BELFB - NASDAQ

Good morning and welcome to the Bel Fuse Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Jean Marie Young with Three Part Advisors. Please go ahead, Jean. Please go ahead, Jean.

Thank you, and good morning, everyone. Before we begin, I'd like to remind everyone that during today's conference call, we will make statements relating to our business that will be considered forward-looking statements under federal securities laws. That will be such as statements regarding the company's expected operating and financial performance for future periods, including guidance for future periods in 2024. These statements are based on the company's current expectations and reflect the company's views only as of today, and should not be considered representative of the company's views as of any subsequent date. The company disclaims any obligation to update any forward-looking statements or outlook. Actual results for future periods may differ materially - those projected by these forward-looking statements due to a number of risks, uncertainties, and other factors. These material risks are summarized in the press release that we issued after market closed yesterday. Additional information about the material risks and other important factors that could potentially impact our financial performance and cause actual results to differ materially - our expectations is discussed in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K for the fiscal year ended December 31, 2023, and our quarterly report and other documents that we have filed or may file with the SEC - time-to-time. We may also discuss non-GAAP results during this call, and reconciliations of our GAAP results to non-GAAP results have been included in our press release. Our press release and our SEC filings are all available at the IR section of our website. Joining me on the call today is Dan Bernstein, President and CEO, Farouq Tuweiq, CFO, and Lynn Hutkin, Vice President of Financial Reporting and Investor Relations. With that, I'd like to turn the call over to Dan. Dan?

Thank you, Jean. Good morning, and thank you for joining our second quarter 2024 earnings call. Overall, we were pleased with our second quarter results. The collective work of the global team over the past year has resulted in improved margins, even in a challenging top-line environment. Our sales came in at $133 million, achieving the higher end of the forecast range we provided on last year quarter earnings call. And in relating earnings, we were able to maintain press releases with gross margins well above forecast range. Each of our product groups trended as expected with modest essential growth and connectivity and magnetics - quarter 1 '24 being offset in part by $1.7 million reduction in power sales. We are proud of the excellent results achieved by the team. On the management side, early this month, we welcomed Steve Dawson onto the executive team as the new president of Power Solutions and Protection. Our power group is going through a pivotal transition with AI and e-mobility as long-term growth drivers. And we are excited to have Steve at the helm as these new markets are locked with new opportunities. We would like to thank Dennis for his almost four decades of dedication to Bel and helping achieve the success we have today. His commitment and friendship have been displayed, deeply valued by all of us at Bel, and wish him the best in his retirement. To provide an update on our previously announced $25 million stock buy program, we have continued to make open market purchases of both class of stock. As of June 30, 2024, our program to date purchased a total of $14.2 million, representing 20,600 shares of class A and common stock of 214,900 shares of class B common stock. Lastly, we're pleased for our class A stock to be added to the Russell 2000 Index. In late June, this is a testament to the overall growth of the company and our recent IR efforts, which aided in the class of stock meeting the eligibility requirements for inclusion in this index for the first time in Bel's history. And with that, I would now like to turn it over to Lynn. Lynn?

Thank you, Dan. - a financial perspective, in summary, we saw continued margin expansion on a lower sales base when looking at Q2 '24 versus Q2 '23. Second quarter 2024 sales came in at $133.2 million, representing a 21.1% decline - the second quarter of 2023. The majority of the sales fluctuation was driven by our power and magnetic segments, as we'll discuss further. Our gross margin increased to 40.1% in Q2 '24 - 32.9% in Q2 '23. And these profitability improvements were largely driven by our power and connectivity segments. Turning to some details at the product group level, power solutions and protection sales for the second quarter 2024 were $58.6 million, representing a 32.8% decline - Q2 last year. The decline in sales was mainly due to lower sales of our power products used in networking and consumer applications. On a positive note, we saw continued strength in sales of our rail products, which grew over 40% - Q2 '23, accounting for a $3.2 million increase in sales - Q2 '23. Despite the overall decline in sales, the segment posted a gross margin of 45.7% in the second quarter, reflecting a 1,000 basis point improvement - Q2 '23. We are viewing the Q2 gross margin level for this group to be high and estimate approximately half of this basis point improvement and power margins as being driven by the completion of internal initiatives related to procurement, pricing, and cost containment, and is therefore viewed as sustainable. The balance of the basis point improvement and gross margin versus Q2 '23 relates to items that are either non-recurring or temporary in nature and should not be factored into a normalized view of gross margin for this segment. Turning to our connectivity solutions group, sales for Q2 '24 came in at 57.8 million, up 5.4% - Q2 ‘23. The main growth driver within connectivity was within the distribution channel, where sales were up $2.5 million as compared to Q2 ‘23. Sales into commercial air applications amounted to $15.4 million for the quarter, and sales into defense applications totaled $12 million for Q2 ‘24. Each of these levels were consistent with the respective sales - Q2 ‘23. The year-over-year increase in sales for this group was despite the divestiture of connectivity's check business in June 2023, which previously contributed around $1.5 million per quarter to this segment. The gross margin for this group was 38.9% for the second quarter of 2024, which represents continued improvement - the 37.4% in the second quarter of 2023. This margin expansion was made possible due to the operational efficiencies achieved through facility consolidations that were completed in 2023, along with implementation of contract renewals on more balanced terms. These favorable margin factors were partially offset by minimum wage increases in Mexico that went into effect in Q1'24, and the unfavorable impact of FX related to the peso. Lastly, our magnetic solutions group posted sales of $16.8 million in Q2 ‘24, representing a 37.3% decrease - Q2 ‘23. This reduced sales level was generally in line with the expectations discussed on last quarter's earnings call, and largely related to lower shipments into a large networking customer as they work through inventory on hand. The gross margin for this group was 26.4% for the second quarter of 2024, as compared to 24.6% in the second quarter of 2023. This improvement in margin was primarily driven by lower fixed overhead costs resulting - the facility consolidations in China completed in late 2023, and favorable FX related to the Chinese renminbi versus Q2 ‘23. At the consolidated level across all product segments, our backlog of orders was $304 million at June 30, 2024. R&D expenses were $6 million in Q2 ‘24, a level consistent with Q2 ‘23. We expect future quarters to generally be in line with the Q2 ‘24 expense. Our selling general and administrative expenses were $24.1 million or 18.1% of sales, down - $25.1 million in Q2 ‘23, but up as a percentage of total sales. Within SG&A, an increase in salaries, fringe benefits, and amortization expense were largely offset by lower legal fees. If you recall, we incurred $1.2 million of legal fees related to the MPS litigation in Q2 ‘23, and these expenses did not recur in Q2 ‘24. As there are no unusual items of note contained within SG&A during Q2 ‘24, we view this level of expense as generally indicative of the anticipated run rate for future quarters in 2024. Turning to balance sheet and cash flow items, we ended the quarter with $143.8 million in cash and securities, an increase of $16.9 million - year end. We generated $38.3 million in cash flows - operating activities during the first six months of 2024, and had capital expenditures of$ 4.3 million. - an inventory perspective, the downward trend that we experienced over the past several quarters has continued into Q2', reflecting an $8.6 million reduction - year end. The lower inventory levels were primarily seen in the areas of raw materials and finished goods as we continue to work through our own inventory on hand. I'll now turn the call over to Farouq for additional commentary. Farouq?

Thanks, Lynn. As noted in our last two earnings calls, we anticipated 2024 to be a reset year, and our second quarter and first half results were in line with our expectations. We do expect a slight downward shift as we enter the third quarter. As noted in our earnings release, based on information available as of today, we expect Q3 ‘24 sales to be in the range of $118 million to $126 million. This compares to sales of $159 million in Q3 ‘23. We believe the following factors are the main drivers of Q3 ‘24 sales as compared to Q3 ‘23. At a high level, connectivity is projected to grow a bit. Power is expected to be down approximately $20 million to $25 million, with the remaining $10 million to $15 million decline related to magnetics as it has been going through that correction. Many of the factors contributing to these year-over-year declines in power and magnetics in Q3 ‘24 compared to Q3 ‘23 are not new, as destocking and networking and distribution have been ongoing factors for the past few quarters now. There is, however, one new factor this quarter that will impact us beginning in Q3 ‘24. One of our China-based former suppliers has recently become subject to trade restrictions applicable to it beginning in the second quarter by executive order of the Biden administration. The team has been diligently working to onboard a replacement supplier and thus expect a few quarters' worth of impact given the work needed ahead. It is unclear at this time of the ultimate impact of the supplier change, but for purposes of our Q3 ‘24 guidance, we're assuming a full impact to be on the conservative side. Our sales in Q3 ‘23 that were supported by this supplier amounted to $4 million. These factors are expected to be partially offset by continued strength of our rail and market, which we anticipate will be up by approximately $2 million as compared to Q3 ‘23. When bridging Q2'24 sales to anticipated Q3 ‘24 sales, our power segment is the main driver of the decline, with Q3 sales expected to be down by approximately $9 million due in equal parts to the previously discussed softness in networking, sales impacted by our former supplier, China-based supplier discussed, and lower volume of shipments out of Europe due to the usual European summer break at our manufacturing sites and at those of our customers based in the region. We anticipate modest continued improvement in magnetics in Q3 ‘24 on a sequential basis - Q2 '24, and this is expected to largely offset a lower ship quarter anticipated in our connectivity segment due to primarily the timing of military programs. Turning to our operational initiatives, our team has continued its efforts in maximizing efficiency level at our manufacturing sites globally. To highlight a few initiatives within our magnetics segment, comprehensive product process and facility cost management projects are ongoing at our new manufacturing facilities to better align our magnetics cost structure with anticipated levels of near/medium term future demand for these products. We're also continually exploring other areas of production to better meet customer requirements, including non-China sites. In addition, we had recent efficiency improvements at our signal transformer facility in the Dominican Republic. Shifting to the connectivity solution segment, the facility consolidations completed in the U.S. and U.K. in 2023 have resulted in improved operational efficiencies, contributing to the 150 basis point improvement in this segment - Q2 '23 to Q2 '24. On the restructuring front, the recent initiative to transition manufacturing operations - our Glen Rock, Pennsylvania location to other existing sites is on schedule for completion by the end of 2024. Anticipated annual cost savings related to this initiative are expected to be in excess of the initial $1 million estimate. Shifting over to M&A, the heightened level of activity described in our last earnings call has continued. There's something -- there is nothing to report here today, but the team is actively evaluating a number of opportunities within our existing product groups in support of our growth strategy. Consistent with prior quarters, we'll continue to influence those areas within our control, and we remain very optimistic about Bell's future. I'll now turn the call back over to Dana. Dana?

Thank you, Farouq. Can we open up the call now for questions, please?

Certainly. We will now be conducting the question-and-answer session. [Operator Instructions]. The first question is - Bobby Brooks - Northland Capital Markets. Please go ahead.

Hey, good morning, guys. So, you know, last call, there was a healthy amount of discussion on emerging opportunities, specifically within AI, but also within EV and space. So any color you think would be helpful to hear about that. You know, I understand that these are long sale cycles, but also - my perspective, it seems like stuff within AI is moving quite fast. So, am I right in thinking that those sale cycles could become shorter? Thank you.

Yeah, thanks, Bobby. I appreciate that question. As we said previously, our power segment will be the biggest beneficiary of the AI world. We do see that, obviously, as, you know, we are seeing more exciting opportunities in that space as well. One of the things that we have talked about previously is given the high level of complexity and sophistication of our products, they've been AI ready, call it, for the most part. So, as a result of that, as we think about the networking, destocking, there is a little bit of a preference to using some of the product that's in the channel. So, we tend to focus on really what is the new inbounds, what are the new opportunities coming in, and we're seeing those come in. And we do expect sequential growth - our AI customers on play, as we go out through the year and definitely heading into 2025. So, we're optimistic about it, and we're seeing it. We think that it is a real thing, but it will take a while, especially as the channel clears out a little bit, and some of where we're playing in position there takes a toll.

And, Bobby, I can just add on the space side. So, revenue there continues to grow. So, in Q2 '24, our revenue into space applications was $2.3 million. On a year-to-date basis, it's $4.3 million, and we're still looking at $7 million for an estimate for full year 2024, expecting it to be a little lighter in Q3 and then picking back up in Q4. So, $7 million for the full year still on pace.

Awesome. Appreciate that color. And then, kind of stepping back a little more, on the fourth quarter conference calls, you guys listed several growth-focused sales initiatives along with the revamped European sales force. So, we're several months into those after announcing them. Curious to hear any early results - it, any lessons learned, or just any color on kind of those growth-focused initiatives that you talked about in the fourth quarter conference call?

Again, I think it's too early to state, you know, when we're going to see improvement. But I'm very surprised with the sales incentive program, that most of the salespeople did receive it very positively. And even though in the first two quarters, the majority of them didn't get the compensation bonus because they didn't hit their targets, they still believed that they found it to be very beneficial. So, I think just having that motivated with this new structure is a really good sign. And with the activity level in Europe, since Sabine came aboard, we are seeing a lot more activity, a lot more quoting, and substantial greater opportunities than we have seen in the past.

And maybe to double-click on that, Bobby, as well, of all our three regions, U.S., Asia, and Europe, I could say we are seeing some bright spots in a challenging market, right? So, as the markets calm down a little bit and things flush out of the system, I think that will be what we're looking forward to. But to Dan's point, I think early signs are optimistic.

Got it. And then, last one for me. So, you know, you guys gave a good amount of color on the trade restriction on that Chinese risk supplier. So, I guess one thing that I was kind of wondering if we could double-click on was with the third quarter guidance. So, you said that supplier initially was supporting $3 million to $4 million in sales into the consumer-end market and that the guidance took a conservative view on that. Does that mean that essentially you're backing out, saying that $4 million that you would see in a quarter - the supplier you're essentially saying, like, that $4 million goes to zero in this quarter? Kind of any more color on that? And just when did -- how long was -- so, - when the Biden administration made that executive order to when you found the new supplier, like, how long did that take? And is this new supplier going to be -- I'm going to -- is it my right to assume [Indiscernible] that it's probably going to be, yeah, high -- lower margins or I should say cost more?

Yeah, so, we are taking a conservative approach. Generally, obviously, we tend to take these things pretty aggressively. In Q2, the mandate came out. And in the early days, there was a little bit of confusion, what's allowed, what's not allowed, and working through all that. And where we've settled in on is really no new orders, right? So, there might be some things left in the inventory side or being shipped over that may be a little bit, you know, you see some uplift there. But given our design cycles, as you know, it's not as easy as shifting things over, right? Because a lot of these things have to go get retested and requalified. And so, once you identify a replacement side of things, right, it's going to take a little bit of time as it goes through the requals and recertification, and that takes different timelines, if you will. So, as we're going through all that iteration of understanding, we have suppliers identified, I think, for, you know, maybe not everything yet, but a decent amount. And it becomes a question of how fast you can get that in the market, requal, because there's going to be some dollar spent on the customer side. So, we said, let's just kind of take a view of saying, we're going to have really no sales of that here in the quarter, and then maybe we can be pleasantly surprised a little bit to the upside. But that's not something we want to sign up for. Again, trade restrictions are serious, so we just want to make sure that we're within bounds on all things. So, it is a little bit of a conservative view. So, we'll have a better update on that in the October call in terms of progress and where we think things will shake out.

Fair enough. I like that approach. Thank you guys for taking my call.

Thanks, Bobby.

The next question is - Theodore O'Neill - Litchfield Hills Research. Please go ahead.

Thanks very much. Just on the power segment, a little more granularity, if you could. So, I would expect that given we already talked about AI, but in terms of AI, e-mobility, data center, blockchain power conversion, can you give us some more information about how that power segment is doing in those areas?

Yeah, I would say it's really kind of more of the same, right? I mean, the way we tend to think about it is really more simply, anything that influences growth in data centers, whether it be new builds or upgrade cycles, is good for us. And then we also think about, as we think about data, kind of transmission and the whole ecosystem around data, we think that's good. We've talked about previously our avoidance of the hyperscalers, which is kind of all the news and the headlines these days for various reasons. And we think the hyperscalers are roughly 50% of that market, and we're on the other 50, if you will. But ultimately, we're bullish on that. But right now, there is a little bit of a clear-out of some of the products in the system.

But we are, again, just so you understand, when we look at data centers, we did a substantial job with Facebook maybe five years ago, and it was almost a $12 million, $15 million customer for us. But the margins were extremely low. And I think since Farouq came aboard, we really try to focus on margin improvement and realize that top-line growth is not the end-all and be-all for us. So with that in mind, we really are focused on the niche markets. So even though EV is a very big market, our niche market in EV are school buses, tractors, large equipment. So not going after the Tesla's of the world, but really who can we support properly, who can understand our engineering proposition we offer them. In the same way we look at data centers, we support, for one of our big customers in that area, is the testing equipment that they're using for the ICs that they're using into data centers. So again, anytime electronics goes up, there's a lot of areas that we can grow in. And again, we really are focused on areas that we have to be profitable in.

Okay, thanks very much.

The next question is - Jim James Ricchiuti - Needham & Company. Please go ahead.

Hi, thanks. Good morning. I wonder if you could spend a few moments just talking about the pricing environment, just given the weak demand environment, trying to get a better sense of what the gross margins could look like in a more normalized demand environment, whatever that looks like. But just any sense as to what you're seeing - folks.

Theo, I hate to say this on the phone, but to be shocking, I think this is, you know, I've been involved for over 40 years, and this is the first time in a down market that we haven't seen very little price pressure. I think everybody's still trying to focus on supply. You know, it's very difficult when you push back your orders, asking for a price decrease at the same time. So I think, for the past 18 months, the focus hasn't been on pricing at all. It's really been on inventory management. And then if it does cut loose and the lead times do get stretched out, then pricing increases become available. But again, this is the first time in my memory that there's a down market, and we haven't seen any overt price pressures.

You know, remember, Jim, right, obviously as volumes pick up, right, in a more healthier environment, you'll get some of those pressures. And that's kind of why we've been doing a lot of the work we have been doing around cost management and the facility work that we have been doing. The other thing I should say is, I think - a mindset perspective and approaching new products and the businesses we're going after, you know, in the last, call it, couple of half years, have been lending themselves to a little better potential outcomes. But to Dan's point, we do expect to see that, obviously, in different parts of our business. But we're not there yet.

Okay, helpful. What kind of demand are you seeing in the military and commercial airspace market? I may have missed it. Lynn, did you provide revenues for commercial airspace?

I did. So in Q2 '24 for commercial air was $15.4 million. And military was $12 million.

Got it. Thank you. Thank you. Sorry about that. I missed it. Just a final question - me. I think you've alluded to or suggested that there's some green shoots out there. And we're hearing that - some other players in the market. But maybe this is a question for you, Dan. As you think about the recovery, how could this recovery look?

I've been thinking about the recovery for about 18 months, Jim.

Fair enough. And I guess that was the question. I mean, given your experience in different cycles, what does a cycle look like when we see some signs of recovery? I guess what I'm asking is---

When is it going to turn around, right?

Yeah.

You know, Jim, I tell it all the time. In our industry, it's always six months. It's six months. And you go back to the guy, it's six months. You know, we're in constant contact with Arrow, Adnet, all the major distributors. And we keep asking them, when's inventory going to be down? When are you going to see new orders? When are you going to see new orders? And they always come back, six months, six months. And then all of a sudden it hits them in a day and they start ordering. So I've never seen it to be stretched out this, maybe during the recession in '89. You know, it was about two years, 2.5 years. But just, you're not hearing anything. You know, you see little, you know, areas of improvement like aerospace, of course. But overall, just, I think it's back to that wait and see type of thing.

Yeah.

I wish I could be a lot more positive is the bottom line.

Yeah, no, fair enough. Thank you.

The next question is - Hendi Susanto - Gabelli Funds. Please go ahead.

Good morning, Dan, Farouk, and Lynn.

Good morning.

Yeah, so I would like to follow-up Jim's question. So is it another pushback of six months? I think that is my interpretation and I want to confirm that.

This is the standard answer they give when they don't know. It could be two months. It could be a year. But if you ask anybody, they'll come up with a patent answer, six months. But I don't know if it has any credibility. That's my point. It's just, you know, the checks and the mail kind of line. It's just, you don't, it's just, it's just a line they put out there, but I don't know if you can put any credence in it.

And Dan, if I may ask further, when the recovery happens, do you happen that to be somewhat mixed among different products, different end markets? Like, do you see, let's say like, like where do you feel it is more negative and where do you feel it is more positive in terms of--

I think the down markets really, the down markets really hit us in networking more than any other area, our networking customers.

And then how concentrated in networking?

Networking, which a lot of our distribution comes, you know, it's distribution, but they go out to networking customers also.

Yeah. So I think, can you just, those are obviously our two biggest markets, right? Distribution and networking, and I think both of them are where we're getting hit on.

And then are they undershipping the end demand?

Can you expand on that a little bit? I think...

In networking and distribution, are your customers undershipping or shipping like lower than the end demand there?

I would not think that's the case. I think they'll ship to meet demand.

No, I think they're still using the inventory they have to meet demand. So they don't have to sell over inventory. They don't have to place new orders until they get their inventory down a lot less.

And what we look at, Hendi, the inventory levels, right? So we have, and our view is inventory levels have been coming down pretty significantly. So we do feel, and that's why the last couple of quarters we've been saying, we feel like it's bottomed out and we continue to hold that view. But when does it get back to a little more regular way patterns? So we tend to focus on inventory levels, but we don't think anybody's, they're not sending things to their customers if that's kind of the question.

And then for your internal inventories, I think Bel Fuse has been lowering down and freeing up working capital. How much further should we think about Bel Fuse lowering its internal inventories?

Yeah, I would say, we could probably address that a little bit more with a little healthier sales environment, right? So it's one of those things where we tend to focus a little bit on the terms side of things. We're not quite where we would like to be yet. So that's something we're influencing and trying to influence. I think we've done a pretty decent job at it. A little bit easier to manage and do that in a more healthier sales environment, which we're not in. So maybe in short, we would like it to be better and we're trying to get to that better and it would be a little bit, I think, easier to manage in a healthy environment.

And then Dan and Farouq, I want to ask whether you have any insight into this. There is some conversation that there's sequential improvement in China in automotive and industrial and in IoT. What are the current trends that you are seeing in China?

I remember we do sell some stuff in China, but generally that's not our main customer base, right? And I think that's one of the, I would say quite frankly, good things given just the pricing environment, the high level of Asia competition that tends to be more higher volume type business or medium volume. So it's not kind of our, we pick our spots, we're picky and choosy, but I would say those are not kind of things that we overthink about.

Okay. And then I may miss this, the sales of e-mobility in Q2. May I ask for that number?

Sure, so e-mobility sales in Q2 were $4 million.

$4 million. And then I assume there is no expedite fee, is that correct?

There was no expedite fee this quarter, correct.

Okay, yeah. Okay, thank you so much.

Thank you for your call. We appreciate it.

The next question is Bobby Brooks. Please go ahead.

Hey guys, I just want to jump back on and kind of square something away. So in the press release, you guys said, at an industry conference in May, it was indicated that the consensus view, it was indicated that the worst was behind us. Is that in terms of kind of just on the distribution or is that more broadly distribution and networking? And I guess like, obviously those are kind of two of the biggest end markets that you guys serve, but do you guys mostly serve the networking end market through distribution? I just want to kind of make sure I understand that dynamic, clearly.

Yeah, no. Most of our, a good portion of our networking business is direct. I would say probably 75% is direct to the customer for networking. But overall, when you throw in smaller, you know, networking companies, industrial companies, then they go through distribution. So overall distribution represents about 30% of our sales.

Yeah.

And I think maybe to your other part of your question, Bobby, the conference reference was really, that was a distribution, call it, focused conference that happens once a year. So that specific comment about a conference was on the distribution side.

Okay, awesome. Thank you guys. I'll return to the queue.

The next question is Jim Ricchiuti from Needham & Company. Please go ahead, sir.

Thanks for the guidance on gross margins. I wonder if you could maybe help us a little bit with the OpEx, which has moved around a little bit. You saw a nice uptick in R&D in the quarter. Should we assume that these R&D levels are more normalized? And any sense as to, on the SG&A side, I assume at these lower levels of revenues, probably not a significant uptick there. Is that a fair way to think about OpEx?

Yeah, I think that that's pretty fair. I mean, the, you know, roughly around, you know, the call that $6 million, $5 million, $6 million R&D is kind of where we think it is. Remember, more R&D goes into power and connectivity side of the business. In terms of SG&A, there is some variability in that as it relates to some outside commissions that we pay and some other co-items. So we tend to think about it around $25 million. I would say, we are looking to see ways that we can influence SG&A as we just kind of think about the world that we're in. So that's something where we are focused on, if you will, and looking at what's in the art of the possible there. But largely, we kind of guide towards flattish or range-bound, we should say.

Okay, thank you.

There are no further questions at this time. I would like to turn the floor back over to Dan Bernstein for closing comments.

I just thank you for joining our call, and we're looking forward to speaking to you in October. Thank you very much.