Good morning, everyone. And welcome to the Insight Enterprises, Inc. Second Quarter 2023 Earnings Conference Call. My name is Jess, and I will be coordinator for your call today. [Operator Instructions] I would now like to hand over to your host, James Morgado, Senior Vice President of Finance and CFO of Insight North America to begin.

James, please go ahead..

Welcome, everyone. And thank you for joining the Insight Enterprises Earnings conference call. Today we will be discussing the company’s operating results for the quarter ended June 30, 2023. I am James Morgado, Senior Vice President of Finance and CFO of Insight North America.

Joining me is Joyce Mullen, President and Chief Executive Officer; and Glynis Bryan, Chief Financial Officer.

If you do not have a copy of the earnings release or the accompanying slide presentation that was posted this morning and filed with the Securities and Exchange Commission on Form 8-K, you will find it on our website at insight.com under the Investor Relations section.

Today’s call, including the question-and-answer period is being webcast live and can also be accessed via the Investor Relations page of our website at insight.com. An archived copy of the conference call will be available approximately two hours after completion of the call and will remain on our website for a limited time.

This conference call and the associated webcast contain time-sensitive information that is accurate only as of today, August 3, 2023. This call is the property of Insight Enterprises. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Insight Enterprises is strictly prohibited.

In today’s conference call, we will be referring to non-GAAP financial measures as we discuss the second quarter 2023 financial results. When discussing non-GAAP measures, we will refer to them as adjusted.

You will find a reconciliation of these adjusted measures to our actual GAAP results included in both the press release and the accompanying slide presentation issued earlier today. Also, please note that unless highlighted as constant currency, all amounts and growth rates discussed are in U.S. dollar terms.

As a reminder, all forward-looking statements that are made during this conference call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in today’s press release and in greater detail in our most recently filed periodic reports and subsequent filings with the SEC.

All forward-looking statements are made as of the date of this call and except as required by law, we undertake no obligation to update any forward-looking statement made on this call, whether as a result of new information, future events or otherwise.

With that, I will now turn the call over to Joyce and if you are following along on the slide presentation, we will begin on slide four.

Joyce?.

Thank you very much, James. Good morning, everyone, and thank you for joining us today. Q2 was more challenging than expected and our performance was below our expectations.

Although we did not achieve the results we anticipated, we are pleased with many of our key performance indicators that confirm we are making progress on the strategic and financial goals we previously outlined. Here are a few highlights.

We achieved a record gross margin of 18.4% as we continue to make progress on our sales mix and pricing and profitability initiatives. Insight core services gross profit grew 7% and cloud gross profit grew 12% and both are key drivers of our solutions integrator strategy.

Adjusted EBITDA margin was 5.9%, up 50 basis points and we generated $188 million of operating cash flow in the first half of the year. These are proof points that demonstrate we are on the right path.

Although we are at the beginning of this journey, we continue to gain traction in the fastest growing areas of the market, cloud, data AI, and edge, which importantly align with our areas of expertise.

In addition to our focus on growing our business, we are implementing further cost reductions designed to improve the efficiency and effectiveness of our operations and preserve capital for key areas of investments, including M&A, that support our strategy. Glynis will provide more details.

Considering our Q2 results and our current expectations for the second half of the year, we are lowering our full year adjusted diluted EPS guidance range to $9.40 per share to $9.60 per share, which reflects a 4% year-over-year growth at the midpoint.

The long-term dynamics of the IT market are very strong and our clients remain committed to digital transformation and leveraging technology, including generative AI, to improve efficiency, reduce risk and deliver a better customer experience. We are confident that we will see a resurgence in buyer confidence and demand in the midterm.

As a reminder, there are four key pillars underpinning the strategy that we outlined last fall at our Investor Day. First, captivate clients. This is all about delivering exceptional value to our clients. We pride ourselves on delivering high quality outcome based solutions and earning the right to do more.

This leads to our second pillar, sell solutions. We are transforming our sales capabilities and aligning our incentives to focus on our solutions portfolio. The theme here is really about focus, doing a finite number of things and doing them really well.

Our third pillar is deliver differentiation, this is all about providing innovative scalable solutions through reusable IP, exceptional technical talent and our very compelling rich portfolio.

Again, we are focusing on our strength that align with the fastest growing areas of market and where our clients need the most help, cloud, data, AI, cyber, and edge. And the fourth pillar is champion our culture. This has been a strategic advantage for us and is critical to attracting and retaining incredible talent.

Our ambition to be the leading solutions integrator requires a deep understanding and a passion for technology and our solutions team continuously strives to develop and refresh our IP. We recently launched our proprietary Insight Lens for gen AI.

This configurable ready to deploy modern data platform solution helps organizations quickly design, build and deploy infrastructure to support generated AI platform. A key element of our solutions integrator strategy is our deep partner network and we collaborate with industry technology leaders in their respective domains.

For example, as NVIDIA’s 2023 Americas Retail Partner of the Year, our technical experts work closely with NVIDIA to help our clients leverage best fit AI, data analytics and machine learning solutions. At the very heart of gen AI is data, this is one of our core capabilities and it’s critical to effectively implementing AI projects.

We have been helping clients manage and improve their data estates for many years. I will describe a couple of client use cases that are in progress leveraging gen AI. For example, we are working with a recruiting firm to reduce the time and effort associated with matching candidates to roles.

We are building a solution that retrieves job postings and other hiring metadata and aligns those with candidate profiles to identify strong potential matches. We are leveraging Insight Lens for gen AI to streamline the development time.

In another example we partnered with a global technology distributor to take a proof-of-concept OpenAI and conversational agent to full production. The goal of this project is to drive accuracy in the responses and streamline retrieval of information, while carefully controlling the users access to information.

We are also partnering with this client to develop their gen AI roadmap and develop detailed technical plan. Although, it’s still early for gen AI, our solutions team has been implementing AI and machine learning solutions for many years.

For example, we have built a solution for one of our clients that utilize machine learning to create targeted treatments for patients with high blood pressure. The recommendations were based on nearly 800 data points per patient, including patient symptoms, medications and risk factors.

This solution has led to a more personalized care, improve patient quality of life, healthcare cost savings and improved treatments. With machine learning at the core of the solution, our client is significantly improving hypertension care.

We are proud of the solutions we deliver to our clients, which are validated by the numerous industry recognitions we received. We are pleased with the nine 2023 Microsoft Partner of the Year awards we have recently won, including Worldwide Solutions Assessment Partner of the Year, U.S. Azure Cloud Native App Development Partner of the Year, U.S.

Retail and Consumer Goods Partner of the Year, Australia Partner of the Year and Hong Kong Partner of the Year. Insight has also been revised as one of the best places to work in the U.K., Italy and Spain. In separate evaluations by Great Place to Work and most recently as the Best Place to Work for Disability Inclusion.

Recent awards are in addition to dozens of other recognitions Insight has received this year and highlight the strength of our partner ecosystem, the diverse solutions portfolio we offer and our teammates that deliver terrific outcomes for our clients.

In summary, we are making progress towards becoming the leading solutions integrator as is evidenced by the performance indicated -- indicators mentioned earlier and we are focused on the fastest growing areas of the market and where our clients need the most help. I look forward to discussing our progress as we continue our journey.

With that, I will turn the call over to Glynis to share the key details of our financial and operating performance in Q2 and updated outlook for 2023.

Glynis?.

Thank you, Joyce. As Joyce mentioned, our results for the quarter were below our expectations. At a high level, the hardware net sales decline of 24% year-to-year impacted results in the quarter. Additionally, the normal software acceleration we typically see in late June did not occur.

Despite the decline in net revenue, we continue to see year-over-year gross profit growth in software and cloud, as well as Insight core services. We continue to grow in the high growth areas of cloud, data, and AI. We also achieved record gross margin of 18.4%. In Q2, net revenue was $2.3 billion, a decrease of 14% in U.S.

dollar terms and constant currency compared to the prior year. This decrease was driven by significant decline in devices, partially offset by an increase in networking, storage, cloud and software. Over the past few quarters, we have communicated our expectation that devices would be down in the first half of 2023.

However, the decline in Q2 was larger than we had anticipated. We believe the device market is near the bottom. In the second half of the year, we expect the rate of decline will be lower than in the first half of 2023 and we still expect devices to be down year-to-year in total for 2023.

Overall, on a 14% decline in net sales, gross profit declined 1%, reflecting the hardware performance, partially offset by higher cloud and Insight core services growth, as well as the benefit of the profitability and pricing initiatives we began implementing last year.

Gross margin was 18.4%, an increase of 240 basis points and reflects the higher mix of cloud, Insight core services and infrastructure products, which transacted higher gross margins relative to devices. In addition, our profitability and pricing initiatives also contributed to higher hardware and services gross margin.

Insight core services gross profit was $72 million, an increase of 7% year-over-year. This performance reflects lower growth in integration and other services related to the decline in devices, but was offset by growth in applications, data, digital enablement and networking.

Cloud gross profit was a record $115 million, an increase of 12% and reflects higher growth in SaaS and infrastructure as a service. Our adjusted EBITDA margin expanded 50 basis points to a record 5.9%. For the second quarter, adjusted diluted earnings per share was $2.56, down 8% in U.S. dollar terms and in constant currency year-to-year.

We have been focused on prudent operating expense management, leveraging technology to drive productivity and efficiency in our business improving cash flow and preserving capital for critical initiatives.

To expand on Joyce his comments, we have accelerated our cost reduction actions in the current quarter, while protecting our client experience, and critical internal investments to support future growth.

These actions primarily include, headcount reductions, rationalizing backfill positions, accelerating our best sure efforts and optimizing our external vendor spend.

As we previously discussed, with slower growth in hardware in the quarter, we generated $28 million in cash flow from operations in the second quarter, compared to a use of $158 million in Q2 of 2022.

Through the first half of 2023, we have generated $188 million in cash flow from operations, compared to a use of cash of $442 million in the first half of 2022. And to update you on our share repurchase program, in Q2 we repurchased approximately 720,000 shares of our stock for a total cost of $100 million.

Through the first half of 2023, we have repurchased over 1.6 million shares of our stock for $217 million. We did not repurchase any shares in the first half of 2022. We currently have approximately $200 million remaining under our current $300 million share repurchase authorization.

We intend to repurchase shares to offset the dilutive impact from the warrants associated with the convertible notes as appropriate. We continue to evaluate our options relative to the convertible notes, as well as the impact of the convertible notes on dilution and our share repurchase strategy.

Our 2023 share forecast includes the net impact of share repurchases and anticipated dilution throughout 2023. You will find an illustration of the convertible note dynamics in our investor presentation. We exited Q2 with debt of $338 million outstanding under our ABL, compared to $718 million outstanding as of Q2 2022.

This reduction in our debt balance is after spending $217 million on share repurchases in the first half of 2023 and is indicative of the strong cash flow in our business. As of the end of Q2, we have approximately $1.5 billion available under our $1.8 billion ABL facility.

We have ample capacity to fund our business operations and capital deployment priorities including M&A. Our adjusted return on invested capital or ROIC for the trailing 12 months ended June 30, 2023 was 15.6%.

Our presentation shows our trailing 12-month performance through Q2 2023 relative to the metrics that we laid out at our Investor Day in October. We continue to believe that we are on the right track to hit these metrics in 2027.

Adjusted EBITDA, margin expansion, cloud gross profit growth, Insight core services gross profit growth and improvement in free cash flow as a percentage of adjusted net income. As a reminder, 2022 is our baseline for the 2027 CAGR based metrics.

Since our last earnings call, we have seen a further slowdown in our client’s decision making and an extension of the current economic environment. We now believe that these dynamics will continue throughout 2023.

We expect a high single-digit decline in net sales for the year, but we anticipate low to mid-single-digit gross profit growth, driven by continued growth in software, cloud and Insight core services, as well as our pricing and profitability initiatives as we execute our strategy to become the leading solutions integrator.

In addition, we believe our operating expense management will position us well in the second half of 2023 and provide a tailwind going into 2024. As we think about our guidance for the full year of 2023, we expect to deliver gross profit growth in the low-to-mid single-digit range.

We expect adjusted diluted earnings per share for the full year of 2023 to be between $9.40 and $9.60, a 4% increase at the midpoint compared to 2022.

This outlook assumes interest expense between $46 million and $48 million, an effective tax rate of 26% for the full year, capital expenditures of $45 million to $50 million and an average share count for the full year of 34.8 million shares.

This outlook excludes acquisition related intangible amortization expense of approximately $32 million, assumes no acquisition related or severance and restructuring and transformation expenses and assumes no meaningful change in our debt instruments or the macroeconomic outlook. I will now turn the call back to Joyce..

Thanks, Glynis. As Glynis noted, we continue to make progress towards our solutions integrator strategy and we have confidence that we are on the right path for several reasons. First, our performance indicators continue to move in the right direction.

Cloud gross profit grew by 12%, Insight core services gross profit grew 7%, gross margin expanded by 240 basis points to 18.4%, adjusted EBITDA margin expanded by 50 basis points to 5.9% and trailing 12-month free cash flow as a percentage of adjusted net income was 224%. Second, digital transformation is here to stay.

Gen AI will only accelerate transformation as clients seek to improve workflows and enhance productivity, making the work we do even more important. Third, we have a strong balance sheet and our business deliver strong cash generation. We have the capacity to fund our capital allocation priorities, in particular M&A and stock repurchases.

Our portfolio of solutions gives us the resiliency to navigate through this economic cycle and we are prepared to capture growth opportunities when spending patterns improve.

In closing, I want to thank our clients for trusting Insight to help them with their transformational journeys, our partners for their continued collaboration and support and delivering innovative solutions to our clients, and our teammates for their commitment to our clients, partners and each other.

This concludes my comments and we will now open the line for your questions..

Thank you, Joyce. [Operator Instructions] Our first question today comes from Matt Sheerin from Stifel. Please go ahead..

Yes. Thank you, and good morning, everyone. Joyce, my first question, just regarding your commentary on the demand environment, which still looks to be challenging. A couple of your peers reported yesterday in both has seen a modest uptick in orders and tone from customers coming out of the June quarter.

It sounds like you are actually seeing the opposite where things continue to be challenging.

So could you be a little bit more specific about what you are seeing and why you may be different?.

Yeah. I mean, so first of all, I mean, that Q2 was more challenging than we expected, but we are pretty pleased that we are making some really good progress against our strategy to become the leading solutions integrator and we see some pretty good gross margin expansion, EBITDA margin expansion despite the revenue decline.

Hardware declined 24%, and as you know, cyclicality of hardware is quite significant and so that is actually the reason for our strategy, right? We are trying to change the mix of our business and grow our services as a percentage of our mix and we are also trying to make sure we are growing in the fastest growing areas of the market like cloud, data, and AI.

So we do see some more strength going into Q3, both in terms of bookings and also in terms of results so far in Q3. So we also expect the second half to be better than the first half. And as Glynis noted, our guidance assumes that we will grow our EPS by 4%, so -- at the midpoint.

So I would say that we feel the second half will be better than the first half, it’s just not going to be quite as robust as we initially anticipated..

Ok. That’s helpful….

The other part from that..

Got it. Yeah..

The other part from that..

Got it. Yeah.

And then on the hardware side is that for both client devices and infrastructure products as well?.

Well, we are seeing some improvement in infrastructure for sure in Q3. We think we are close to the bottom as Glynis said on devices and so we expect devices to basically be down year-on-year and for the entire year, but we do expect to see that improve Q4..

Okay. Thank you..

That is Q1 to-date -- in Q1 to-date we have seen hard -- the hardware decline is less at the start of Q3 than it is at that it was in the first two quarters sequentially..

Okay. Great. Thank you, Glynis.

And then -- and just my final question regarding your some cost reduction actions, is there a number around that and where we see that in terms of the P&L, do you expect OpEx to come down?.

So, Matt, I think, what I can tell you is, you will see it in OpEx. And I guess what you could look at is in the second half of the year OpEx as a percentage of GP will grow at a slower pace of NGP. Growth in OpEx in the second half will be slower than the growth in GP in the second half..

Okay. Great. Very helpful. Thank you..

That’s how we get the expansion in EPS drivers..

Okay. Got it. Okay. All right. Thanks a lot..

The next question on the line is from Joseph Cardoso from JP Morgan. Please go ahead..

Hey. Thanks. Good morning and thanks for the question.

My first question here, I just wanted to see if you can give us a peek under the hood at what you are seeing in the services business, particularly wanted to touch on the more moderate year-over-year growth in agent services, as well as the trend you are seeing core services with the sequential recovery in the second quarter, which also came with record gross margins I believe.

Can you just touch on the drivers of those two and then how are you thinking about those tracking into the second half of this year?.

Yeah. So we grew our core services business 7%. Now -- so keep in mind we have sort of two components of our core services. The first is in those fast growing areas of the market that we keep talking about cloud, data, AI, et cetera. Those parts of the services business grew and consistent with our expectations.

The piece that we also though see -- we have a piece of our core services business that is very much tied to devices. So think about labs and configuration capabilities, et cetera, and those declined. So it’s a little bit of a tale of two cities there..

And then just on the year-over-year growth in agent services being a bit lower than what you have seen over the past four quarters?.

I think that’s related just to the how it plays out with regard to different accelerated that we may get have may be able to take advantage of in one year that are not necessarily available in other years. It’s not anything that we think is structural..

Got it. And then just in terms of my second question, just wanted to touch on the AI opportunity that you highlighted, particularly as it relates to the generative AI use cases. I guess how should investors think about this revenue materializing for the company.

Specifically, can we -- can this be a material driver going into 2024? And then maybe just on the flip side of that, we get this question a lot from investors around cannibalization of spend from customers as they deprioritize maybe other areas to focus on AI? I guess are you seeing any of that behavior? Thanks for the questions..

So, first of all, we see enormous interest, every single client wants to talk about generative AI. Many start with trying to understand things like what kind of policy should I have in place? What kind of governance and security should they have in place? And importantly, how do I get my data estate ready for that? So -- for the use of generative AI.

Then that morphed into, let’s talk about use cases, let’s talk about specific opportunities to drive specific outcomes at the clients, et cetera. So we see significant opportunity. I would say it’s mostly in the discussion phase at the moment. We are, we do have active engagements around generative AI.

And just keep in mind, we have been doing AI and data for a really long time, so this is not a big leap. In terms of the drivers of the business though, I don’t think it will be significant in the back half of the year.

I do think we will see it set up as we will provide some another tailwind for us in 2024, because there is so much interest and there’s so much opportunity to improve overall business structure and business outcomes. And then, in terms of cannibalization, we aren’t seeing any of that yet.

But I don’t think it can be really separated from digital transformation, broadly speaking, it’s a really -- it’s just another way to get to the same kinds of outcomes that we are talking about, potentially faster and potentially more efficiently..

Got it. Thanks for all the color. Appreciate it..

Yeah..

The next question on the line is from Adam Tindle from Raymond James. Please go ahead Adam..

Okay. Thanks. Good morning. Joyce, so I just wanted to start by asking, if you could maybe provide a little bit of color on linearity in the quarter. As mentioned before, one of your competitor cited a surge in June, and I think, we are trying to figure out what happened with you guys relative to that.

I noticed in the comments you talked about not seeing the software surge in the month of June, so maybe that’s describing some of the delta.

But if you could maybe just at a high level take us through the cadence of the quarter and if you want to tie in any trends in July that you are seeing to support your back half that would be helpful?.

All right, Matt. I will take that one. So we did see strength in May and June. I would say there were normal cycles going in the second quarter.

June, historically, is always the largest month of the quarter, the third month of any quarter is always the largest month for us and we saw probably a little bit more deterioration in hardware in June, as well as not the strength in software that we typically see just at the end of the quarter.

I would say that going into Q3 and the second half we have seen software very strong start in Q3. Infrastructure still remains strong. We have backlog still continuing to flow through. Devices has improved, the decline enterprises devices is not as severe as it was in the first two quarters.

So that is improving in the second half and we anticipate that it will get even stronger in Q4.

But I think that would be the answers in terms of why we feel comfortable with regard to what we are seeing and based on conversations we have had with our clients, as well as with our OEM and publisher partners in terms of their expectations also for the second half and most people are talking about the fourth quarter being particularly strong relative to the third quarter.

And just as a reminder for you -- for everybody, the third quarter is not typically our strongest quarter. That’s been a little bit different as it relates to the pandemic last couple of years, but in general, the first quarters and third quarters are not our strongest quarter.

So, historically, you would expect that Q3 would be down in Q4 would be up as it relates to the second half..

Got it. Okay. And then on the cost reductions, Joyce, I just wanted to maybe touch on the logic to doing this now. It sounds like the decline in the or the deviation relative to your forecast was largely in the device ecosystem being maybe not as robust as expected, but you are also talking about kind of calling the bottom in that market.

So if we had a delta in that device ecosystem, but it’s going to accelerate from here, what went into the decision to implement cost reductions now? And Glynis, I am sorry, if I missed it, did you quantify the amount and timing of those reductions? Thanks..

We didn’t quantify the amount. The timing is in the second half. So our principle that we have is that SG&A should grow at a slower pace than GP growth. That’s the principle that we have. That did not occur in the second quarter.

We had been doing prudent, what we would call, prudent expense management throughout this year and the second half of last year with regard to looking at backfills before we fill them, may be delaying some backfills.

And based on what we are seeing for this year, we made decisions around reductions that we needed in order to continue to fund sales and technical talent that we need for the business on a go-forward basis.

So hardware is not performing as well, we have some efficiencies that we put in as it relates to how we execute on hardware and we believe that the reductions that we are making now will ensure that in the second half of the year SG&A growth at a slower pace than GP and it sets us up with the tailwind going into 2024..

And the only thing I’d add, Adam, is -- I mean, we are declining 14% on the topline. That hurts and it’s an opportunity for us to look at the cost structure and set ourselves up so we are a more efficient business, as Glynis said, as we head into 2024..

Okay. Just to clean this up on the device stuff, I think, the exciting part is the calling the bottom here and thinking about back half trends maybe getting better. But at the same time near-term here just in this quarter you had expected better growth than experienced in devices.

So I guess maybe a way to try to ask this would be, what would be different about the back half of the year and this kind of calling the bottom forecast relative to what you just experienced in Q2, which missed your forecast? What’s underpinning the confidence to call the bottom at this point? Thanks..

Yeah. I mean -- so, first of all, we are -- we still want to be clear. We think devices will be down for the year. We don’t see we will -- think we will see device growth until the very end of the year in Q4 if at all and that’s against easier compares for us.

So we didn’t anticipate that the decline in devices that we saw in this quarter, we thought we would be a little bit better and so -- and that was really driven also by our mix of business. So just as a reminder, we have a pretty robust, large enterprise and corporate sector and our commercial business both declined significantly.

Public sector was up, but it’s just not a very big sector for us.

So we feel like we have a pretty good handle on the beat and we have actually seen from Q1 to Q2 some reduced, less severe decline in devices and we expect that to continue in Q3 and we would expect to see potentially some very slight flat -- flat to slightly up recovery in Q4 on devices..

Okay. Thank you very much..

[Operator Instructions] We have a question on the line from Vincent Colicchio from Barrington Research. Please go ahead..

Yeah.

Joyce, I am curious with valuations getting a little bit better, may we see you become proactive with some tuck-ins here in this market?.

Absolutely. We are very excited that we started to see some normalization of the valuations and we are really excited about the opportunities that we have talked about as part of our strategy to build capability in those fast growing areas of the market cloud, data, AI, apps, et cetera.

So, yes, and we are very comfortable with our current balance sheet and we think -- we believe we have ample capacity to support those acquisitions. So we are pretty pumped up about that..

And any differentiation in what you are seeing on the demand side for enterprises versus small and mid-sized businesses?.

I mean, they were pretty -- there are some slight differences in terms of overall performance in terms of smaller commercial business, we call it, in large enterprise and corporate business, but it’s sort of -- they are both in sort of 15% to 20% range decline. So, and then, obviously, public sector was up, as I said.

We just need -- we -- our public sector is only 14% of our business. So that would be great if it would be bigger in that particular market..

And maybe a qualitative question, your positioning as a solutions integrator -- your new integrator positioning, are you seeing that resonate maybe in the past few months, any sense if that’s having an impact?.

Yeah. I mean, I think, we are hearing the term repeated by our clients and our partners. We are seeing some similar type discussion from traditional competitors as well.

So we think the notion of delivering outcomes, delivering them fast, earning the right to do more, makes a lot of sense and building those -- delivering those outcomes with a combination of hardware, software and services is making a lot of sense to our clients.

And with new technologies like gen AI, I mean, that’s a really great example of how we can layer in even more knowledge and value and from a services point of view to help deliver those outcomes. So we are pretty pleased with kind of the response we have heard so far to our strategy..

Okay. Thank you..

Thanks, Vince..

We have no further questions on the question queue, so will now conclude today’s conference. Thank you everyone for joining. You may now disconnect your lines and enjoy the rest of your day..