EnerNOC's (ENOC) CEO Tim Healy on Q2 2016 Results - Earnings Call Transcript

| About: EnerNOC, Inc. (ENOC)
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EnerNOC, Inc. (NASDAQ:ENOC) Q2 2016 Earnings Conference Call August 2, 2016 9:00 AM ET

Executives

Chris Sands - IR

Tim Healy - Chairman and CEO

David Brewster - President

Neil Moses - CFO

Analysts

Patrick Jobin - Credit Suisse

Sean Hannan - Needham & Company

Pavel Molchanov - Raymond James

Monika Garg - Pacific Crest Securities

Operator

Good morning and welcome to EnerNOC's Second Quarter 2016 Conference Call. My name is Beth and I will be the moderator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded.

I would now like to introduce your host for today's call, Chris Sands, EnerNOC's Director of Investor relations. Please go ahead.

Chris Sands

Thanks, Beth, and good morning everyone. Welcome to our second quarter 2016 conference call. I'm joined on today's call by Tim Healy, our Chairman and CEO, David Brewster, our President, and Neil Moses, our Chief Operating Officer and Chief Financial Officer. The press release announcing our second quarter 2016 results and a slide deck that we will reference during this morning's call as a supplement to our prepared remarks are available on the Investor Relations section of our website at investor.EnerNOC.com.

During this call, we will refer to non-GAAP financial measures, including adjusted EBITDA and free cash flow. These are non-GAAP financial measures that are not prepared in accordance with Generally Accepted Accounting Principles. The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure are available on today's press release.

On today's call, we will discuss estimates as well as make statements that are forward-looking under the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These include but are not limited to management's future expectations, beliefs, intentions, goals, strategies, plans, prospects, and any other statements that are not historical fact. These statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied. Additional information concerning these factors is contained in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q available at www.sec.gov. The forward-looking statements made today represent our views as of August 2, 2016 and we disclaim any obligation to update them to reflect future events or circumstances.

With that, I'll turn the call over to Tim.

Tim Healy

Thanks, Chris, and good morning to everyone joining us on the call. We posted strong financial results in the second quarter and made good progress with two of the three overarching goals that we highlighted at February's analyst day. I'll begin with a quick recap of the financial results, and the, David, Neil and I will each discuss one of those goals which you will recall are growing our subscription software business, maximizing demand response cash flow, and ending the year with more than $100 million of cash on the balance sheet.

Starting with the quarter, consolidated second-quarter revenue of 133 million was better than expected and significantly higher than the $73 million of revenue that we recorded in the second quarter of 2015, due primarily to our increased participation in PJM's extended program for the 2015-2016 delivery year, which concluded in May. Consolidated adjusted EBITDA in the quarter was $3 million, up $10 million year-over-year, and at the high end of our guidance range. Looking forward, continued strong performance of our demand response business has resulted in an increased outlook for that business and the Company overall, and we are increasing our full-year consolidated revenue and adjusted EBITDA guidance by $5 million each.

Turning to the growth of our subscription software business, we ended the quarter with $28 million of subscription software ARR, which now excludes ARR related to our utility customer engagement software business unit following our decision to exit that business. On a pro forma basis, excluding utility customer engagement ARR, subscription software ARR was $7 million, or 33% higher on a year-over-year basis and down $1 million sequentially. Subscription software ARR additions in the second quarter came in lighter than planned as the flow of larger deals continues to be lumpy. That said, an improving pipeline, our maturing sales force and strengthening business drivers for EIS point to a better second half of the year.

In addition to the divestiture of a non-core utility services business unit that we highlighted on our last call and subsequently completed in the second quarter, in May, we announced our intention to exit the utility customer engagement software business. We have completed a restructuring of this business unit and it is currently being held for sale. The restructuring eliminated approximately half of the operating costs associated with that business, resulting in a leaner team to service existing contracts. The business has garnered interest from multiple potential buyers, but we won't elaborate further since the sale process is ongoing.

Before I turn it over to David, I'd like to take a moment to acknowledge that Neil is participating in his last earnings call today before he retires. Neil joined the Company more than three years ago as our CFO and has served as both our CFO and COO for the last two years. Neil's tenure has corresponded with one of the most important periods of EnerNOC's history, and he has demonstrated tremendous leadership throughout helping us transform the business into a broader, more valuable platform for enterprises to manage their comprehensive energy strategy.

Neil will be succeeded as CFO by Bill Sorenson, who is joining the Company later this month. Bill has an impressive track record, including serving as CFO of several successful software businesses. He is excited about our future and is energized for the opportunity in front of us. Bill will take over the day-to-day responsibilities as the CFO when he starts, but Neil will remain on board in an advisory capacity until he officially retires early next year. So thank you, Neil, for all of your contributions. I know I speak for the entire team when I say that you will be missed as a colleague and as a friend. We wish you the best and a well-deserved retirement. With that, David?

David Brewster

Thanks Tim, and thank you Neil. It's been a real pleasure working with you over the last few years. Good morning to everyone joining us on the call.

Second-quarter financial results for our demand response business were strong with revenue of $116 million, exceeding our expectation and growing significantly from the $53 million that we generated in the second quarter of last year. This substantial growth is driven primarily by the recognition of revenue from the 2015-2016 PJM extended program that ended in May. Our demand response business generated $28 million of adjusted EBITDA in the second quarter.

Our strong second-quarter results and ongoing efforts to boost the profitability and cash flow of our demand response business enabled us to increase our outlook for this business, as Tim mentioned. We are raising our full-year demand response revenue and adjusted EBITDA guidance by $10 million and $5 million, respectively, and now expect revenue in the range of $303 million to $328 million and adjusted EBITDA in the range of $50 million to $55 million for this business in 2016.

In the second quarter, we continued to make progress optimizing our existing demand response portfolio and simplifying our organizational structure. In other words, we are focusing our resources exclusively on programs that will deliver substantial profit and exiting those that won't, and we are making end-to-end improvements to our business processes to enhance performance and reduce operating expenses.

Within PJM for instance, increased focus on our portfolio of commercial and industrial end-users and a successful sale season delivered an approximately 300 basis point improvement in our splits, which represents a percentage of capacity payments that we share with C&I businesses that provide capacity and therefore is a direct improvement to our profitability.

On the business development front, we announced during the quarter that we expanded our relationship with Consumers Energy, Michigan's largest utility. Under the new contract, Consumers will offer demand response to more of its commercial and industrial customers, delivering up to 40 megawatts of demand response capacity into the mid-continent independent system operator, or MISO, market. This marks the first time at EnerNOC our portfolio will participate in the MISO market. We expect this multimillion dollar five-year contract to contribute nicely to our demand response cash flow growth.

More recently, we announced that we have secured the London Underground, more commonly known as The Tube, as part of our growing network of C&I end users in the new capacity market in the UK. The Tube is the largest consumer of electricity in London, and its addition to our network was part of a strong first-half effort in which we secured more capacity commitments in the UK than planned. The UK capacity market starts in earnest next year, and while demand response is expected to represent only a small percentage of total capacity at the outset, favorable market rules and a strong national interest in clean energy sources suggest that demand response could ultimately contribute a meaningful percentage of the UK's total capacity. We are excited about our early progress in this market that holds promising long-term potential.

Lastly, PJM held the base residual auction for its 2019-2020 delivery year during the second quarter. As many of you are probably aware, pricing in that auction was low relative to the previous two base residual auctions, which both featured healthy year-over-year increases in pricing. Relative to last year's auction for the 2018-2019 delivery year, pricing in the most recent auction declined in the mid-30% range. Notably, despite that pullback in pricing, it is still modestly higher than pricing in the current 2016-2017 delivery year, which began in June. Total demand response volume cleared in the auction remains strong at more than 10,300 megawatts compared to approximately 11,000 megawatts in the last few auctions.

Our CLEAR volume was very consistent with the approximately 3,000 megawatts a year that we have cited as our target in the past. From a product perspective, due to limiting pricing separation between the two products, the vast majority of total CLEAR demand response, 94%, was in the summertime based capacity product with 6% clearing in the annual capacity performance product. Demand response resources and portfolios will migrate to the capacity performance product in a more meaningful way beginning with next year's auction, and we look forward to participating in that auction.

In summary, the first half of 2016 has been very constructive for our demand response business, building upon the momentum that we received from our Supreme Court victory in January. The team is focused and invigorated to build upon our global leadership position in demand response and we are well-positioned to achieve the multi-year cash flow targets for this business that we articulated at our analyst day in February.

And with that, I'll turn it over to Neil.

Neil Moses

Thanks, David, and thank you to everyone participating in today's call. My commentary will follow along with the slides we posted to our website this morning.

Starting with Slide 4, second quarter consolidated revenue of 133 million was 60 million higher year-over-year due to significantly higher demand response revenue, as both Tim and David mentioned and as I will describe in greater detail in a moment. Consolidated adjusted EBITDA of $3 million in the quarter was $10 million higher year-over-year.

Gross margin of 39% declined year-over-year due to the larger mix of demand response revenue, but the higher revenue more than offset that decline as gross profit increased by $12 million year-over-year.

Second-quarter operating expenses of $61 million, excluding restructuring charges and a gain on sale, were comparable to the prior-year period. And GAAP net income was slightly positive in the quarter, equating to zero diluted earnings per share compared to negative $0.66 per share in the second quarter of last year.

Relative to guidance, earnings per share in the quarter was higher due to the adjusted EBITDA beat and a larger than anticipated gain on sale related to the divestiture of a non-core utility services business.

Turning to Slide 5, software segment revenue was $16 million in the quarter compared to $20 million in the second quarter of 2015. This year-over-year decline was due to divestitures in our professional services business that took place in the fourth quarter of last year and early in the second quarter of this year. Excluding that activity, software revenue was higher year-over-year driven by growth in our subscription software revenue.

Procurement solutions revenue was flat year-over-year at $9 million, while professional services revenue of $2 million was also relatively flat on an organic basis.

Software segment adjusted EBITDA was negative $20 million in the second quarter compared to negative $15 million in the prior-year period. This decline was driven primarily by the loss of gross profit from the divestiture services businesses as well as higher year-over-year sales and marketing expense.

On Slide 6, you will find our key subscription software metrics, which are all pro forma, excluding the utility customer engagement software business unit. We ended the second quarter with $28 million of subscription software ARR, which was $7 million or 33% higher on a year-over-year basis, and down $1 million sequentially, as Tim noted. Subscription software ARR per customer was approximately $25,000 at the end of the quarter.

Slide 7 highlights the results of our demand response segment. Second-quarter demand response revenue of $116 million increased significantly year-over-year from $53 million in the second quarter of 2015 while adjusted EBITDA more than doubled to $28 million.

Let me take a moment to elaborate on the large year-over-year increase in demand response revenue. In PJM, we currently recognize revenue upon completion of a program. In the 2015-2016 delivery year that concluded in May, PJM had three programs, one that concluded in September of 2015, and two that concluded in May of 2016. Traditionally, our participation has been heavily concentrated in the summertime program that ends in September. In the 2015-2016 delivery year, we expanded our participation in the extended program in a meaningful way for the first time, and that program concluded this past May. Due to the revenue recognition practice I just mentioned, we booked all of that revenue in the second quarter but did not have comparable extended program revenue in the prior-year period, hence the large year-over-year increase. Excluding PJM altogether, demand response revenue was roughly flat year-over-year.

It's important to understand the implications of a changing program mix within PJM because, as we highlighted at February's analyst day, we expect our program mix to drive an unusual pattern in our revenue over the next two years. PJM revenue is now expected to be north of 170 million this year and as we noted in our analyst day presentation, we expect it to decline to 75 million to 100 million in 2017 before rebounding to more than 200 million in 2018. Pricing in PJM steadily improves over that period and we have relatively stable volume, so the choppy revenue profile is being driven exclusively by our changing program mix.

Additionally, that revenue profile assumes the early adoption of new revenue recognition standards beginning next year. If we do not early adopt, the profile will be even choppier with a much lower 2017 trough, although, notably, there will be no impact to our projected cash profile. I've strayed a bit from my comments on the quarter, but I thought Q2's PJM revenue was good context to remind everyone of the unique profile of our anticipated PJM revenue over the next few years. We want to be absolutely certain that expectations reflect what we have shared on the topic.

Now back to the quarter and Slide 8, where you will find key balance sheet and cash flow data. Free cash flow in the quarter was negative 21 million, comprised of an operating cash outflow of 16 million and capital expenditures of 5 million. Cash flow from investing activities included a net cash inflow of 13 million related to the sale of the utility services business that we announced last quarter and which closed in the second quarter. We ended the quarter with 95 million of cash and remain on track to end the year with more than $100 million of cash on the balance sheet.

Before I end, let me provide an update to our full-year guidance as well as share our outlook for the third quarter. Slide 9 contains our updated outlook for the full year. We are increasing our consolidated full-year revenue guidance by 5 million to a range of 370 million to 400 million as more modest expectations for software revenue, primarily as a result of lower than anticipated sales from the utility customer engagement software business unit, are being more than offset by an improved outlook for demand response revenue. As David mentioned, we are raising our full-year demand response revenue guidance by 10 million to a range of 303 million to 328 million, driven entirely by higher anticipated revenue from grid operator customers.

We now expect software revenue in the range of 67 million to 72 million driven by 30% to 40% growth in subscription software revenue, or roughly 50% growth if you exclude the utility customer engagement software business unit. We are increasing our full-year demand response adjusted EBITDA outlook, which is now 50 million to 55 million, or 5 million higher than our previous guidance range. And our consolidated adjusted EBITDA guidance is increasing by the same amount to a range of negative 35 million to negative 25 million as there is no change to our full-year software adjusted EBITDA guidance.

We are raising our full-year GAAP earnings per share guidance by $0.30 to a range of negative $2.95 to negative $2.60

Slide 10 highlights our guidance for the third quarter. We expect consolidated revenue of $141 million to $161 million comprised of $16 million to $19 million of software revenue and $125 million to $142 million of demand response revenue. Consolidated adjusted EBITDA is expected to be in the range of $15 million to $22 million and GAAP earnings per share guidance is a range of $0.00 to $0.24.

That concludes my prepared remarks, but before I turn it back over to Chris, I'd like to thank Tim and David for the kind words as well as the entire EnerNOC team. I've truly enjoyed my time here and wish the team all the best going forward. I've also enjoyed getting to know many of you on the call today, so thanks to all of you as well. Chris?

Chris Sands

Thanks Neil. Beth at this point we'd like to open up the call for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Patrick Jobin, please go ahead, with Credit Suisse.

Patrick Jobin

Hi, good morning and Neil, wishing you all the best. First question, can you dive into what's happening in the software subscription business? I guess I'm surprised because you entered the year in Q4/Q1 with ARR that kind of supported that 50% growth. I'm just trying to figure out what's happening, also with ARR per customer. Thanks.

Neil Moses

Yes, Patrick it's Neil. I'll start and obviously Tim can chime in if he'd like. Look. I think Tim mentioned on the call that the business is still relatively nascent, and therefore sales are somewhat lumpy. So we definitely had a light quarter in terms of ARR additions. And I think we've talked in the past about the fact that our sales force is sort of approaching maturity in the second half of the year.

So yes, the second quarter was disappointing, no doubt about it. We have much higher expectations for the second half of the year. We believe we have a pipeline to support it, and we think that we are still going to see, as I mentioned in my prepared remarks, roughly 50% growth in the software business from a revenue perspective, excluding the utility customer engagement business which we are holding for sale.

Patrick Jobin

Okay. And then just two follow-ups. One, can you talk directionally on what you are seeing with customer acquisition costs? I guess, if I look at the EBITDA guidance for software, it looks like, even with the lower revenue, you're keeping EBITDA flat, suggests some improving profitability perhaps. So that's one question. And then I'll come back with my last one.

Neil Moses

Sure. I think that, from an EBITDA perspective, you're right. Our guidance on the software side is flat. As we've talked about in the past, we've made some investments in sales and marketing sort of in advance of the demand or in anticipation of demand for the business. And I think we've also mentioned in the past that if we don't see that demand materializing fully as we've expected, then obviously we will address that on the cost structure side. But we are really looking at the second half of this year as sort of a very important period of time to see the trajectory of our software business, and we've built a pipeline that makes us confident that we can rebound from Q2.

Patrick Jobin

Got it. And last one, I realize there's very little you can probably say from the sale process here, divesting the utility customer engagement software unit. Is there any expectation we should have on timing, and anything else you can share beyond a few bidders that are looking at the business?

Neil Moses

We do have multiple bidders for the business, which is a positive. I don't think we can comment explicitly on timing. Certainly our expectation is that that sale process will be completed this year, but I think it's premature to say much more than that.

Operator

Our next question comes from the line of Sean Hannan. Please go ahead.

Sean Hannan

Good morning. Can you hear me? Neil, yes. Also just to echo some other folks, it's been a real pleasure working with you. So just really some modeling questions here. I think that if I'm hearing correctly, the messaging that you really trying to get across to us is that, as we think out to 2017, not that you are guiding to that, but for us to be conscious of the fact that you're going to have a $70 million $95 million headwind that would materialize. Unless we have something that is otherwise really extreme for growth in other areas, you're probably looking at a down revenue year.

Neil Moses

I think that's fair. We certainly expect growth in our software business, but that headwind you described in our demand response business, that's accurate. That's due to pricing that was secured in auctions several years ago. As you know, there's really no impact to cash from that headwind, but I would also say that assumes early adoption of the new revenue recognition standards, as I mentioned in my prepared remarks.

Sean Hannan

Yes, okay. That's helpful. And then secondly, so based on the restructuring, the costs that you've removed, and when I look at the individual line items in your OpEx, directionally, can you give us some indication for what we should be expecting for how that models moving forward?

Neil Moses

From an OpEx perspective?

Sean Hannan

Yes, particularly as least as it compares to the June quarter. Thanks.

Neil Moses

I think what's fair to say is, those costs will be at worst flat and probably more likely down going forward. Obviously, we don't want to give guidance on OpEx for 2015 at this point in time. But certainly if you see our OpEx for the last couple of quarters, it's been relatively flat to down year-over-year. And given the fact that we do have the headwinds that you mentioned in 2017, I certainly wouldn't expect expenses to be increasing in 2017.

Sean Hannan

Okay, that's helpful. And last question I'll hop back in queue. From a DR standpoint, so that was flat year-over-year ex-PJM. You've had some momentum that's been occurring within South Korea. There are some other dynamics that have been in play within -- over Australia and New Zealand. Can you talk to us a little bit more on what we should be thinking about what's occurring in the international environment, any changes there, and any either pushes or pulls in terms of where your optimism is? Thanks.

David Brewster

This is David. No major developments in terms of international markets. We are actively evaluating new markets. As we talked about at our analyst day, we are going to be highly strategic and selective in terms of our international growth opportunities. And as we've said, rather than make a bunch of small bets around the world, we are going to triangulate on markets that have the highest potential for profitable market development. We are looking at a handful of attractive markets around the world in Asia, the Middle East, Europe, Latin America, and we will certainly have more to say about that as we move closer to entering any new markets.

So, in summary, the trajectory stays the same. We are continuing to find fertile ground for us to go and continue to like where we are in markets like South Korea, as you mentioned, and UK, as I mentioned in my prepared remarks.

Operator

Our next question comes from the line Pavel Molchanov, please go ahead.

Pavel Molchanov

Thanks for taking the question, guys. You mentioned a $100 million cash target for the end of the year. I recall, about six months ago, you repurchased a portion of your convert using some of your cash balance. Given that it's still trading well below par, I wanted to ask would you consider repurchasing more of the convert using your current cash?

Neil Moses

Pavel it's Neil. We would consider it and we've talked in the past about being opportunistic there. The convert is trading at a higher rate than it was when we made that last purchase. But we are sort of doing a self-imposed constraint, if you will, in that we'd like to end the year with more than $100 million of cash. Provided we can do that, we will consider repurchasing some convertible debt along the way.

Pavel Molchanov

And then a follow-up to that also use of cash question, you divested part of your software business and another one is currently for sale. Would you consider bulking up using M&A, your core subscription software business, or is that off the table?

Tim Healy

Pavel it's Tim. I don't think anything is off the table. I think we made a number of acquisitions that were very important, very strategic, for us in terms of what we needed on the product side of things. We have spent the last year and a half or more with the integration. And like all M&A, some of the things that we found were exactly what we expected. Others required a lot of focus and a lot of attention in order to make sure that we integrated these products properly. And right now, we are squarely focused on making sure that we are delivering customer success. That's what we think is the number one thing that's going to continue to drive our ability to achieve our goals with our subscription software business.

So, right now, we are a company that has a number of really interesting assets, interesting avenues. We've got over 1,000 subscription software customers that are teaching us new things every day about how they're using the software, what they require to be successful. I think that's really where we need to focus right now more than anything. It's not -- what we are not finding is there are significant product holes at this point in time and we think that probably our focus needs to be on just getting our customers to understand the value that we have been able to provide them with such a rich and robust product. So, I think that probably speaks for itself in terms of where our focus and mindset is right now.

Operator

[Operator Instructions] Our next question comes from the line of Monika Garg. Please go ahead.

Monika Garg

Thanks for taking my question. The first is on PJM. You talked about 2019, 2020 pricing is lower to mid 30% levels. Maybe could you talk about the factors which led to that, and what is the expectation? I know it's hard to predict, but do you think the pricing goes up for 2020, 2021?

David Brewster

Sure. I'll take that. I think your question is why was the pricing down in the BRA that just occurred this May for the 2019-2020 delivery year? There's a lot of factors at play. It's a combination of supply and demand, as it is in any year. For this particular year, I think there was about 5,500 megawatts of new gas-fired peakers that cleared in the market, so there was an increased volume of supply, particularly on the gas side. And simultaneously PJM demand forecast in the auction was lower by about 2,000 megawatts.

So that's what shifted the price down to where it cleared in the 2019-2020 delivery year. And with regard to your second question about our projections for the next auction, we've seen research out there that speculates, but we are not going to speculate here, and we will move as we get closer to that auction. Just to remind everybody again, that auction is a single product auction, so we look forward to participating in that auction where it's a capacity performance product for all resources.

Monika Garg

Got it. Thanks. And the last one is on the software business. If you look at the software EBITDA loss, it's kind of running at 90% EBITDA loss in the software business. How do you see the improvement in that business on the profitability side going forward?

Tim Healy

I think it's very simple -- continued hard look at our cost structure, as Neil articulated, making sure that the investment that we are making in sales and marketing and in product development activities corresponds to the type of market adoption we are seeing, market readiness, and what features and functions are getting the most traction and generating the most customer success. There's plenty of dialogue, plenty of conversation, and plenty of activity here to do those exact things and make sure that we continue to see that improvement, because we set out a multi-year strategy and multi-year goal to go and invest and create this market, create this whole industry and this whole category. And we did that against the backdrop of some very important cash goals, and those cash goals put pressures and constraints that are very important to us and that keep things in balance and in check. We're going to achieve those cash goals by making sure we get our cost structure in line and making sure that we continue to grow the top line and bring in the revenues commensurate with the investment that we have.

I don't think there's anything magical. There are some CLEAR learnings that we already have through the first six months of the year of some of the things that are driving customer adoption. We find that customers are pretty compelled when we can get in there and be part of the fabric of their organization and do the things that they have to do like manage the payment of their utility bills. We find that compliance activities continue to be a strong driver of growth in why customers need our software in order to comply whether that's local or regional mandatory reporting requirements or any other types of things internally that they're mandated to comply with. These are things that are driving increased interest in having an energy intelligent software platform to help them with those business processes that they have to do, and then what we can do is extend from there.

And we are finding solid pockets of traction and there are definitely areas that I would say late last year and even early this year we found that aren't fertile grounds, and those are some of the things that we are carving out and not continuing to go after anymore. So, I think you will hear continued commentary from us in the quarters to come that suggests that we are refining and getting even tighter with some of that activity.

Operator

[Operator Instructions] As there are no other questions, that does conclude our Q&A portion of the call. I will now turn the time back over to Tim Healy for closing remarks.

Tim Healy

Thank you Beth. And thank you to everyone who joined us for this morning's call. We look forward to updating you again following the third quarter. And happy birthday to my five-year-old son, Tristan. Have a nice day.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using the AT&T Executive Teleconferencing Services. You may now disconnect.

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