kind of guardrails do you have just to ensure that you can fulfill the throughput in the next chapter in terms of ensuring holiday execution is a way you wanted for e-commerce?

Okay. So I think as we mentioned the order management system was where our biggest problem was during the fourth quarter last year. That's been fixed. We’ve put it through all kinds of load testing. Anticipated net volume will skyrocket. And it's actually being tested pretty severely right now because our demand continues to be very strong. So we’re excited about that. And then the other fact that we had turned off our DTC fulfillment and it's been turned on in all stores. That's working really well and it’s contributed to the positive results in e-com. So the only thing that we haven't done is we have not turned up on back on customer pickup. That will be turned on. So it's an extensive testing. We want to make sure we’re extensively testing. But overall we look like we're in really good shape and I feel pretty confident that going into Q4 to the high volume period that we will be okay.

Here in the back-to-school season, e-com, we noted was up 8.1% for Q2, it’s in the double-digits now, so -- through the back-to-school season. So it has performed very well through the back-to-school season so far at an even significantly higher comp rate what we achieved in Q2.

The back-to-school momentum is also impressive. What do you think is fueling the resulting there and do you have any initial thoughts about on how you will prepare for holiday and what the environment will be like as you look to the back half?

Well, I think -- I don’t think there is any one single thing that we are seeing. We have a lot that's working right now across all merchandise categories. I think our assortment is as good as it's ever been. And so I think that's a single biggest contributing factor. I felt and I think we all felt that there was a lack of newness in some categories particularly women for a long time and just in terms of trend and we’re starting to see newness. There is no one single trend that I can point to that we’ll carry forward which actually is a good thing because I think we’re seeing positive trends in a lot of different categories which I think will help carry us through for the balance of the year.

Okay, and our last question Mike the inventory levels have also been impressively managed and you've achieved good results on lower inventories. What's happening to the nature of your inventory composition and where do you expect that to go in terms of driving efficiencies and how you're pursuing that optimization?

Yes, we've been working hard on this for the entire time that Ed and I've been here together last two to three years. As we noted, we had 11 consecutive quarters of sales comps being stronger than inventory. We've just gotten a lot more disciplined about it over time, trying to be much closer to need and the trends, all the efforts that we’ve talked about in prior calls with our underperforming stores and making sure they are as localized as they can be and get them moving back in the right direction. So we expect to continue to be very tight on the inventory. It's sacred to both of us. It’s sacred to our entire team that works together with us to make sure that we keep these inventory levels in the right place. We’re not anticipating that we're going to let inventory levels creep-up, even though we are having very nice results right now. So as I mentioned in our prepared remarks, we expect it to stay kind of at or below LY levels as we manage looking forward.

Our next question comes from line of Mitch Kummetz with Pivotal Research. Please proceed with your question.

On the Q3 comp guide, I'm just -- I curious what gives you confidence, particularly the fixed comp at the higher end of the range, I mean is that obviously back-to-school is going well, the digital business is back up to double-digits. I mean are you kind of assuming that some of the current trends continue for the quarter or have you just banged so much comp already through the first few weeks of the quarter that's what gives you the confidence, can you just kind of elaborate on that?

Sure. Given the peak volumes of the back-to-school weeks we’re really roughly halfway through the quarter's anticipated sales as we sit here today. So we've got half the quarter in at a nice number. Honestly we’re a little above our earning -- our comp guidance range right now, but what I am anticipating is a slowdown, a deceleration as we go past the peak of back-to-school leading into back-to-school. California was actually our weakest area in the second quarter. It was actually slightly down. So given it had that kind of run rate in the several weeks leading into peak, it's performing very nicely during the peak right now. But I am concerned that there could be a return to that softer trend once we are out of the peak lead time frame and contemplating that into the guidance that we have.

And then on the margins obviously you're anticipating the EBIT margin is down year-over-year and I think it all has to do with the calendar shift and the 13.9 million that comes out of the comp base. But normally on a 3 to 6 comp you would get a lot of leverage on your fixed cost. So is there any way to kind of break out how much margin you’re capturing with the strong expected comp versus then how much are you’ve been than losing based on the calendar shift? Is there any way to kind of triangulate that?

Well, the primary thing is what I mentioned in response to Dave’s question, we have not had profit based bonuses in this business for the last several years. And I mentioned the numbers that would be involved in our earnings range, especially as you get towards the top end of that range. That’s really what’s causing the most drain from what would normally be a few more pennies of EPS if we did not have those bonus provisions or if on a year-to-year basis you’re anniversaring similar kinds of numbers, you would see better flow through. Just at this particular time, given that we’ve been without those for some time, we’re having to absorb those, given we’re hitting our targets having nice results and meeting our budget targets at this point.

And then lastly, it sounds like you feel really good about the trends that you’re seeing now, you mentioned that your assortments have been as good as ever. I would guess that down there are certain key brands and items that are helping really drive this momentum. I’m just curious how you sort of feel about your allocations beyond kind of back-to-school, where you have visibility to kind of the pipeline of product that’s -- that you’re kind of on-boarding?

The good thing is that there is no one brand that’s driving the overall results. It’s performance has been good across almost all brands, not everyone but all brands. Some are always stronger than others and obviously the strongest brand you never have enough. But we’re in pretty good shape and I think the team -- the merchandising team has done a really good job of chasing where it can be chased and staying on top of those categories that are maybe outperforming what we originally expected. So I’m really -- I’m excited about the fact that there is no one particular trend or category, again that’s driving our business. It’s -- a lot of it’s across the board.

Our next question comes from the line of Jeff Van Sinderen from B.Riley FBR. Please proceed with your question.

Let me add my congratulations. With comps accelerating, can you touch on your latest thinking around unit growth as we approach 2019 and do you think that with increasing pressure on landlords to reduce rents that there may be more opportunities to get better terms on new leases as well as renewals?

Okay. So Jeff we have several locations that we’ve been looking at working on way beyond what we planned on our growth for this year. So we’re positioning ourselves to accelerate our growth. I don’t know what those numbers are going to be yet. There’s still a few moving piece -- moving parts with landlords in terms of what will happen in certain locations, whether it’s off mall or mall and as you know we do both. But we’re in pretty good shape to capitalize on growth. And I think we’re starting to -- we have been starting to see better occupancy costs on new deals, newer deals across the board, which is something that we expected when we stopped that growth. We expected that to happen and I would expect that to continue. So more to come on that at a later point Jeff, but that’s kind of where -- with what we’re at right now.

And then anything to report on the RSQ-brand pop-up. Just wondering what you think the plans might be there, what the potential is?

So far so good and I think we just went to our first high volume season with back-to-school with the three stores and now going to holiday. It’s very much in demand by the landlords. We don't have any plans yet to expand the number of stores in that concept. So still to be -- a little bit more to be learned. As you know, it was really intended to be a marketing vehicle for us to build the brand in markets where we may not be as well-known as we are in a heritage market and I think so far so good with that.

Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.

I guess a follow-up on a comment you made earlier about California in the second quarter being maybe a little bit weaker and then improving during back-to-school. Do you have any thoughts as to why it was weaker in the second quarter?

Not -- nothing that -- no single thing that we could point our finger and say this is it, no. It's been erratic. It’s just been erratic and somewhat unpredictable but nothing that we could put our arms around and say it’s been this. There were a few periods of time where the weather in Southern California right in our backyard here was extremely warm and clearly there -- definitely we saw an impact as a result of that but as weather more normalized that we saw our business get better. So that’s the only thing that I could point to.

Okay, and I know at this point you commented that it’s much stronger during back-to-school and you’re anticipating maybe more normalization in the latter part of the quarter. Is that kind of entirely zapped the gap versus the rest of the country in back-to-school or is it still kind of lagging?

I'm not sure I understand what you just said, what was it something about GAAP, what is that?

Well, obviously California was lagging the overall comp, it sounds like in the second quarter right and so you said it improved in back-to school but the overall comp has improved as well it sounds like during back-to-school. So I just wondered if it had improved in line with the overall country or whether or not it had improved more because it was coming off of weaker start, if that makes sense?

Okay, got you. No, there’s been consistent strengthening across markets. We've actually seen nice success here in August in all of our markets, California getting back into a nice and steady area that we would be happy with and all other markets actually increasing their rate of comp growth as well. So it is still -- I would say it’s still maybe a little bit behind some of the other markets, but all quite healthy right now.

Okay. And then just one last follow-up on the comment about needed development for ‘19, do you have any takeaways on what's working and what’s not working on the new units you’ve opened up so far in 2018.

I mean we’ve opened up both off-mall in-mall and they are both working. So we've opened up in mostly filling in in existing markets with a few what I consider maybe newer markets, but there's nothing that stands out. Again we will continue our strategy of both -- expansion of both off-mall or in-mall because we know that we have experience with it, we know that concept works well in both and it's more of being an -- more of taking advantage of an opportunity in a specific market. So that's all I can tell you right now.

[Operator Instructions]. Our next question comes from the line of Janet Kloppenburg with JJK Research. Please proceed with your question.

I had a question on the merchandise margin being flat year-over-year and I just wondered maybe if you could talk a little bit about markdown levels, motion levels year-over-year that kind of thing, and what the outlook would be there and if there is any opportunity for improvement? And then as the digital channel becomes a bigger percentage of the business and congrats by the way on that turnaround, do you see that putting pressure on the reported gross margin results?

So I'll take the gross margin part and then Ed can maybe chime in on the e-com side. So similar to last quarter, we had lower initial markups and a more favorable markdown rate offsetting each other in the second quarter. So the branded penetration of the business as you know we've been in a strong branded cycle here, with that comes a little bit lower markup rate but then our aggregate markdown rate was reduced year-over-year that offset it. We’re expecting that to continue for the near term. And as you know our product margins have historically been very, very consistent year-over-year for many, many years. So our product margins don't tend to jump around 200 and 300 and more basis points from quarter-to-quarter, so we are not expecting anything dramatic one way or the other. We expect them to remain healthy, remain consistent, right around flat, they could be a little bit up, a little bit down depending on exactly how things shake out but not expecting any major movement.

As far as the impact on e-com, we've always done a pretty healthy business and good clearance merchandise online. What’s happening most recently with all the fixes and stuff we're seeing a healthy increase in our regular price business online, which is good. And we are not driving either our store comps or our e-com performance by promoting like crazy. It’s the margins are consistent and we see some opportunity to improve upon that, but there's no reason to why we are going to change that with everything clicking on all cylinders right now.

But can you think the shipping and fulfillment cost could put pressure on the gross margin line as the mix of e-com sales grows?

I don’t think so Janet. I mean we -- right now there is no -- our operating margins, I think it's a profitable business. We are sensitive to the fulfillment cost. One advantage that we have is we have our own fulfillment center and it's been in place for a few years now and it's -- that's a big advantage we have helping to keep some of our cost down, the transportation cost it is what it is industry wide but I don’t see any big significant negative hit as a result of that.

Okay, I would expect it to help operating margin but perhaps to hurt gross margin. That was my point. And I know you said your comps are not being given by any one category, but I just wondered if you could talk a little bit about trends in denim, because we’re seeing those be pretty strong universally here in back-to-school?

Denim has been good. So denim has been good. One of the things that’s helped the women’s business is also not only denim but soft bottoms performance has been good. So it’s really driven more outfitting on the women’s side. But overall, denim has been good. Our RSQ-brand performance continues -- we have some newness there this year and it continues to perform pretty well.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Ed Thomas, President and CEO for closing remarks.

Okay. So final remarks as I’d like to acknowledge the amazing job our team has done. They’ve been incredible in helping us perform, as well as we are right now. Thanks again for joining us today. We look forward to discussing our third quarter results with you in early December. Have a good evening.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.