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Executives

Paul Cody Phipps - Chief Executive Officer, President, Director and Member of Executive Committee

Fareed A. Khan - Chief Financial Officer and Senior Vice President

Analysts

Oliver Wintermantel - ISI Group Inc., Research Division

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

Christopher McGinnis - Sidoti & Company, LLC

Gregory W. Halter - LJR Great Lakes Review

United Stationers (USTR) Q2 2013 Earnings Call July 23, 2013 11:00 AM ET

Operator

Good morning, ladies and gentlemen, and welcome to the Second Quarter 2013 Earnings Conference Call for United Stationers. My name is Denise, and I will be your conference coordinator for today. Before we begin, the management team of United Stationers would like to remind you that the information shared on this call may include forward-looking statements, which are based on certain assumptions. What you hear today may be affected by the risks and uncertainties in the United Stationer's business, markets and the economy. Despite the company's best efforts, actual results may be different from what is said on this call. To understand the factors that may affect these forward-looking statements, please review the cautionary language in yesterday's news release and in the United Stationers' Form 10-K and 10-Q filings with the SEC. Also remember that the information on this call should be considered current only as of today and the company has no duty to update it. At this time, you can find the second quarter news release, along with the financial slide presentation and other information relating to this call, on the Investors section of the company's website at investors.unitedstationers.com. Shortly after the call ends, an archived version of it may also be found there. As a reminder, today's call is being recorded for replay purposes. I would now like to turn the call over to your host, Mr. Cody Phipps, President and Chief Executive Officer. Please go ahead, sir.

Paul Cody Phipps

Thank you, Denise. Good morning, everyone, and thanks for joining us. With me are Fareed Khan, our CFO; and Todd Shelton, President of United Stationers Supply.

We posted another quarter of strong earnings driven by solid execution across our operating initiatives. Earnings per share grew at 30%, following last quarter's adjusted 24% increase. Net income rose 28%. Gross margin improved over 100 basis points, and EBIT margins expanded by 70 basis points to 4.6%. Benefits from the acquisition of O.K.I. Supply, a better product mix and progress on our margin and cost initiatives all contributed to this result.

In addition, we continue to progress against our long-term strategic initiative. We are in a solid financial position with several compelling opportunities for growth.

These opportunities stem from the way we are thinking about our business, and I want to give you some insight into this. As I've discussed, we are in the process of repositioning our business in light of the changes taking place in our industries.

We aspire to become the premier provider of digitally sourced business essentials. Here's what this means.

Every day, there's a tremendous amount of productive activity being accomplished in the workplace. A salesperson is preparing for a major presentation, an assembly shop is in the final stages of completing a critical order, a welder is a few hours away from completing a project, the cleaning crew must finish the building before the first employees arrive in the morning. These activities depend on people but they also depend on products, essential, everyday products that simply must be there for the work to get done. That is the business we are in. Our reseller partners bring these business essentials to workplaces every day, and we help them be more efficient and effective. We have a very diverse offering, including office products, janitorial items, safety and industrial products, coffee and snacks, available and ready to ship, with the vast majority of our orders shipping the same day the orders are received.

Companies we work with range from some of the largest and best known in America, the scrappy, customer-obsessed local distributors of all shapes and sizes. They provide outstanding service and ensure that their end-users never run out of the essentials their companies need to succeed. They use our business model as an extension of theirs more effectively and efficiently run their businesses. Independent resellers, the core of our business, leverage our supply chain to bring world-class service to their customers in a capital-efficient way. Mass merchants and leading online retailers use us to fulfill web orders. Many of these players are either new to the market or are building out their product offerings.

Large retailers and distributors use us to accelerate growth in new areas or to handle challenging categories. To make this happen, every day, these customers depend on our industry-leading supply chain and logistics capability and increasingly on our e-commerce capabilities. We bring a wide array of digital resources to help resellers evolve and succeed. The macro trends we see in the industry: rise of e-commerce, the shift from traditional catalogs to online and the convergence of channels all create opportunities for us to deepen our relationships and define new routes to market where we add value. With the broader business definition of business essentials, we have a much greater addressable market. This also gives us the opportunities to profitably grow by leveraging our proven capabilities in new categories and channels. In essence, our strategy has 2 planks: the first is to have a strong core business; the second is to diversify our offering of business essentials to drive profitable growth.

Let's start with the strong core. This means we are in a position to capture the growth created by changes in how and where our categories are purchased. The shift of sales to e-commerce is one example. It also means relentlessly driving improvements in the way we serve our customers and in the efficiency and cost effectiveness of our supply chain and logistics network. Here are 3 examples: First, customers and businesses are purchasing more products online. This creates opportunities for our resellers but also requires them to change and adapt to a digital market. We're bringing digital content and merchandising capabilities and a wide array of fulfillment services. We continue to strengthen our online capabilities. This year, we brought in new talent and invested in building the services our customers need. We are working with the leading online players to help accelerate their growth in the categories we offer. Second, we see distributors broadening their categories and diversifying their businesses. This trend is happening in all of our channels, as resellers seek new ways to grow and increase their relevance with end-users. Our model allows them to quickly enter new categories and also to quickly scale these offerings. And third, the government and public sectors want to work with smaller and local businesses, including those owned by women, veterans and minorities. We give these companies the scale and services they need to reach this market. As our customers succeed, we grow with them. Strengthening the core also means driving efficiency and cost improvements to ensure our success. We are making progress here as well. By continuing to optimize our distribution network, driving cost savings with our War on Waste program and restructuring parts of our business while we make the right investments in growth areas.

The strong core has allowed us to drive consistent earnings growth over the long term while investing for the future. Underpinning all of this is our purpose-driven culture. Our associates are dedicated to their customers, but also to the communities in which they operate. We use our purpose-driven culture to engage our associates, which leads to deeper partnerships with our customers.

The second plank of our strategy is to diversify our business. Here's where the definition of business essentials drives our focus. Janitorial items including breakroom have gone to over 26% of our portfolio. Online sales and the sale of these items in nontraditional channels continue to expand at near double-digit rates. Many of our office products and industrial resellers see this category as a natural extension to their businesses. We are at the forefront of these changes. Breakroom products, which is still a small part of our portfolio, are growing rapidly. We are in the very early stages of this opportunity. We are expanding our product assortment to take this category to the next level. We will also invest in new talent and in new services to bring this important category to its full potential. Our industrial business was new to the portfolio 5 years ago. Now it accounts for over 10% of our sales. We see compelling opportunities in this large and fragmented category.

Yes, we had strong results this quarter, and yes, this was done in a soft market. But what I think is most impressive is the progress we are making on these long-term strategic initiatives while staying focused on executing against our current opportunities. Now that I've given you the strategic perspective, I'll turn the call over to Fareed for a closer look at our performance in the second quarter. Fareed?

Fareed A. Khan

Thanks, Cody, and good morning, everyone. Earnings per share were $0.86, up $0.30 -- up 30% from $0.66 a year ago. This is a record for the second quarter.

Growth in higher margin segments, margin improvement initiatives and cost savings, coupled with lower interest expense help drive these results. We ended the quarter in a solid financial position, returning to a leverage ratio of 2x debt-to-EBITDA after fully integrating the O.K.I. acquisition during the first quarter.

We have ample financial flexibility to fund our business initiatives and make acquisitions, while still returning capital to our shareholders through our dividend and share repurchases. Now, I'll walk through some of the details, starting with sales.

For the quarter, total sales were $1.27 billion, roughly flat with the prior year on the same number of selling days. Looking at our segments, industrial sales rose 31.5% to $132 million and now comprise over 10% of our consolidated sales. The acquisition of O.K.I. Supply in the fourth quarter of last year was the primary driver behind this growth.

Safety and general industrial categories showed the strongest growth. Oil field and welding segments continued negative sales growth trends that began early in the year and this reflects soft underlying market demand.

Margins in this category remain solid and this platform was an important driver of our overall margin expansion. Janitorial and breakroom revenues rose 2.6% to nearly $333 million. This category represented 26% of our sales for the quarter. Breakroom items showed strong growth, posting a double-digit increase. We also saw a solid growth in sales to e-tailers through our independent office products resellers that have been promoting this segment. These customers continue to diversify their product offering and leverage our business model to help them expand their businesses. Sales to national account customers in the category were up in the low single digits. Similar to last year's quarter, we saw very low inflation and we believe the underlying market remains flat overall. Sales from our 3 office products categories came in at roughly $775 million for the quarter. This represented a decrease of 5.2% from the prior year. Traditional office products categories were down 4% to $324 million. Technology sales were roughly $374 million for the quarter, representing a decline of 6.3%. Furniture sales of nearly $77 million fell 5%.

A few factors are relevant to these results. Let me outline them here. First, the demand environment for office products continues to be challenging, reflecting low jobs growth and needed small business confidence levels. Second, our customer sales to government and public sector were very soft, reflecting the impact of reduced government spending. Many of our resellers noted significant year-over-year declines through this important channel. Third, as part of our margin execution efforts, we are deemphasizing low-profit portions of our business. And finally, as in our other businesses, we saw little or no product inflation during the quarter. Looking at channel results, our business with independent resellers were flat for the quarter and this channel now accounts for 89% of our sales.

Sales to national account customers, the remaining 11%, were slightly below last year's levels. Gross margin was 15.8% of sales, up over 100 basis points from last year. An improved product mix, reflecting the continued growth of our industrial and janitorial and breakroom categories, as well as the decline in lower margin technology sales, helped expand margins. Programs and product-purchase initiatives during the quarter also yielded strong supplier allowances and rebates. And we also benefited from ongoing while cost saving initiatives, including restructuring actions focused on network optimization and structural cost reduction. Operating expenses were $143 million or 11.2% of sales. This result is down nearly $6 million from the first quarter but up just over $5 million from the same period last year. This reflects increased employee-related costs, including those associated with the addition of O.K.I., investments in our growth businesses and variable management compensation. Offsetting these increases were benefits from our first quarter restructuring actions and we remain very pleased with the bottom line impact of these efforts. Cost synergies from the O.K.I. acquisition are also coming in favorably and we have the business integration activities completed. We continue to invest in our growth businesses, specifically in areas of digital marketing and merchandising and front-line selling efforts aimed at our industrial and janitorial and breakroom segments. Operating income increased 17% over last year's quarter to $58.9 million. And as a percentage of sales, operating income came in at 4.6%, up 70 basis points from the prior year. Interest expense was down year-over-year, mostly because of the increased borrowing under our lower cost ABS facility and the impact of the expiration of several fixed-rate swaps. During the quarter, we completed an amendment and extension of our $700 million revolving credit facility and this effort allowed us to lock in committed financing through July 2018 at attractive pricing.

Now I'd like to take a minute to thank our lenders for their support of our strategy and for their contributions to a highly successful outcome.

For the quarter, our tax rate was 38.2%. Net income increased 28% to $34.7 million. Our weighted average diluted shares outstanding for the quarter were $40.3 million, down from $40.9 million, as a result of our share repurchase program.

As mentioned, earnings per share increased 30% or $0.20 for the quarter above the prior year period. Our share repurchase activity accounted for roughly $0.01 of this improvement.

Let me now turn to balance sheet and cash flow items. Here are a few of the key points. Free cash flow for the quarter was $54.2 million versus $14.6 million for the last year period. Improved payables leverage in this year's second quarter was a primary reason behind the year-over-year changes. Our capital expenditures were roughly $8 million during the quarter, versus roughly $6 million last year. This reflects timing differences, as well as modest increased investment in the business.

Share repurchases totaled nearly $33 million, up from about $7 million in the first quarter. Most of these repurchases took place early in the second quarter.

We paid a dividend of $0.14 per share, representing $5.6 million. And as you may recall, we increased the dividend by 8% in the fourth quarter of last year. Inventory on a LIFO basis was $732 million at the end of the quarter. This result was down from levels of $767 million at year end, but up slightly from $726 million at the end of the first quarter. Our receivables and customer credit picture remains stable and continues recent trends. Debt-to-EBITDA was roughly 2x at quarter end and this remains on the conservative side of our target of 2.0x to 2.5x. Total debt was $518.5 million at the end of the period. Now let me close with a couple of comments on our outlook before we turn to Q&A.

Until we see an improvement in jobs creation, business confidence and the government sector, the demand picture for office products will remain challenging. We also expect a low inflation environment continue. Offsetting these headwinds are several attractive growth opportunities, particularly those related to the shift of demand to online that we feel we are in a very good position to capture. We're expecting flat demand in the janitorial and breakroom market but we should be able to outperform as a result of our growth initiatives. And we expect that continuation of the recent market trends in industrial categories, welding will remain soft but other categories such as safety and general industrial should continue to post growth. These factors suggest that we should expect a more muted demand environment than we anticipated for the remainder of the year. And if we take these factors together, we now expect sales for the full year to be flat to slightly positive. Our earnings will continue to benefit from the restructuring actions we have already taken and we remain very confident in the synergies being delivered from the O.K.I. acquisition.

That concludes our comments. And I'd like to turn it back over to the moderator to begin the Q&A session. Denise?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question will come from Oliver Wintermantel of ISI Group.

Oliver Wintermantel - ISI Group Inc., Research Division

Can you maybe break down the gross margin's performance into the different buckets this quarter?

Fareed A. Khan

Oliver, it's Fareed. Sure, let me give you sort of the main moving parts. As we mentioned, the portfolio mix was a pretty important factor. If you look at the percentage of sales in industrial, for example, it was about a 250-basis-point increase from where we were last year to this year. We also saw declines in technology categories, which are lower margins. So if I take the portfolio shift, that's about a 40-basis-point increase in margins. We had a number of execution efforts around margin, around cost, other factors that contributed another 40 basis points. A strong supplier allowance in rebate quarter contributed another 50. And then we had some cost savings and benefits on the freight side and these were offset by inflationary factors. So that roughly should bridge it to about 100 basis points.

Oliver Wintermantel - ISI Group Inc., Research Division

Okay, great. That's been helpful. And then just a follow-up on the supply side. Can you maybe talk about what supplies did, excluding O.K.I.? And what the underlying organic trends are in this business?

Fareed A. Khan

Oliver, for the -- are you talking about the industrial market?

Oliver Wintermantel - ISI Group Inc., Research Division

That's right.

Fareed A. Khan

Yes. So one of the things we're seeing, and this trend was toward the end of last year and into this year, is the divergence in the growth rate of the different subcategories under industrial. So areas like safety and general industrial products continue to show solid growth. And we're also seeing some of the cross-selling dynamics into other channels as well with those categories. The other in the spectrum is the welding segment, which is actually showing low double-digit/high single-digit declines. And the mix of those kind of plays into the overall results. So I think on an organic basis, we'd probably say that the overall business is probably running at about a minus 2% kind of growth rate, mostly because of the waiting we have to the industrial -- to the welding category. As you could recall, the O.K.I. acquisition had a higher percentage of welding to it. And again, we feel that these are more of kind of where the economy is now short-term trends. As we step back, we see a very fragmented customer base. We actually see the independents. We did some recent work on this, picking up share, and so the long-term opportunities for us to increase our share wallet with the independents to capture new customers is very much there. We're just dealing with some cyclical demand in a couple of categories within welding.

Operator

Our next question will come from Brad Thomas of KeyBanc Capital Markets.

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

I just want to follow up on the margins in general, I mean, if I look back, I think this second quarter was the highest operating margin for the second quarter that I can find in my model going back almost a decade. There were obviously some one-time issues, rebates and things like that. But maybe if you guys could just step back and help us think about how much this is a structural improvement as you guys move your way from a 4% margin to more of like a 5% margin, versus sort of some one-time issues happening in this quarter?

Paul Cody Phipps

Brad, it's Cody. I'll just comment, and I'll let Fareed do a bit of a bridge again. Now, first it's completely on strategy. As we have talked, we have a very explicit effort to margin up the business, and one of those big levers is the portfolio, and I think it's been an under-levered opportunity for us. So as we look at things like expanding our industrial footprint and category and then taking a harder stance on lower margin parts of our business, I think that's what you're seeing play into this quarter. So from our viewpoint, it's on strategy and something that we're going to continue to do. Fareed, comments?

Fareed A. Khan

The only thing I would add is that we've been making pretty good progress over the last -- let's call it couple of years, and we see good benefits from the levers. It's still going to remain a very high focus area for us, and as we look at the portfolio mix, as we look at execution initiatives, it's going to continue to be a priority. As you know, the comps are going to get tougher because we saw some pretty solid gains going into the tail end of the last year and the early part of this year. But it's an important lever for us. And as Cody mentioned, the portfolio mix is, I think, playing in here as well with the growth of higher margin categories like industrial.

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

Great. And then if I could just follow up on uses of capital. Obviously, you've brought down the leverage ratio in the wake of the O.K.I. acquisition. That acquisition's worked out very well for you. As we go forward, should we expect you to primarily use the excess cash to buy back stock? Or would you think maybe want to refill the coffers and continue to look for your next potential acquisition?

Paul Cody Phipps

Yes, Brad, we're going to keep a balanced approach to deploying the capital. We're going to return value through share repurchase and the dividend. But again, another explicit part of our strategy is to use M&A to shift and reposition the business. So I think what you should expect from us is a very balanced approach and we're going to look for opportunities to reposition the business to higher growth and higher margin channels and categories.

Operator

[Operator Instructions] The next question will come from Chris McGinnis of Sidoti & Company.

Christopher McGinnis - Sidoti & Company, LLC

Just on the supplier allowance. I know you guys have done a great job, obviously, on that, but does that change as industrial gets to be a higher piece of revenue? Does the benefits from the supplier allowance change in a seasonality basis?

Fareed A. Khan

Chris, it's a good question. One thing I would say about the allowance is the structure of how rebates work does vary by business. And so as the portfolio shifts, you could expect to see shifts from that. The main thing we can do is come back to our supplier partners with growth opportunities, help them reach fragmented market segments that have a high cost to serve, and it's those efforts, opening up markets, allowing them to serve those markets more effectively, that really generates the allowance activities. On a more -- so that's clearly the big picture standpoint, very important part of our business. On a more tactical standpoint, as we saw toward the end of last year, being positioned to be able to take advantage of favorable sort of allowance environments and be able to work with our supplier is very important. So as we go into the tail end of the year, it's going to be an important lever for us. Tough comps, again, because we had such a strong finish last year on the allowance area but as we look at our margin management kind of efforts, broadly, it's an important element to that. We've got a lot of other levers as well and we want to take a balanced approach to it.

Christopher McGinnis - Sidoti & Company, LLC

And then secondly, just on the cost -- kind of the cost savings over the remainder of the year and next year, how do you see that flowing through? And how much do think you'll reinvest maybe a portion of that for the growth initiative?

Fareed A. Khan

I'd say that the -- we're very pleased with the results of the restructuring actions that we took in the first quarter of this year. We did some last year as well. And then the synergies from the O.K.I. acquisition are coming in very favorably as well. So that's giving us the ability to offset cost inflation in other areas of the business while still investing in growth areas. We'll probably deliver more of our synergies and savings to the bottom line this year than we did last year, where we had more investment but it will be a balanced approach. And as we get into the tail end of the year, the integration efforts of O.K.I., for example, pretty much completely done. And so more of those benefits -- cost benefits will flow through.

Paul Cody Phipps

And Chris, it's Cody. I'd just add, you've followed us, you've seen we've had a lot of success with our War on Waste program. What we see now is that as the channels blur, it's giving us more opportunities to rethink our network and think about how we deploy our distribution network. And I think that's going to open up some additional opportunities for us as we think about repositioning the business.

Christopher McGinnis - Sidoti & Company, LLC

Sure, it makes sense. And then just one, quick one maybe just with the pending merger, is there anymore -- I know when we -- I think we last talked, it was just announced. Any more thoughts around that? And how it's either positive or maybe negative for you?

Paul Cody Phipps

No new thoughts. I think our position remains the same, which is that should provide an upside opportunity for us. We believe we're the best partner for that combination and would welcome the opportunity.

Operator

Our next question will come from Greg Halter of Great Lakes Review.

Gregory W. Halter - LJR Great Lakes Review

Regarding the share repurchase, number one, I wonder how much is left under that program currently.

Fareed A. Khan

We continue to be in the market and share repurchases, about 36 million available in our current plan. But as you know, this is something that's a key part of our capital deployment and we expect to continue to have that part of our program. But in the current authorization, there's about 36 million shares.

Gregory W. Halter - LJR Great Lakes Review

Okay. That doesn't seem right. Didn't you -- in May, wasn't there another $100 million share authorization granted by the board?

Fareed A. Khan

Yes, let me be clear. The board -- I apologize for that, the board approved $100 million recently with our current 10b5 plan that's in the marketplace, we have about 36 million to go through and so...

Gregory W. Halter - LJR Great Lakes Review

Got it, okay. And so under that plan, you can continually buy based on certain limits. So I presume you would continue to be buying here into the third quarter?

Fareed A. Khan

We'll continue to be in the market. The way the plan is structured as -- we set tiers, if you will, and the rate of purchases go up or down, depending on where the stock is. It's not something we sort of manage on day-to-day basis.

Paul Cody Phipps

We don't try to time it. It's all done through a 10b5.

Gregory W. Halter - LJR Great Lakes Review

Right, right, okay. Your private-label business, what percentage of that is of your total revenues and how is that doing these days?

Fareed A. Khan

It's roughly about 16%, 17% of our total sales. The percentage of private label varies by business and by product category. I would say essentially, pretty stable trends there. We support the brands that we have with our suppliers obviously, and it is positioned as an alternative product or just an additional offering. So it's an important part of our business. We balance that with the support of manufactured brands as well and different roles in different parts of the business.

Gregory W. Halter - LJR Great Lakes Review

All right. And I know you've made some comments about capital allocation but just wondering on the M&A side, if there's any particular areas that are more attractive than others? And I guess I would say it's probably the industrial and the janitorial, sanitation breakroom but just wanted to get your thoughts on that.

Paul Cody Phipps

Yes, Greg, you're correct on that. As we look, we're very attracted to that marketplace, because of its size and fragmentation, we see both potential tuck-in opportunities and potentially new business opportunities. So that's certainly what we would call a target-rich environment and more of our focus is going there but there's still some remaining opportunities in the Jan/San space as well.

Gregory W. Halter - LJR Great Lakes Review

Okay. And you broke out or you kind of broke out the breakroom product side being still small. Can you characterize that? How small that means? Or how big that means relative to Jan/San or the total company currently?

Fareed A. Khan

We're not going to get into that type of detail but what's interesting about the category is that our resellers, particularly our office products resellers, view breakroom as kind of an interesting growth opportunity for them. If you go back a few years, that's how they view the janitorial and breakroom segment. And we've been seeing pretty strong growth rates as they diversify their offering. Because they're already calling on these businesses, they already have many of the relationships, and it's a natural to add on janitorial products. And now they view kind of snacks, coffee, sodas, those types of categories as being incremental growth opportunities. And to Cody's point in his comments, breakroom fits very well with this idea of business essentials, small order sizes, need for rapid fulfillment, complex SKUs, and so we feel we've got a very good business model to be able to expand that category and be relevant in. And we have a reseller base of current customers that are viewing this as a pretty important growth opportunity. And they're coming in with very strong capabilities that they've honed over the years, competing with some large players. And they seem to be going into these new categories and doing very well.

Paul Cody Phipps

And Greg, I'd just add, we brought in some new talent into that category. It's really -- and that talent's brought compelling new opportunities to us. And we also see that our supply chain is really well suited for the category. So we think we can bring some really leading edge distribution capabilities to this category.

Gregory W. Halter - LJR Great Lakes Review

And there's definitely nothing worse than going down to the pop machine for a 3:30 p.m. Pepsi and its empty. One last one for you. I don't believe you have any convertible debt or bonds or anything but we've certainly noticed that the short position of the stock, about 4 million shares, seems awfully high and certainly relative to the other company's we cover. Do you have any inclination of why that may be? It just seems very odd.

Fareed A. Khan

You're right on the first comment. On the second, I really don't know if we have any sort of official comments we want to make. I mean, it is what it is.

Operator

[Operator Instructions] Ladies and gentlemen, this will conclude our question-and-answer session. I'd like to turn the conference back over to Cody Phipps for his closing remarks.

Paul Cody Phipps

Thank you, Denise. Fareed, Todd and I, thank you for being with us this morning. Let me leave you with some final thoughts. We had another quarter of solid results. Our strategic initiatives are working. We are in a solid financial position and we continue to strengthen our purpose driven culture. Our operating priorities for the rest of the year remain unchanged. We will maintain our focus on execution to ensure solid results. We will take the necessary actions to reposition our business in this rapidly changing environment. We will continue to invest in our long-term success and we will make further progress on building the organization and the capabilities that will enable our customers to succeed. We look forward to speaking with you again in October to give you a progress report on our third quarter. And with that, I'd like to thank you for your time with us here today.

Operator

Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.

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