Good afternoon. This is Heidrick & Struggles' Second Quarter 2017 Conference Call. This call is being recorded. It may not be reproduced or retransmitted without the company's consent. [Operator Instructions]. Now I will turn the call over to Julie Creed, Vice President of Investor Relations and Real Estate. Please go ahead..

Good afternoon, everyone and thank you for participating in Heidrick & Struggles' 2017 Second Quarter Conference Call. Joining me on the call today is our President and CEO, Krishnan Rajagopalan; and our Chief Financial Officer, Rich Pehlke.

During the call today, we're going to be referring to our supporting slides that are available on the IR homepage of our website at heidrick.com and we encourage you to follow along or print them. Today, we'll be using the terms adjusted EBITDA, adjusted EBITDA margin, adjusted net income and diluted earnings per share.

These are non-GAAP financial measures that we believe better explain some of our results. A reconciliation between GAAP and non-GAAP financial measures can be found in our press release, on the last page of our financials and in our supporting slides.

Throughout the course of our remarks, we'll be making forward-looking statements and ask that you please refer to our safe harbor language contained in our news release and on Slide 1 of our presentation deck. The slide numbers that we'll be referring to are shown in the bottom right-hand corner of each slide.

And Krishnan, I'll now turn the call over to you..

Julie, thank you. Good afternoon. Let me begin by saying that it's a privilege to take on the role of President and CEO of Heidrick & Struggles. We have the preeminent leadership brand and a global team that wakes up each and every day trying to fulfill our purpose. We help our clients change the world one leadership team at a time.

I've had the benefit of a strong partnership with Tracy Wolstencroft over the last 3 years plus in developing the firm's overall strategy, while leading the Executive Search business. Now I look forward to Tracy's guidance as our Chairman of the Board. Our strategic direction remains unchanged.

As our clients' trusted adviser, we will increasingly combine distinctive data-driven leadership and talent solutions to accelerate the performance of the world's most influential organizations. In keeping with our brand, we work at the top on talent, leadership and performance issues that are the most relevant to the C-suite.

What is changing faster than ever is the global business environment which in turn demands an acceleration in the pace of our own transformation. Clients are increasingly asking more of us. This creates enormous opportunity if we're agile and quick to execute.

In response to this changing environment, over the course of the next several months, I will look closely at refining our go-to-market strategy and our cost structure to support the entire business.

As a first step in that process, today, we announced that we'll be combining our Leadership Consulting and Culture Shaping businesses into one client-focused service unit, Heidrick Consulting. We see a number of benefits to having one consulting business.

It provides our clients with a clear, cohesive suite of leadership offerings to accelerate their performance. Heidrick Consulting will offer a more seamless solution set. We will have a modular suite of tools, harmonized to work together as one platform powered by a shared database.

For employees, we believe that the increased clarity of our consulting offering combined with additional commitment to training will enable all of our consultants, search and consulting, to have more and broader conversations with their clients. And for shareholders, this should all lead to growth in revenue and profitability.

We believe there is improved leverage, operating leverage, in combining both entities with opportunities for cost synergies as well.

There were a number of notable positives in the second quarter, including an improvement in revenue as a firm, driven by solid performance in our core Executive Search business and sustained growth of 35% in our Leadership Consulting business.

Still, our financial results did not meet our expectations, in particular, the performance of the Culture Shaping business and the impairment charge of $39.2 million. Culture is still a very integral part of our service offering. It is a frequent topic in the C-suite and boardroom and Heidrick's Culture solution is powerful and distinctive.

The heritage and depth of experience we have on culture from Senn Delaney is considerable and we'll take the best of that thinking along with the best of our Accelerating performance framework, especially around organizational performance, to deliver a highly distinctive inside out and outside in view on culture.

The actions we're taking to establish Heidrick Consulting are consistent with our vision and strategic direction. Heidrick search is strong and growing and will be further complemented by Heidrick Consulting, positioning the firm and our shareholders for profitable growth.

We're targeting to complete the integration as quickly as possible within the calendar year. Now I'll turn over to Rich for a more detailed look at the quarter then I'll come back to discuss some of the priorities for our firm..

Thanks, Krishnan. Good afternoon, everyone. I'm going to start on Slide 4 with an overview of second quarter results. Second quarter net revenue of $152 million was up 2% compared to last year's second quarter, up 4% in constant currency. Our Executive Search business grew 3% year-over-year or 4% in constant currency.

Americas was up 2%, Europe was up 10% or 16% in constant currency and Asia Pacific declined 3% or 2% in constant currency. As you'll see later in the presentation, our backlog remains strong.

Operating margin for the search business was 19.3% compared to 20.4% in last year's second quarter, a slight decline as a result of higher expenses in Europe and the decline in revenue in Asia. Referring to Slide 7.

We ended the quarter with 355 Executive Search consultants, up by 39 year-over-year and down 8 sequentially, mostly as the results of the performance management we implemented in the second quarter. Referring to Slide 8, we confirmed 2% more Executive Searches in this year's second quarter and for the first 6 months confirmed 5% more than last year.

Consultant productivity, as shown on Slide 9, was $1.5 million in the quarter and $1.5 million on a trailing 12-month basis as well. Recall in the first quarter that we promoted a record 28 people into the search consultant ranks as principals. This, as expected, has impacted productivity, but it is improving. Turning to Slide 10.

The average revenue per search worldwide on a trailing 12-month basis was fairly steady at $115,600. Referring to Slides 11 and 12, you'll see that the Education & Social Enterprise practices -- practice had a great quarter.

The Industrial and Healthcare & Life Sciences practices showed good growth and the Financial Services practice was essentially flat. Turning now to the Leadership Consulting. Leadership Consulting grew 35% or 44% in constant currency as a result of both good organic growth and an acquisition made last August.

The operating loss was $1.7 million which is less than the loss in last year's second quarter. We're pleased with the trajectory of revenue growth in this business but remind you that results will vary from quarter-to quarter as it continues to scale up in size.

As Krishnan had already noted, Culture Shaping results in the second quarter were disappointing. Revenue was down 36% year-over-year. The decline in revenue was impacted by longer sales cycles of core offerings as well as an increasingly competitive market. These factors also contributed to lower-than-expected revenue per consultant.

The decline in revenue, obviously, impacted operating income as well. The current performance of the business and the uncertainty around the timing of improving performance became the trigger for testing the value of the intangible assets and goodwill.

We determined there has been an impairment and the $39.2 million write-down removes the balance of the amortizable intangible assets and goodwill associated with the acquisition of Senn Delaney. Looking at Slide 14. Salaries and employee benefits expense in the second quarter increased $1.8 million or approximately 2%.

Fixed compensation expense increased $3.8 million while variable compensation expense declined about $2 million. The increase in fixed compensation reflects compensation of benefits related largely to the acquisitions made in 2016 as well as other investments in new hires primarily in Executive Search.

The higher fixed compensation expense reflects investments that the company made in 2016, including a large increase in consultants who have also yet to reach full productivity. Turning to Slide 15. General and administrative expenses increased $2.5 million to $38.1 million.

This increase is due to higher bad debt expense incurred in the quarter as well as an increase in professional services related to both litigation and audit fees during the period. An increase in occupancy cost and the inclusion of G&A from acquisitions made late last year were offset by other savings and run rate expenses across the business.

As you'll see in Slide 16 to 18, as a result of the impairment charge, we reported losses in operating and net income. Now referring to Slides 19 through 21. Adjusted EBITDA was $16.6 million compared to $18.1 million in the last year's second quarter. And the adjusted EBITDA margin was 10.9% compared to 12.2% in the 2016 second quarter.

Referring to Slides 22 through 25. We provide you with net income or loss and the diluted earnings or loss per share both on a GAAP and adjusted basis, excluding onetime factors that influence the tax rate in each of the last 3 quarters.

The effective tax rate in the second quarter was 36.4% and this tax rate reflects the deferred tax benefit on the impairment and the inability to recognize losses in certain jurisdictions.

Excluding the impairment charge in the second quarter, net income would have been $6.3 million and diluted earnings per share would have been $0.33 based on an effective tax rate of 40%. Our 2017 full year estimated tax rate is now about 46% adjusted for the Q2 impairment and the Q1 EBT settlement that we talked about last quarter.

Now looking at Slide 26. Cash and cash equivalents at June 30 was $58.2 million compared to $85.4 million at June 30, 2016. The difference compared to last year reflects the combination of higher cash bonus payments and repayment of short term borrowings on our credit facility.

Cash generated by operating activities was $24.3 million compared to $34.2 million in last year's second quarter. Our cash position plus the cash we have access to through our revolving credit facility remains strong and we're in an excellent position to continue to invest and grow the business. Now looking to the third quarter.

Our Executive Search backlog is shown on Slide 27 and is still quite healthy. We still have a week left in the month of July, but our confirmation trends are shown on Slide 28.

Other factors on which we base our forecast include anticipated fees, the expectations for our consulting assignments, the number of consultants and their productivity, the seasonality of the business, the current economic climate and foreign currency exchange rates.

We're forecasting 2017 third quarter net revenue of between $148 million and $158 million. Reported net revenue was $143.5 million in the third quarter of 2016. And with that, I'll turn the call back over to Krishnan..

Thank you, Rich. We've accomplished much in Executive Search over the last 3 years, rebuilding and growing this business, outpacing all of our major competitors. At the same time, we established an improved foundation for Leadership Consulting, built on our accelerated performance IP.

Now with the integration of LC acquisitions all but complete, our attention moves to better aligning our consulting offerings, starting with the integration of Leadership Consulting and Culture Shaping to create Heidrick Consulting. While I readily acknowledge that there's always work to do, this puts us on a better trajectory for profitable growth.

Tomorrow is the start of our global consultant meeting here in Chicago, 3-plus days that include workshops and cross service line meetings, designed to inform, align and foster greater connectivity within our firm. Here are some of our priorities that we're aligning around.

We will accelerate the pace of our go-to-market strategy in a more coordinated way, offering clients integrated services across search and consulting for greater impact.

We will increase our commitments to the training, development and mentoring of our consultant teams on our product and service offerings in order to accelerate their path to trusted leadership adviser. We will be the firm of choice for the best talent in the industry. We will continue to grow our search business.

We will substantially grow the size and scale of Heidrick Consulting. We will continue investing in the development of our distinctive IP and more fully leverage our data and analytics.

We firmly believe our clients, our employees and our shareholders will benefit from the full impact of our integrated and complementary services and form our deeper client relationships. We see a great opportunity ahead for Heidrick & Struggles and we're moving forward to take full advantage, positioning the firm for sustainable, profitable growth.

Now Rich and I would be happy to take any questions you may have. Don, we're ready for Q&A..

[Operator Instructions]. And we'll take our first question from Kevin McVeigh with Deutsche Bank..

Extend my regards to Tracy, hopefully he's feeling better. Krishnan, congratulations on the new role.

I wonder just in terms of style, relative to Tracy, any thoughts on where you'd like to see more or less emphasis from a service perspective or just areas that Heidrick focuses on as opposed to Tracy? And any upside surprises as you settle into the new role?.

Yes, Kevin, thank you. I think where I'd like to just see more focus is and I don't -- I wouldn't say it's on the different services, it's more on the integration and trying to drive a tighter go-to-market between our search and consulting businesses. That's probably what I'm focused on right now..

And is there any way to kind of frame where kind of that is in terms of the search versus the consulting? Is that kind of cross-selling? And is there a way to think about what clients currently use one or more services? And where you'd like to see that go?.

Yes. We've got numerous clients. We got 13% of our revenue currently that comes from non-search-related business and we like to see that number, obviously, go up. We've got many clients that are sharing both search and consulting resources and we're working with them jointly.

What I'd like to see happen is for our major accounts, to run a play through our major accounts and be able to provide integrated services and offerings to them through the account system that we've got in place and be able to drive that..

Got it. And then just, Rich, real quick.

Of that cash, how much of that is readily available to kind of invest as opposed to being restricted?.

Yes. We've said many times, Kevin, that we probably need a run rate of around $30 million to $40 million for operating cash flow across the globe, where we feel comfortable. So we're still ahead of that level. In actuality, I think we can even squeeze that a little bit. And then on top of that, we have our credit facility.

So cash and funding needs in the short to intermediate terms is in pretty good shape and doesn't really pose much of an issue for us..

Got it. And then just on that guidance, I know we've been kind of framing out revenue.

Any sense of when we're going to be able to introduce some type of EBITDA range? I know that the earnings gets tough because of the tax rate, but just any thoughts on that?.

Yes. It's something we talk about all the time, Kevin. And I think scale is going to be an important factor here as we build out the consulting business because I think that's really is the key to getting us on a more steady stream where small matters don't move the needle as much.

We're still too much in a situation because of the scale of our business where the EBITDA can really vary by $1 million or $2 million on really very small issues.

So we're hoping to get more comfortable with that as time goes on and we get a broader sense of the diversification and build out that revenue stream that Krishnan referred to which is more than 13%, be certainly more than 13%..

We'll take our next question from Tim McHugh with William Blair & Company..

Just on the Executive Search business. I guess, the overall revenue -- obviously, that's the biggest driver of overall revenue and you came in, I guess, at the lower end of or slightly below the guidance you gave last quarter. The search trends don't seem terribly different, I guess, as we went through the quarter.

But how did the quarter play out differently than you might have expected? And then maybe I'll leave it there..

Hey, Tim. This is Rich. I'll start and then turn it over to Krishnan and he'd give you a little color about the operating environment. I think the thing that played out a little bit for us is I think we saw a little bit of our confirmation trend a little back end loaded in June at the end of the quarter.

So I think from a revenue recognition standpoint, just on the timing of some of our confirmations, we didn't quite hit the number we thought we'd hit. And that's one of the reasons why our backlog was there. On the non-search side, obviously, we've talked about the fact that culture was a miss.

And we have thought we'd see a little bit more of the ramp-up from first quarter to second quarter be a little stronger than it was. $0.5 million run rate was not the uplift we were looking for. We were looking for to get a little closer back to historical levels.

So I think the combination of those 2 things were the driver in the short term and where the revenue came out. And I'll let Krishnan comment about the overall environment which I think still remains pretty steady. But I'll let Krishnan fill that out..

Yes, Rich, thank you. I think, look, if you take a step back and you look at the overall environment for search, it's still very similar to what it was in the first quarter. I wouldn't say there were any market changes from what we talked about. There's good volume. It isn't necessarily over-the-top robust, but it's still a good environment for us..

We'll go next to Kevin Steinke with Barrington Research..

So just a couple of questions about the newly formed Heidrick Consulting business. You talked about how combining Culture Shaping and Leadership Consulting could drive some operational efficiencies and expand margins. So I don't know if you could quantify any sort of cost synergies you see from putting those 2 businesses together..

I'll start on the mechanics of the financials. I'll maybe turn it back over to Krishnan to talk a little bit more on the strategic side of the combination. I think there are a few things that we can certainly do on the mechanics side and getting some efficiencies by combining the 2 businesses.

And we were already starting to do some of that already and I think we're going to accelerate it in some of the work streams that will happen between now and the end of the year which will accelerate pretty quickly. But again, I don't think it's as much of a cost story as it is about driving the top line.

I mean, I think at the end of the day, if we're going to think about driving margin in this business and getting to where we think it needs to be, driving the top line and leveraging all of our sales channels and all of our relationship channels is going to be pretty important to the growth and profitability of that business..

Yes, Rich, let me just amplify on that. Our clients who are buying consulting services from us, they're not looking for siloed conversations on various leadership topics. So this represents an opportunity for us to be able to provide a cohesive suite of offerings and that one conversation with the client as well.

So I think that's a huge win for clients and for us as well because from a search channel perspective, it makes something simpler as well in terms of having points of contact and easier integration as well. We also have more partners and principals, we're selling a full range of products for Heidrick Consulting.

And I would imagine that the scale of putting these two things together is also going to provide us some opportunities on our IP development efforts as well that would be rather unique. So we see a value creation opportunity with clients, particularly top growth associated with creating Heidrick Consulting organization..

Okay. And you've referred to how important scale is in that business, for getting the profitability up. But I guess, that would imply also that you need to do some more investing there just in terms of adding headcount.

So we're just wondering how aggressive you're being right now or you plan to be in terms of adding headcount to grow that Heidrick Consulting piece?.

Yes. So let me take a step back and just kind of talk a little bit about where we're in the integration process. We've got 9 work streams set up to run our integration over the course of the next several months.

And they're looking at a variety of different topics on that from brand to value capture and you can imagine several other things that we're thinking about there. But I do believe that we'll be in the market trying to grow this business and trying to add headcount into the Heidrick Consulting platform.

That's something that we need to do and we'll be doing that shortly..

Okay. And then you mentioned again the increasingly competitive market for Culture Shaping.

Do you think combining with Leadership Consulting in any way helps alleviate some of that competitive pressure or differentiate the offering in the market?.

Yes. Let me take a crack at that and Rich, if you've got something to add to that as well. Absolutely. Look, I think there was the diagram that we showed earlier that talks a little about Culture Shaping.

We think we've got great expertise with culture design and culture implementation that we bring from Senn Delaney and we augment that with an outside-in view that comes from our Leadership Consulting as well, that's rather distinctive on thinking about external markets, trends, being able to create -- to look at assessment and engagement through a different lens as well.

And we think that we can combine that together. We've got a fairly distinctive culture offering out there. I mean, it's clearly rooted in the 30-plus years of data and insight and strong track record from Senn Delaney, augmented by new IP and tools that we've got. So I think it is distinctive.

Rich?.

Yes. Kevin, I guess, the thing I would add is that I think the thing that's changed as we think about where we go from here is that culture was pretty much a standalone offering that had a long legacy and a very successful history with the very defined aspects of the culture offering.

But as we're thinking about our vision of where we're taking the consulting business today and really rallying around the broad theme of Accelerating performance which is embedded within our consulting offering now and we're integrating that across all the products and services we offer, culture is a natural fit with that.

And the opportunity did not only do what we did historically but also expand some of the culture offerings and services, both in terms of what we offer as well as the markets we address and the clients we address, we think will be beneficial for the future of the culture business and actually expand their opportunity to address the market..

Okay. That's helpful. And then specific to Executive Search. Asia Pacific had a couple of better quarters. And now you kind of saw a slight falloff there.

Just any comment on the environment in Asia Pacific or what's going on there?.

Yes, it's Krishnan. Look, we're not alarmed over that. We don't think the environment has changed much. I'd encourage you to kind of think about it from a 6-month view and look at how that business is doing and we think it's doing markedly better the first 6 months of this year than it was the previous 6 months.

So I don't think there's any anomaly going on in that market right now..

[Operator Instructions]. We'll go next to Tobey Sommer with SunTrust..

I'm curious, what you think the margin potential is in the business? I realize you'd just kind of taken the helm here recently. But profitability in this expansion is not mapped against prior economic expansions.

And I'm curious if you think that there's a -- if you have plans to achieve prior levels of profitability?.

Yes. Look, we think that there is opportunities for both revenue and margin expansion over here. I think, as Rich mentioned, we need to scale the businesses to be able to achieve that.

I feel that we've built a more stable and sustainable search model to now leverage off of and be able to build these other -- to build our other consulting offerings and leverage that platform as much as we can. So I do think there is -- it's early for me to be able to give you a number as we're just pulling all these together.

But we will come back to you as our work teams come back with data and with numbers on progress with the Heidrick Consulting business..

Okay. On the search side, your slides indicate a sequential decline in confirmations. Is there something seasonal there? Or is that -- I'm having trouble recognizing that graphic with comments about demand being relatively stable per se..

Are you looking at the month-over-month part on Slide 8, is that....

No, the quarterly one..

Yes, Slide 8?.

Is that the slide you're looking at? I am....

Yes, Slide 8. So sequentially, it looks like confirmation is down like a meaningful percentage so....

They're still up year-over-year..

They're still up year-over-year. We came out in a very, very strong first quarter. And so they're still up year-over-year is how I'm looking at that chart..

Still up 5% year-over-year. And just I think it goes back, Tobey, to the lumpiness of our business and you have a couple of great months and then you end up spending the next month or so filling those searches. So I don't think it speaks anymore to what we saw. I mean, if you look at our backlog going into 3Q, it's right there. It's the same..

Okay. Shifting to leadership, you talked about the acquisition as well as organic growth.

Could you give the organic growth number and the contribution from the acquisition in Leadership Consulting business?.

Yes, Tobey, this is Rich. There's about half and half in terms of the growth of the organic operation year-over-year versus the contribution of the acquisition we made last year..

Okay, perfect.

And then I'm curious if you could elaborate a little bit on the decline in enterprise agreements that you talked about relative to Culture Shaping?.

Work assignments plus the enterprise agreements..

Right. I'm not sure -- I guess, the comment we made was a little bit more about the longer sales cycles and so forth. So there's 2 basic ways that the culture product is sold today. One is a series of stages of culture-related consulting assignments which can go 1, 2, 3 ways deep in terms of the management.

And the more waves you do, obviously, the longer and more people are involved. And those assignments get bigger.

And then, obviously, as clients latch on to the -- and we become part of their learning system and their HR systems and part of their own talent management systems and development systems, on the culture side, if they sign enterprise agreements, that's a very high margin revenue that usually have some life of anywhere from two years and can sometimes go up to as many as 8 to 10 years.

I think the average life on the enterprise assignments usually runs in the 2 to 5-year range. All in all, I don't think the balance of that work has really shifted much.

What we have seen that we've experienced in the last couple of quarters is that because of the competitive nature and the very topic of culture itself, there are many competitive offerings that are out there, it has been a different decision-making client.

It was usually more just the CEO or just the HR professional and now it's sometimes committees or management committees and so it's a longer sales cycle. It's a different decision process.

And I think it's one of the contributing factors that we're evaluating as we bring these two businesses together because we're having some of those conversations anyway and talking to those various people sometimes in different formats or on different topics.

So I think we're trying to match our organization as well to the change in the client behavior and I think that's going to lead to a better outcome. The pipeline is still -- we still believe in the business. The pipeline is still there. The interest in the topic is still there. The interest in the company is still there.

But we clearly did not have the recovery we thought after the management transition and that's what triggered the action we took..

Okay.

I guess, to follow up on that, if there's a little more competition and you cite enterprise agreements, doesn't that make it a little bit harder to turn and maybe require a little bit more time if these enterprise agreements have kind of longer terms to them as opposed to the spot market for smaller projects that maybe increased effort or management organization reshuffle could impact more quickly?.

Yes. The enterprise agreements follow a project. They're not sold standalone. So I think our hope here is that as we increase the funnel for Culture Shaping, we'll actually be able to enable more enterprise agreements to occur. So that's what we're trying to do. They're not sold independent. So you need to have a funnel upfront.

You need to have the funnel active and working for you and able -- to be able to get the enterprise in.

What we're finding in culture and just piggybacking on something that Rich was saying, is look, we're having to pivot what has been a -- sold to traditionally only a business unit, we're recently finding that we're selling functionally to drive large IT transformations and things like that as well.

So we've had to change and we've had to adapt in this competitive marketplace and we think there's actually more opportunities for culture than ever before if we can pivot and adapt appropriately..

We'll take our next question, a follow-up, from Kevin McVeigh with Deutsche Bank..

Just real quick, are you folks seeing any behavioral changes in the U.K.

at this point?.

It's Krishnan. Yes. I don't think that I would say we've noticed any noticeable behavioral change in the U.K. in the last several months. It's been similar for the last 4 or 5 months now. So I don't think there's a difference that we've seen..

And we'll go now to Kevin Steinke with Barrington Research..

You called out increased bad debt expense in the quarter.

Is there anything more to elaborate on behind that? Or just any reason that you called it out specifically?.

Yes. I called it out, Kevin, because it's a little unusual for us, to be honest. We're not a company that has much bad debt hit and we just happen to have a higher-than-usual amount in the second quarter. We got hit with a couple of companies and clients that went bankrupt and a couple of disputes that resulted in slight adjustments.

And again, not big numbers, but by the time those added up, it was unusually high for us on a year-over-year basis and caused the big part of the variance year-over-year. So when normally what is almost a nonexistent run rate expense actually hit us for close to $1 million in the quarter. So it just was unusual for us..

Okay.

Is that something you expect will just kind of normalize going forward?.

Yes, I think it will normalize back. The very nature of our business doesn't -- is not a high bad debt experience. I mean, we can usually shut that off pretty quick. And that's usually, given the nature of who our client is and who we're dealing with in the enterprise.

If we do get bad debt, it's usually because the enterprise itself comes into some difficulty, not because of the work or anything like that..

And it appears there are no further questions at this time.

Would you like to give any closing remarks?.

Thank you. Let me close where I began. I feel privileged to be the new CEO of Heidrick & Struggles and to start forward -- a forward-looking journey of growth for us. We're about to begin a global conference with our consultants and it's especially well timed.

We have the best people in the industry and I'm really excited to be there with them to engage on our go-to-market strategy and to begin to drive greater integration within our business. Thank you very much..

This does conclude today's conference. Thank you for your participation. You may now disconnect..