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Republic Airways Holdings, Inc. (NASDAQ:RJET)

Q1 2014 Earnings Conference Call

May 1, 2014 11:00 a.m. ET

Executives

Bryan K. Bedford - Chairman, President and Chief Executive Officer

Timothy P. Dooley – Chief Financial Officer & Executive Vice President

Joe Allman – Treasurer and Vice President, Financial Planning & Analysis

Wayne Heller – Chief Operating Officer;

Matt Koscal – Vice President, Human Resources

Analysts

Richa Talwar – Deutsche Bank

Duane Pfennigwerth – Evercore Partners.

Elie Mishaan – Corsair Capital Management

Glenn Engel – Bank of America Merrill Lynch

Richard Haydon – Yield Capital Appreciation Partners

Bob McAdoo – Imperial Capital

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2014 Republic Airways Holdings Earnings Conference Call. My name is Sheila and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over now to Tim Dooley, Chief Financial Officer. Please proceed, sir

Timothy Dooley

Thank you, Sheila. Good morning everyone. Welcome to the first quarter 2014 conference call. On the call today I’m joined by Bryan Bedford, our Chairman, President and CEO; Wayne Heller, Chief Operating Officer; Joe Allman, who’s our Treasurer and Vice President of FP&A; Ryan Willman, Vice President and Corporate Controller; and our newest executive, Matt Koscal who is our VP of Human Resources.

Before we get to the prepared comments, here is our Safe Harbor disclosure. Please note that the information contained in our earnings release and this call contains forward-looking information as defined by the U.S. Securities laws. Forward-looking information is subject to risks and uncertainties and we refer you to a summary of risk factors contained in our most recent filing with the SEC.

And now I’ll turn it over to Bryan.

Bryan Bedford

Thank you, Tim, and thank all of you for joining us for our first quarter 2014 earnings call. I want to take a minute to introduce the newest member of our executive management team, as Tim mentioned, Matt Koscal, who’s recently joined Republic as our Vice President of Human Resources. Matt has extensive experience in leading cross functional change initiatives within the pharmaceutical industry and we very much look forward to utilizing Mark’s unique skillset to ensure we are taking care of our most important asset, our people.

Let me spend a few minutes expressing my gratitude to all of our team members, from our flight crew and maintenance technicians, to our dispatchers and back office support team. I’m certain this past quarter will go down in the record books as one of the worst winter weather seasons in several decades. Certainly our operation was not immune from significant disruptions and we estimate the negative impact of weather on our pretax earnings was roughly $7million for the quarter. We cancelled nearly 13,000 flights during the first quarter. To put that into perspective, that’s about the same number of flight cancellations we incurred over the entire first nine months of last year.

In addition to the severe winter weather, this was also the first quarter where the new flight and duty time regulation, that’s FAR 117, became effective. Needless to say our operation team was certainly under some stress throughout most of the quarter. Yet despite these headwinds our flight crews, our mechanics and all of our other operational support personnel remained vigilant, maintaining safe operations and providing outstanding customer service. The leadership team is very grateful for the commitment of our team and the dedication to our mission of providing safe, clean and reliable service to our passengers and our major airline partners. So again on behalf of the entire senior leadership team, thank you for your continued hard work.

As we discussed on a previous call, you are certainly aware of the tough decision that we made during the quarter to accelerate the removal of 27 small jet aircraft with United and American. While both of these CPA contracts were scheduled to terminate later in 2014, we had hoped that we’d be in a position to extend these aircraft under continued fixed fee relationships with our partners. However, our crew staffing models made it clear that we would not be able to maintain this service and continue to grow our business with E175 flying in American. 12 of the small jet aircraft operating for United were parked on April 1st. Seven of 15 small jet operating for American were removed in March and April, and the final eight small jets at American will be remove from service and parked between June and August of this year.

Of course we are not content with the thought of having 27 idled aircraft sitting around for the remainder of the year. The management team has been focused on mitigating our exposure to these grounded aircrafts. I’m happy to share with you that we’ve sold one Embraer 145 aircraft during the quarter, for a gain of $1.8 million. Additionally we fully impaired 11 of the 27 aircrafts scheduled to be removed from service, as we expect these Embraer 140s to be permanently parked. The impermanent resulted in a charge of $19.9 million during the quarter. On the good news side, these aircraft are covered under our Chautauqua restructuring agreement, which will effectively make these aircrafts cash neutral to our business plan. The expected increase in subsidy under the restructuring agreement results in an $18.4 million gain in our non-operating income and expense.

And I’m pleased to report we are also in advanced discussion with several parties to sell or sublease the remaining aircraft. So while we were certainly not pleased with the prospect of having idled aircraft, we’re somewhat bullish that these 27 aircraft will not be a drag on earnings or cash flow beyond the end of this year.

Now despite the significant pull down on our small jet operations, our E175 operation continues to expand. We’re growing by roughly two aircraft per month throughout 2014. This results in an operation that’s roughly 10% larger in ASMs and 5% to 6% larger in terms of block hour production over 2013 even after considering the removal of these small aircraft.

Crew resource challenges continue to be on the forefront of our minds and that of the entire regional airline industry. In fact I just returned last night from testifying before the House subcommittee on transportation and infrastructure and I’ll share some of those thoughts about the hearing at the end of our call.

On the topic of the failed TA, we believe that agreement was a significant step in the right direction for all of our pilots. At a time when other carriers are seeking significant concessions, our proposed agreement included increases in pay, significant improvements in work rules, quality of life enhancements and more flexibility in scheduling. Despite that an overwhelming majority of our pilots rejected the proposed agreement, which of course is very frustrating for us. I really don’t have any more information to share with you on this point. We have had no further discussions with IBT Local 357 since the results of the vote were announced nor are any mediating sessions scheduled. Unfortunately we just don’t anticipate a quick resolution of this situation.

With that, let me turn the call over to Joe Allman to cover some highlights of our financial results for the quarter. Joe?

Joe Allman

Thanks, Bryan. We’re certainly pleased with the financial results in the quarter, despite the weather head winds that Bryan mentioned. So for the quarter, we’re reporting income from continuing operations of $14 million or $0.26 per diluted share. This result is just above the top end of our guidance range. As most of you are aware, Republic purchases and debt finances most of its E-jets. Accordingly we don’t anticipate paying a significant level of federal cash taxes in the very near future. Most of this is due to the tax phase’s differential in our tax depreciation and book depreciation. So if you consider our earnings on a pre-tax basis, we reported $22.8 million or $0.42 per diluted share. Of course these results include the negative effect of weather of roughly $7 million and the three other items Bryan mentioned related to our small jet fleet. The net impact of the three small jet transactions was only $0.3 million. So if you add back the weather we generated pre-tax earnings of approximately $30 million for the quarter.

For the quarter, operating revenues increased $12.8 million or 3.9% versus the first quarter of 2013. The increased revenues during the quarter relate to our additional Q400 flying for United and the E175 growth at American Eagle, our American Eagle operation. These were offset by fewer E190 aircraft operating under the prorate operations at Frontier and the removal of certain pass-through revenues related to landing fees which Untied begun paying directly in 2013. We operated our last flight for Frontier in early February and the five E190 aircraft operating under the prorate agreement with Frontier are scheduled to be leased offshore by the end of this year.

During the quarter we took delivery of five E175 aircrafts for our American operation. We anticipate taking delivery of the six E175s in second and third quarters of 2014 and seven aircraft in the fourth quarter. The final four aircrafts will be delivered in the first quarter of 2015. That’ll bring us to the total fleet counts of 47 at American.

We ended the quarter with total cash of $303.3 million, of which approximately $276 million was unrestricted. Our restricted cash balance of $27 million relates to charter escrow payments and a few cash collateralized letters of credit. Our total debt, including current maturities increased $57.5 million to $2.2 billion. The net increase in total debt relates to new financings obtained on our E175 deliveries for American. During the quarter, we made scheduled principal payments of $58.1 million. Our CapEx for the quarter was roughly $131 million.

And with that, I think we’ll turn the call over to Tim who’s going to give you an update on our guidance and some more information on the full year 2014. Tim?

Timothy Dooley

Thanks Joe. As you know, we announced in early April that our board had authorized management to utilize up to $75 million of unrestricted cash to buy back common shares and or early retire convertible debt over the next 12 months. Under the authorization the company is authorized to repurchase up to $50 million of common shares and early retire up to $50 million of convertible debt or any combination of those two up to a maximum of $75 million. I’m pleased to share with you that we’ve already settled one of our convertible notes for $22.3 million in early April. So going forward this will remove about 2.2 million shares from our diluted share account.

As you may recall, the full year guidance that we issued on our last call included the economical provisions related to our tentative agreement with our pilots. However, given the failed ratification of the TA and the unlikely prospects for a resolution this year, we have removed that economic effect. So to be clear, the guidance I’m about to provide includes the removal of the expected pilot wage increases under the TA. Also the reduced level of small jet flying at United American and as well as that the related costs associated with our parked ERJ aircraft. It also assumes a reduced share count, assuming that our share repurchase program is fully utilized in the calendar year 2014. We have quarterly steps that you can find on our website that assume we continue to grow our E175 operations in American and have no further operational pull downs to crew resources.

So for the full year 2014 we currently expect operating revenues in the range of $1.35 billion to $1.4 billion. That’s unchanged from our previous guidance. Our full year pretax margin increase is to be between 7.5% to 8.5%, and that results in an earnings per share in the range of $1.20 to $1.40 per diluted share. Assuming again that we utilize the full remainder of our share repurchase authorization, we will expect our unrestricted cash balance to decrease by yearend 2014 to $195 million to $205 million. And that drop in cash from our yearend 2013 balance certainly relates to a significant investment in new E175 aircraft as well as the assumed full utilization of the share repurchase authorization this year.

As Joe mentioned, given the structure of our debt financings and the depreciation policies for our aircraft, we do have a sizable mismatch in our noncash aircraft depreciation expenses and our scheduled aircraft principal payments. And in 2014 our scheduled debt payments will exceed our book depreciation by roughly $60 million.

Turning to our guidance for Q2, we expect operating revenues in the range of $340 million to $350 million. We expect a pretax margin range between 7.5% and 8.5%, and that should produce earnings per share in the range of $0.30 to $0.35 per diluted share. We expect to see our unrestricted cash balance to decrease by at least $22 million to a $250 million to $255 million range. This of course includes the settlement of the convertible note that was done in early April. I’d like to clarify though that we do expect to utilize more of our share repurchase authorization in the second quarter. However, the guidance I just provided does not include an assumption for additional usage. So we would expect our unrestricted cash to decrease as we utilize more of our authorization.

So now I’ll turn the call over to Bryan for his closing remarks. Bryan?

Bryan Bedford

Great. This certainly was not the message for 2014 we’d hoped to share with our owners at this point in the year. I want to understate the challenges we face moving forward along with the rest of the regional industry. Increasing earnings guidance as a result of our failure to ratify a new collective bargaining agreement with our pilots frankly is a pirate victory. As we celebrate our 40th year of operations on August 1, we must continue to take a long term view of how to ensure Republic and its 6,300 team members are well positioned to remain successful for another 40 years.

That now includes the short term step backward as we remove small jets aircraft sooner than we would have otherwise preferred. We continue to believe that Republic is well positioned in the industry and once we can reach a reconciliation with our pilots on a fair CBA, I’m very optimistic that we can return to an even higher sustainable growth rate. There are certainly many opportunities in our space, but we simply need to be pulling in the same direction with all of our crew members to achieve a positive outcome.

With that, that’s the end of our prepared remarks. So Sheila, we are ready for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Mike Linenberg of Deutsche Bank. Please proceed.

Richa Talwar – Deutsche Bank

Hello everyone. It’s actually Richa filling in for Mike. First, I just wanted to ask about the American airlines business that’s up for grabs. On their call last week they mentioned that they are in discussions with a few providers replacing those E175 aircraft. Is it fair to assume that you are not able to even potentially bid for that business because of the uncertainty around your pilot costs? It sounds like based on what you said Bryan, the answer is yes, but I just wanted to confirm that.

Bryan Bedford

That’s a fair assumption.

Richa Talwar – Deutsche Bank

Okay. And then regarding your discussions with the pilots, is there a timeline for restating the negotiating process that you could share? I know you said nothing this year, but should we expect it to be a 2015 event, 2016? How should we think about that?

Bryan Bedford

The reality is we just aren’t in control of when we’re going to reengage with Local 357. They are. So we’ll wait to hear from them. If they want have further conversations, the door is open and I really can’t offer you much guidance other than we’re just going to have to wait to hear from them.

Richa Talwar – Deutsche Bank

Okay and then if I could just squeeze one more in, on the convertible notes that you redeemed in April, could you tell us the coupon that was underlining that note? And second, can you tell us what’s left in terms of convertible debt on your balance sheet and the coupon rates underlying those notes? Thanks.

Joe Allman

Richa, the coupon was an 8% on that at a convertible price of $10. Going forward we’ve got roughly $27 million of convertible notes left at a coupon of 6% convertible at $10.

Operator

And your next question comes from the line of Duane Pfennigwerth of Evercore. Please proceed.

Duane Pfennigwerth – Evercore Partners.

Hey guys, good morning. I wonder if you could just expand a little bit on the impairment and the gain. Can you just explain those two things?

Joe Allman

Certainly. This is Joe speaking. So on the 11 E140 aircraft, we basically took those down to a net book value of zero. Any residual that was left on the books from our impairment in 11 was further reduced at this impairment. The gain results to a fair value mark to market on our restructuring asset and it essentially is a reflection of the increased cash flows under the restructuring agreement that we were able to secure in 2012. And that’s about as much as we can get into with respect to the gain.

Bryan Bedford

Bottom line Duane is aircraft brought down to zero and we increased the subsidy that we’ll get. Those aircrafts are now cash neutral for us going forward.

Duane Pfennigwerth – Evercore Partners.

Okay. So between these two moves maybe depreciate -- just considering these two things, depreciation lower, amortization of that asset higher. Is that so maybe net neutral kind of D&A?

Joe Allman

That’s right.

Duane Pfennigwerth – Evercore Partners.

I’m really interested in the market that there’s any bid for E145s out there. Could you just add some detail and how likely is it that we see more of this? Is it a part out opportunity? Who’s buying 145s?

Bryan Bedford

The airplanes are actually priced at a level that makes them attractive to a number of different users. Some are putting them into dedicated charter service. Several of them are going offshore in supporting other airline initiatives that are out of the scope of the US marketplace, so just lots of different uses. No gigantic orders. These are generally sort of two to four aircraft type transactions, but the pricing on the 145 is fair and these aircrafts are all sister ships and they’re in great condition and they’re covered under fully paid for maintenance reserves on the engines and LLPs, so actually quite desirable.

Duane Pfennigwerth – Evercore Partners.

What’s the number that are parts that you could potentially sell if there’s a market for these assets?

Bryan Bedford

Again I think our rating comments were somewhat bullish that we’ll have all these aircraft resolved by the end of the year.

Duane Pfennigwerth – Evercore Partners.

Okay and then just sneak one more in. Tim, can you talk about CapEx for 2015 and for payments for 2015? it just feels like, if we assume a no growth scenario that CapEx comes down a lot and potentially the cash flow available to do more shareholder returns, I don’t know. Can you just expand on that?

Timothy Dooley

So Duane, we’re taking five aircrafts in 2015. I’m not going to get into specific numbers, but as you’ve deduced the level of CapEx into aircraft is going to be less than 2015 and absent the share repurchase in 2014, the cash flow of the business is neutral. So yeah, you would expect the business in 2015 absent anything with labor, absent anything with further pull-down of operations to produce more cash.

Operator

And your next question comes from the line of Elie Mishaan of Corsair Capital Management. Please proceed, Elie.

Elie Mishaan – Corsair Capital Management

Hey guys. Congrats on a good quarter despite the weather headwind. I think the last question was actually pretty close to what I was asking basically free cash flow presumably if you are not receiving 25 jets next year, which is a fair assumption at this point, that free cash flow will be pretty significant, especially without the CapEx. So has the company thought about what it would do with it? And I guess part of that question is, should we assume that all of that incremental free cash flow is available to management to do what you what to do with it, whether there’s an opportunity to grow, whether it’s returning it to shareholders etc.? But that cash flow should be available free and clear next year, right?

Bryan Bedford

Yes is the simple answer and certainly it will go to the highest and best use for the benefit of our owners. I think it’s premature sitting here today to guess what that might be. But we can certainly look at how we are behaving currently and deduce where we might go from here.

Elie Mishaan – Corsair Capital Management

Okay, great. And in terms of the American jets and just other business that’s out there in general, is there any potential that it makes sense to go after some larger jet business and think about parking more lower margin smaller jets?

Bryan Bedford

Yeah. It’s certainly on our radar screen. Obviously small jets don’t produce let’s call it big margins and in some cases don’t produce margins at all. So transitioning scarce resources from lower margin business to higher margin business is certainly something that we are working on here.

Operator

Your next question comes from the line of Glenn Engel of Bank of America. Please proceed.

Glenn Engel – Bank of America Merrill Lynch

First question just on the labor side. What is the turnover right now of the pilots? Are you able to hire new pilots without a new contract? And is there a risk that you’ll be short pilots for your schedule by the end of this year?

Bryan Bedford

Right now, Glen, we are essentially hiring for attrition so we are neutral on pilots which is what we need in order to continue to execute. We do see our partners have significantly peaked our July and August schedules. Of course then they de-peak in September and beyond. So I’ll tell you, it’s tight for July and August. So we just need to continue to hit our recruiting targets.

Glenn Engel – Bank of America Merrill Lynch

But you’ve been still able to recruit even with current contract?

Bryan Bedford

Yeah. I’ll actually touch more on that in my closing comments.

Glenn Engel – Bank of America Merrill Lynch

And then the final question I have is really on reliability in the first quarter. The FAR seems to have meant that when operations are bad, everybody struggles a lot more. Now the winter weather was severe, but we are going to have thunderstorms as well in the summer as well. So are we going to find that the reliability issues and cancelations are just going to be elevated throughout the year whenever there’s bad weather, not just because there’s bad winter weather?

Wayne Heller

This is Wayne. Yeah, that possibility exists but I would qualify that with -- we’ve been a East Coast centric airline for a while. So we’ve been dealing with this and we’ve taken the appropriate steps to help mitigate the effects of part 117. So we are holding our own when it comes to weather and the new regulation.

Glenn Engel – Bank of America Merrill Lynch

And where are we in terms of the maintenance cycle? I guess the older plans with the heavier maintenance, the E145s are going out. That’s good for maintenance. When do the 70 seaters start going through pickup in maintenance cost for you?

Joe Allman

Yeah. So Glenn, the 70 seaters, we have some new and our oldest are about 10 years old. So the heavy event, the life limited part is on the engine. That’s going to start happening over the next two to call it seven years. So there is a timeframe where expenses will be greater on those aircraft in our five year business plan.

Bryan Bedford

Of course some of those are covered under pass-through agreements with our partners as well. So there’ll be a pickup in revenue that’ll offset it.

Glenn Engel – Bank of America Merrill Lynch

With the shift away from the 50 seaters, the maintenance line should be a good guide in 2014 and possibly 2015?

Bryan Bedford

Again we’re growing. So as we’re growing revenue, when we’re growing block hours, we’re going to grow maintenance expense. So I don’t know on an absolute basis that it’s down, but on a unit cost basis it will be.

Glenn Engel – Bank of America Merrill Lynch

That is what I meant. Okay, thank you

Operator

Thank you and your next question comes from the line of Richard Haydon of at Yield Capital. Please proceed

Richard Haydon – Yield Capital Appreciation Partners

Good morning. This is more an observation than a question. There’s this question that I was going to ask that’s been asked twice already. But I think in perhaps a reconsideration of the cash flow development over the next couple of years would be a great benefit to listeners of this call and for future investors. So I would encourage you to think about making those numbers available in the future.

Bryan Bedford

Thank you, Richard.

Richard Haydon – Yield Capital Appreciation Partners

Okay.

Operator

Your next question comes from the line of Bob McAdoo of Imperial Capital. Please proceed.

Bob McAdoo – Imperial Capital

Hi guys. Good quarter. Just a couple of things. The restructuring agreement in 2012, is that a piece – let’s make sure I’ve got this right, that’s a piece tied to the overall American Airline bankruptcy and what happened there relative with Embraer. Is that the agreement we’re talking about?

Bryan Bedford

So back in 2012, we restructured our Chautauqua subsidiary, which was all the 50 seat aircraft which operated on behalf of Delta, United and American at the time to lower our ownership costs on the aircraft, the maintenance cost on the aircraft just to try to make them sustainable for the near future. So that’s what we’re referring to when we talk about the Chautauqua restructuring agreements.

Bob McAdoo – Imperial Capital

Did you go back to the manufacturer or how -- you talk about -- as I understand it’s not like you’re talking about the cash, this thing generates cash now because you’re (inaudible). Is that correct?

Bryan Bedford

What it did Bob is that it went to all of our debt and lease holders, essentially marked the aircraft to market. In fact the remaining convertible debt obligation is probably associated with part of the restructuring of all of the small jet lease and debt obligations back in 2012.

Bob McAdoo – Imperial Capital

So that was a situation where there was a certain range was made at that point to reduce costs and whatever, with a subsequent follow on, if you needed it, the cash can come in at this point. That sounds like it was not activated at the beginning of the agreement. Is that the right way to think about it?

Bryan Bedford

Yeah. In fairness it capped our risks on small jets regardless of the duration of our CPA commitments. And again you can probably go back to calls from when we were discussing Chautauqua restructuring, but the way our business was set up, Bob, is Chautauqua was essentially an independent subsidiary with no parent company guarantees or cost defaults or cost realization. So it was really a question of, were we going to continue to operate small jets or are we simply going to shut down that segment of our business completely. By restructuring the business, we were able to continue to keep these aircraft productively employed. So it turned out to be the right thing to do and a good outcome for us, the lessors and the debt holders which is just part of that agreement.

Bob McAdoo – Imperial Capital

Then the other thing, you were talking to Duane about the E145s and you said they’re kind of being priced at a level that makes them attractive to some people, not necessarily what you got out of yours, but what’s the basic range or the ask on an E145 today if somebody wanted one? Not necessarily specifically on a particular airplane, but in round numbers, what are those things? What people are asking for those now that you say is an attractive range?

Bryan Bedford

Bob, if you’re interested in picking one up, call us after the call.

Bob McAdoo – Imperial Capital

Maybe I’ll get three or four and start an airline.

Bryan Bedford

We’re moving them hot so call quick.

Bob McAdoo – Imperial Capital

Okay. We’ll chat later. Thanks.

Operator

Thank you. I would now like to turn the call over to Bryan Bedford, CEO for closing remarks.

Bryan Bedford

Thank you, Sheila. Let me just close with a few thoughts from yesterday’s hearing before the house aviation and infrastructure committee. There was a lot of discussion on the topic of a pilot shortage and the potential effects to air service to small and medium sized communities and whether or not the new first officer flight time experience requirements which were enacted last August have accelerated a shortage. For its part, the general accounting office does not believe a shortage exists and to support these thesis, they point to tens of thousands of licensed ATP holders who are not currently employed in the commercial airline business. And the Airline Pilots Association for its part picked up on that theme to say basically if only regional airlines paid more money, these registered ATP holders would flood back into the market and any potential problem would be solved.

Certainly both of these are reasonable points of view. Fortunately several members of congress present in the hearing also happened to be licensed pilots, including some holding ATP ratings and several thousand hours. They see the fallacy of this perspective that merely holding the appropriate ratings and time requirements does not mean you’re competent to operate on a complex turbo jet aircraft in a commercial airline environment. Last year, Republic vetted well over 2,000 qualified on paper perspective pilots. As we’ve already reported, our intent was to hire 500 new first officers to support both our growth and maintain all of our operations, including the small aircraft. However, we could only find 450 candidates who can meet our standards.

Over the first four months of 2014, we vetted over another thousand qualified applicants on paper and to date have selected 90 to join our team. Now, based on Republic’s experience, I suppose you could say there is no shortage of qualified applicants that can check all the boxes required under the new statute. Be that as it may, Republic is experiencing a shortage of truly qualified commercial airmen and women who can measure up to our standards. And based on my conversations with others in the regional airline industry, I don’t think we’re alone.

I believe many regional carriers like Republic are not just going to hire prospective first officers and place them in our cockpits simply because they can check all the boxes required under the statute. Meanwhile, we do have thousands of truly competent, proficient, well trained young men and women who could meet Republic’s requirements, but are being prevented from fulfilling their career aspirations due to the new arbitrary experience requirements. Our legislators can do better and I strongly urge them not to ignore this issue further as the economic consequence to our country is simply too great.

So with that, I thank you again for your time this morning and we look forward to providing further updates on your company in the next three months. Thank you.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.

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