Cherokee Inc. (NASDAQ:CHKE) Q1 2017 Earnings Conference Call June 9, 2016 4:30 PM ET
Patricia Nir - Vice President, Addo Communications
Henry Stupp - Chief Executive Officer
Jason Boling - Chief Financial Officer
Jeff Van Sinderen - B. Riley & Co.
Eric Beder - Wunderlich Securities
Dave King - Roth Capital Partners
Greetings and welcome to the Cherokee First Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now turn the conference over to Ms. Patricia Nir, of Addo Communications. Thank you, Ms. Nir. You may now begin.
Thank you. Speaking today will be the company's Chief Executive Officer, Henry Stupp; and Chief Financial Officer, Jason Boling. You can also find accompanying slides for today's call on Cherokee's Investor Relations website.
Before I hand the call over to management, please note that on this call, certain information presented contains forward-looking statements. Certain statements contained herein may contain Forward-Looking Statements for purposes of the Safe Harbor provided by the Private Securities Litigation Reform Act of 1995. When used the words anticipates, believes, expects, may, should and similar expressions are intended to identify such forward-looking statements.
Forward-looking statements included in this conference call involve known and unknown risks and uncertainties that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. A further list and description of these risks, uncertainties and other matters may be found in the company's Annual Report on Form 10-K for the fiscal year 2015 and the company's quarterly report on Form 10-Q.
Given these results and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. The company disclaims any intent or obligation to update any of the forward-looking statements contained herein to reflect future events and developments. Their earnings release is posted on the company’s website at www.cherokeeglobalbrands.com.
And with that, I'll hand the call over to Cherokee’s Chief Financial Officer, Jason Boling.
Thank you, Patricia. Good afternoon and thank you for joining us today. I will start today's call with a brief discussion of our first quarter fiscal 2017 financial results. Henry will then provide further detail about our brands and retailer and wholesaler relationships before we open the call to your questions.
Prior to providing the quarterly results, please note that we will continue to provide certain anticipated operational guidance, which should assist our stockholders and the investment community to better understand our business. We also report on a GAAP basis as we feel this is consistent with best practices. We manage our business using strict financial measures with solid fiscal disciplines.
Our financial performance will from time to time differ from the street consensus. As we have seen over the past few quarters, sometimes higher and sometimes lower. For this reason, we will continue to provide this type of operational guidance and financial information relating to our performance in our public disclosures. We are performing as we expected and we remain positive on the long-term outlook of our business.
Turning now to our quarterly results, GAAP revenues increased 4.4% in the quarter to $10.7 million, compared with $10.2 million in the prior-year period. The revenue increase is due to an increase in worldwide Cherokee royalties in addition to revenue related to the acquisition of Flip Flop Shops. Revenues were not impacted by de-valuations in foreign currencies. The timing of certain retail partner transitions had a minor negative impact on revenue, which I'll touch upon momentarily.
During the quarter, we launched both our Cherokee and Liz Lange brands in Sears Canada. And as stated last quarter, we expect fiscal 2017 total retail sales to be in the range of $20 million to $25 million. We continue to remain cautious on Canada in the near-term given the macroeconomic and foreign exchange headwinds. Our namesake Cherokee branded business with Argos in the UK is growing and experiencing increasing consumer awareness and satisfaction, and we remain encouraged by the strength of the brand positioning.
On a year-over-year revenue basis, we continue to see an impact due to the timing related to Q1 2016 royalties received and related to the termination of the Tesco license agreement in the UK, and the subsequent re-launch of the Cherokee brand at Argos during the third quarter of fiscal 2016. Further, the imminent acquisition of Argos by Sainsbury’s is expected to be completed later this year, and we continue to evaluate the impact of this transaction.
As we mentioned last quarter, we expect total Cherokee retail sales at Argos in the UK to be in the range of $9 million to $11 million for fiscal 2017. Selling, general, and administrative expenses were $6.4 million or 60% of GAAP revenues in the quarter, compared to $4.4 million or 43% of GAAP revenues in the prior-year period.
The $2 million increase in SG&A was primarily related to an increase in professional fees from legal and due diligence expenses from potential acquisitions and increase in business development expenses related to the identification and establishment of new brand licensing in the U.S. and increase in stock-based compensation expenses associated with the franchising and expenses associated with the franchising of our Flip Flop Shops brand, which we acquired in October 2015.
The additional legal due diligence and business development expenses amounted to approximately $700,000 or 6.8% of revenue for the quarter. Our 10-Q filing, which will be filed today, includes additional detail relating to this SG&A, which reduced diluted earnings per share by an estimated $0.05. There were no comparable legal due diligence and business development expenses in the prior-year period.
For the first quarter, operating income totaled $4.3 million or 40% of GAAP revenues, which is down from $5.8 million or 57% of GAAP revenues in the prior-year period. The expenses associated with the aforementioned legal and due diligence efforts and additional business development activities reduced operating margins by an estimated 7% for the quarter. Stock-based compensation expense totaled $600,000, compared to $300,000 in the prior-year period.
The increase in stock-based compensation is partially due to higher stock prices at the equity grant date as compared to the prior-year period, which reduced diluted earnings per share by an estimated $0.02. GAAP net income totaled $2.6 million or $0.29 per diluted share and included the aforementioned expenses, which reduced diluted earnings per share by $0.07. This compares to $3.6 million or $0.41 per diluted share in the prior year period.
We recorded tax provision of $1.5 million, which equates to an effective tax rate of 36.7%, compared to $2 million or an effective tax rate of 36.4% in the prior-year period. At April 30, 2016, our cash and cash equivalents were $5.1 million compared to $6.5 million at January 30, 2016. Net debt for the quarter was $16.3 million and our leverage ratio was 1.6%.
Cash flow from operations was $800,000, compared to $2.2 million for the prior-year period. We remain in a very strong financial position as we continue to support the growth of our global platform and actively explore additional strategic brand acquisitions. Thank you for your time.
I will now turn the call over to Henry.
Thank you Jason and good afternoon everyone. Fiscal 2017 is off to a promising start. A strong portfolio of high equity lifestyle brands coupled with our agile execution platform is allowing us to seamlessly flex with our global partners and scale our business. Over the past five years, we've invested significant resources in building our brand portfolio and global distribution, while strengthening our platform capabilities and broadening our scale.
We have done so from the position of financial strength, while maintaining GAAP profitability and an unlevered balance sheet. Our global footprint now spans over 9000 doors in 50 countries worldwide. The benefits of our true global platform continues to gain meaningful traction and are allowing us to recognize strong growth in key international markets, while navigating economic headwinds and retail transitions.
Our core value pillars; vision, agility, and scale are resonating with our retail and wholesale partners as never before allowing them to leverage our high equity brands and brand building expertise, our ability to launch and rollout programs in record time, and then to scale efficiently and successfully. We are well-positioned to build on our momentum and fiscal 2017. And as we plan for our future, we remain excited about our expanding wholesale and retail partnerships, our growing portfolio of high equity lifestyle brands, and our 360 degree platform of next-generation capabilities.
I will now turn to our first quarter fiscal 2017 brand and corporate development highlights. Starting with our namesake Cherokee brand. We are very pleased with our recent advancements in strengthening and growing our U.S. domestic licensee base. In May, we announced our second phase of multi-category licensing agreements, which build on the Phase I announcements made earlier this year. To cover a multitude of new categories, including women's intimate apparel girl’s underwear, men's and boy’s underwear, infant, toddler, kids, juniors, ladies, and men's hosiery products including socks, slipper socks, tights, legwarmers, leggings and more; and accessories for infants and children including diaper bags, feeding, grooming and bath accessories, lunch bags, and backpacks; and finally men's and boy’s outdoor casual and athletic footwear.
We are currently in advanced discussions regarding future additional partnerships for categories including ladies apparel, ladies and girl’s footwear, adults and children's accessories, home textiles and room decor. And you can expect additional announcements in the near future. Across all categories, we are selectively partnering with fashion industry leaders who are product and distribution specialist in their categories. These partnerships will allow us to continue to satisfy the ongoing consumer demand for Cherokee branded products while supporting further category distribution expansion in the United States.
Through these efforts and those of our near Cherokee licensing partners, we’re pleased to report that we will successfully transition the Cherokee brand in the U.S. ensuring widespread retail availability for the full brands of Cherokee branded products in all major categories starting spring 2017.
At this time, we are targeting availability of Cherokee products in 800 to 1200 brick and mortar stores in addition to digital commerce and further expansion within non-competitive retail channels. This will be a significant achievement one that would not have been possible without the support of the entire Cherokee team, our exceptional licensing partners and of course our loyal customers, whose enthusiasm for the Cherokee brand has stayed strong throughout the world.
Retail sell-through in the U.S. remains robust. Cherokee branded sales at Target have continued to perform well as compared to last year at this time. And current Cherokee inventory levels are positioned to positively impact sales for the second quarter. We continue to expect product availability at Target for most of this year.
I'll now turn to international developments for the Cherokee brand. The benefits of our global distribution platform continue to bear fruit in non-domestic markets and demand for Cherokee branded products in our transnational markets has been strong. Awareness of our Cherokee brand a product lines continue to build throughout the UK and Ireland, particular through our direct-to-retail partnership with Argos.
We remain conservative on the initial scale given its pending acquisition by Sainsbury. In Central Europe, we are quite enthusiastic about the upcoming August launch of Cherokee branded products with Albert stores, a division of Ahold in the Czech Republic. Ahold is a major retail player with over 300 locations across Europe. And with their phenomenal commitment to the brand, we see significant upside opportunity built upon our presence in this important region.
In Canada, we’re committed to our relationship with Sears Canada, those sweeping management changes in currency economic headwinds facing the region have led to softer start than we would have liked. We believe that the diversity and dynamic nature of the Canadian retail environment will continue to create new opportunities for other national players, including Walmart Canada, who continues to deliver impressive growth in its region.
As always, in Canada and other countries were market our brands, we will continue to monitor the competitive landscape and identify strategic opportunities with retailers that have excellent locations and strong digital commerce platforms and growth seeking wholesale partners that can benefit from tapping into our brand portfolio, global relationships, and platform capabilities.
In other international territories, we’re seeing strong growth in Japan, South Africa, Chile, Mexico, and India; each of which delivered double-digit increases in local currency retail sales in the quarter. I will now turn to our Tony Hawk brand, where we continue to expand our global reach by following our long-term strategic growth plan.
Our late fiscal 2016 launch with Sports Direct is tracking well and overall consumer reception is being very positive. Sports Direct is an important platform for expanding the Tony Hawk brand in Europe, and as expected since the launch we’re seeing strong interest among other European retail players and we’ve had discussions with several to expand European distribution of the Hawk Brand.
We’re looking forward with great anticipation to the upcoming summer launch of Tony Hawk with Walmart Canada, which will feature the most comprehensive assortment of Tony Hawk product anywhere in the world. We are especially pleased to partner with Walmart, whose high level commitment to supporting customer engagement through in-store merchandising and event marketing has been exceptional. This launch is a testimony to the strength of the Cherokee model and a great example of how we partner with best-in-class retailers and wholesale licensees to join the leverage and incredible platform of capabilities. This marks our first deal with Walmart and we're focused on building our relationship with them.
Rounding out Tony Hawk, given the current softness being experienced by many domestic retailers, including Kohl's, our U.S. licensee for the Tony Hawk brand, revenues for the brand remained flat at $1.2 million for the quarter. We continue to work closely with Kohl's to split the marketing of Tony Hawk partners and remain positive about the brands overall global growth prospects.
I would now turn to Flip Flop Shops, where sales were moderately impacted by the solid domestic retail performance experience during the first quarter. Flip Flop Shops remains another exciting growth vehicle for Cherokee global brands. Especially as we head into the important summer season. In addition, we will continue to explore strategic global retail partnerships and innovative format and business model expansion opportunities for Flip Flop Shops. For example, we are particularly excited about the world of travel retail, one of the fastest growing retail segments globally shop-in-shop partnerships that will accelerate our scale and give other retailers access to Flip Flop Shops value engineered business model and curated brand portfolio.
Flip Flop Shops is a perfect venue for showcasing the hottest brands and latest styles in footwear and the run way for growth is significant. At the end of the quarter, 90 franchise locations were in operation and the plan will add additional Flip Flop Shop franchise locations will build scale and further synergize our brand portfolio.
Our recently announced license agreement with Cobian footwear to create a collection under our Everyday California brand is a great example. Cobian is a longtime leader in casual footwear, and currently a top performing brand within Flip Flop Shops. The Everyday California collection that we are co-creating with Cobian will debut in Flip Flop Shops in the spring of 2017 and it sets a powerful president for how our brands and business models will logically support one another now and in the future.
In other scale building news, retailers continue to show interest in brining the Flip Flop Shops concept into their brick and mortar locations and we are on track to launch the Flip Flop Shops e-commerce digital platform in the second half of fiscal 2017. The opportunities for Flip Flop Shops outside the U.S. are robust. We are in advance discussions with partners throughout the Middle East and India and we are looking at Latin American and having ongoing discussions in Asia regions, specifically China, Philippines, Vietnam, South Korea, and Japan.
Back to the topic of Everyday California in the U.S., in addition to previously mentioned Flip Flop Shops footwear launch, we look forward to debuting the Everyday California brand and approximately 150 to 250 specialty stores this fall. In other brand news, our Liz Lange brand was recently renewed by Target Corporation in the U.S. and continues to perform commensurate with Target’s recent performance on a year-over-year basis.
In addition, Home Shopping Network continues to be a strong supporter of Liz Lange brand and a flagship platform that will boost sales and drive brand awareness throughout the U.S. And lastly, our Point Cove launch with Hawaiian trends in India continues to perform well and we are expanding the product assortment by adding new categories in the near future. We're also planning the expansion of our proprietary Point Cove brand into new markets through licensing partnerships in the U.S. and abroad.
Point Cove is a great example of our brand creation platform network. We created it entirely in-house and look forward to exploring new possibilities. As Jason highlighted in his remarks, the pace of our business development activities has accelerated and is gaining traction. The current market landscape has created many strategic acquisition and partnership opportunities and with our balance sheet leverage significantly lower than our peer group, Cherokee Global Brands is ideally positioned to take advantage of these opportunities. Of course, we’re committed to maintaining a disciplined approach to acquisitions, which will fit our previously disclosed strategic, operational, and financial criteria.
In summary, we’re pleased with our start to the year and remain confident about our prospects in fiscal 2017 and beyond. We had made significant strides in diversifying our brand portfolio, fully leveraging our capabilities and most importantly growing our global distribution. The results of which are beginning to be reflected in our financial results. We have a clear growth plan and are confident about generating organic growth for many years to come.
Before we open up the call for questions, I want to take a moment to thank our shareholders for your continued loyalty and support. We truly appreciate the time and resources you’ve dedicated to digging in and understanding our business. We’re excited about the future and know that you share our enthusiasm.
And with that we’ll open up the call for questions. Operator?
Thank you. [Operator Instructions] Our first question is from Jeff Van Sinderen of B. Riley. Please go ahead.
Jeff Van Sinderen
Good afternoon. I wonder if you guys can speak a little bit more about the Hawk launch at Walmart Canada, where you think the potential might be there, it seems like that’s considerable new opportunity for you.
Yes. Hi Jeff, it's Henry. So, we are launching at the end of July, we’ve developed the broadest merchandise assortment across product development anywhere in the world, not only for adults and young adults, but also big boys and little boys. Apparel, accessories and footwear with additional category growth planned down the road. We're going to be featured in approximately 400 Walmart Canada stores in a customized retail environment and we’ve developed a fully integrated marketing plan to support it, the plans with which we will start to become publicly available over the next few weeks.
We've done already - and have conducted with Tony who has been in Canada with us, some long lead editorial, we’ve also done short lead editorial, and Tony will be saturating the airwaves at the time of the launch. The product looks great and we believe it is priced right. Walmart is very excited about it and it is happening at a time where Walmart Canada is performing exceptionally well. So, we couldn’t be more delighted by the partnership, the collaboration, the inflow we’ve received from them, and frankly our team has done a great job in really rising to the occasion and introducing what I think is the best offering we've seen in Hawk in quite a number of years.
Jeff Van Sinderen
Okay that’s great to hear. And then maybe if we can shift to the namesake brand transition that's going on, just wondering if there is any more, any new thoughts you have on what the ramp down with Target might look like and then how we should think about the ramp-up of revenues with your new licensing partners next year, any color there would be helpful?
Well we were pleased to see that our performance during the first quarter has remained quite strong with Cherokee brand at Target, and we do monitor several metrics every week as part of our ongoing retail analytics. So, we are looking at averaging our retail, beginning on hand inventories, ending on hand inventories, and as we said in our prepared remarks, there is ample inventory to carry us through the second quarter into third quarter. So, overall we’re pleased with what we're seeing on a week-to-week basis, and frankly in terms of the - as a comparative to banner sales, the Cherokee brand continues to perform extremely well at Target.
In terms of our go forward strategy, simply put we are comfortable that we have the best in class licensees already. There is eight that we’ve announced. There will be an additional phase of licensees that we are in advanced discussion on and we expect to announce in the coming weeks and months. Each one of our licensees are products and distribution specialists who have been identified not only for their ability to join us in the development of exceptional products, but have an ability to service and continually service on an auto-replenishment basis a broader swath of retail than the one legacy partnerships that we have.
In terms of where we’re taking the business, we are targeting between 800 to 1200 brick and mortar stores to launch in addition to digital commerce and what we refer to is noncompetitive retail channels. The licensees are excited, we are excited, and we think that this will be a first full acceptance for our future with the Cherokee brand.
Jeff, this is Jason. I think you can see us today where we could actually generate some revenue from the wholesalers as early as Q4 of this year, largely because they have to ship the product to the retailers starting in spring 2017.
Jeff Van Sinderen
Okay, that’s helpful. That would be great to see. And then Jason just a housekeeping question. As far as SG&A going forward, is there a base number or some sort of metric that we should all be thinking about?
So, if you take out the transaction costs and the business development costs, it leaves you about $5.2 million in total SG&A. I think that number at this point is the best number that we can provide you.
Jeff Van Sinderen
Okay. That is helpful. Thanks very much. I’ll let someone else jump in. Best of luck.
Thank you Jeff.
Thank you. The next question is from Eric Beder of Wunderlich Securities. Please go ahead.
You guys are very busy. Could you talk a little bit …
Eric, it is all about balancing out the business, sorry to jump right in, but…
…when the new management came in five and half years ago, clearly we had a concentration of revenue with one brand and frankly one partner. We've been operating from a stated objective of a goal of one thirds where no one brand or one partnership should represent more than one third of our revenue on a go forward basis. And we've been working steadily towards that goal. So, adding to our portfolio, adding to our distribution mix, balancing our multiple revenue streams across multiple categories has been a critical part of our business philosophy and one that we have been activating for five years now. So, with that said, I'm sorry to jump in. Yes, we have been busy and you can now ask me whatever you want to ask me.
A few things here. So, you recently sponsored a Cherokee brand, recently sponsored a music festival, I believe in Nashville. What should we be thinking about as you transition from Target in terms of what you're going to do with marketing the Cherokee brand and how should we think about that in terms of getting support from your licensees for that?
The CMA Fest, which is starting as we speak is, the first step of a multipronged marketing approach that we plan on expanding as we head into spring and summer of next year. And we will keep it going. So, we believe that the collaboration with Country Music Association is an important one. We had several other music related initiatives that we're planning on supporting festivals are super hot and we plan on participating in certain music festivals as well. In all cases, the marketing investments that are made are usually designed as a quid pro quo with our retail partners, so while we are not expecting our licensees at this stage to contribute we do go to the retailers using a base line revenue target and say if you add the significant activities we’re looking for additional fixtures, additional space, additional promotion. So, it is not to just have a cost with a corresponding revenue to help underwrite the marketing activities as we move forward. We had some significant plans these have been in development for quite some time and we have been getting very good reactions from the licensees and those retail partners who we started to introduce the go forward. In addition from a marketing standpoint, many of the retailers that we are targeting are retailers that have high traffic and as always Cherokee Global Brands focuses on conversion at the point-of-sale. So, you can expect us to continue to make investments in in-store, the in-store experience using our proprietary fixturing package, we’ve had great results in every market where we have introduced it. It really drives sales side conversion, increases the basket and will continue to roll it out as well. And that is something that our group of licensees and our targeted retailers were very excited about.
Okay. Just a structural question. So you are targeting 800 to 1200 retailers in the U.S. with Cherokee, now that’s not the traditional [indiscernible] that's going to come you’re your licensees, so in effect I guess the licensees are driving that because you're going to collect revenue from licensees. So in some respects the final door count is a function of your helping licensees and the licensees doing that themselves? Is that correct?
It is a 100% collaboration between us, the targeted retail partners and the licensees. We've had several joint meetings already. We are going in as a group. It is our way of working. The licensees are working together in a seamless fashion and we attended and help lead and coordinate all these meetings with our licensees. So, our licensee may see it up, or we may see it up, but collectively we all go in and present together and it has been very impactful looking that way. It is really a new future today as we continue to have to deal with the reality of spending resources. Our ability to walk-in in a seamless fashion with a group of very strong licensees and present seamless products with the marketing experience strong consumer insights is what we believe the new array of working with retail. Particularly, in the U.S., which is undergoing a little bit of softness right now.
Great. And a final question, you mentioned Everyday California going into specialty retailers and you have a nice picture of it on your presentation. What type of specialty retailers are you targeting for Everyday California? What is the customer base of retail you are targeting there?
We are targeting specialty, who are in the Action Sport for the full season. Everyday California is not being positioned as a surf brand, it is being positioned as a four season brand, drying on its legacy of California the only state where you can go from surf to ski hills in the same day. We are targeting best in class specialty retailers who could really introduce the brand, make sure it is cool and authentic, and then we will expand the distribution from that point. Our goal right now is to maintain the authenticity, introduce very well-designed products, as a new exciting brand in the marketplace with a very strong D&A. The California D&A, which is very clearly understood. We also tell you that globally, and we didn’t address this in our prepared remarks, the reaction to the EBCA has been quite strong and you could expect additional global partnerships as we move into the next few quarters. Not only internationally, but we anticipate adding additional licensees domestically like I recently announced here with Cobian for Everyday California footwear.
Alright, congratulations and good luck to the rest of the year.
Thank you, Eric.
[Operator Instructions] Our next question is from Dave King of Roth Capital Partners. Please go ahead.
Thanks and good afternoon guys.
Hi. Maybe first off regarding the 800 to 1200 retail door potential and e-commerce for the namesake brand, how are you thinking about or how should we be thinking about royalty rates and GMR's for those new agreements? How do they generally compare with what you receive from Target? And I guess more importantly, you're going to be new categories at Target, didn't offer, how should we be thinking about the ability to offset that revenue received from Target any by when do you think you might be able to do so?
We are focused on a smooth transition for a full depth of branded products for adults and kids. The royalty rate is significantly higher through our - and the contribution will be higher through our wholesale licensee base, remember of course the legacy relationship with Target was established back in 1994. So, in terms of royalty streams, the realty is it may take a couple of years to fully replace and build on the Target minimum guarantees. However, while our manufacturers that can and will contribute to our U.S. sales including not only what we plan on doing with Cherokee, but all the irons we have in the fire with respect to continue opportunities on Tony Hawk, Flip Flop Shops and then all the new channels we plan on introducing with Cherokee and new retailers. So, we’ve worked hard to ensure that we have multiple revenue streams being developed in the United States for all of our brands and we feel that we have a good handle on it and we're moving forward into a strong future.
Okay that’s great color. And then, maybe just one follow-up, in terms of the M&A environment since we haven't really touched on that this quarter, Henry how are you thinking about the opportunities out there? How are you feeling about the bid ask spreads at this point? Obviously there's, it feels like there is a number of companies shedding brands. Does it feel it's improved recently and all, any color there I think would be helpful. Thank you.
Clearly from our disclosures we are spending more resources on M&A activity. We do find valuations are starting to settle down as we expected. There are more brands available in the pipeline than we've ever seen. We will maintain our discipline by selecting brands that fit a series of criteria that we've established. First and foremost we’re looking for brands that are strong not only domestically, but have very strong global opportunity. We are not nor will we be solely focused on the U.S. market and I am most pleased right now that we are seeing great growth internationally at a time where the U.S. market is struggling a little bit in many sectors. That’s something that we worked on very hard over the last few years. In terms of acquisitions, we did say for the last few years that we would be focusing more on stabilizing our current portfolio brands, while we were doing several transactions and that we would keep an eye on our balance sheet leverage to that point in time, where we can transact within reasonable valuations and we feel that time is now.
Fantastic. Thanks for the color and good luck.
Thank you. There are no further questions at this time. And with that ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
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