Good afternoon and welcome to Reed's Second Quarter Fiscal 2021 Earnings Conference Call for the period ending June 30, 2021. My name is [Indiscernible] and I will be your conference operator today.

Today's call is limited to one hour, and will have prepared remarks from Norm Snyder, Reed's Chief Executive Officer; and Tom Spisak, Reed's Chief Financial Officer. Following management remarks, they will take your questions. Before we begin today's call, I have a Safe Harbor statement to read to our listeners.

I would like to remind our listeners that this conference call will include forward-looking statements.

Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those anticipated by such statements.

These factors include but are not limited to Reed's ability to manage growth, manage debt and meet development goals, reduction in demand for our products, dependence on third-party manufacturers and distributors, changes in the competitive environment, future business outlook, increasing the potential impact of COVID-19 on Reed's business and result of operation and other information detail from time-to-time in Reed's filings with United States Securities and Exchange Commission.

These statements including financial guidance involve risks and uncertainties that may cause actual results or trends to differ materially from the company's forecast, the achievement or success of the matters covered by such forward-looking statements, including future financial guidance, involves risks, uncertainties and assumptions, many of which involve factors or circumstances that are beyond Reed's control.

Fiscal 2021 guidance reflects year-to-date business trends, including the ongoing operating environment related to COVID-19.

The COVID-19 pandemic and its related impacts create many incremental potential business risks, including potential impacts to Reed’s ability to access raw materials, production, transportation and/or other logistics needs, as well as potential inflation related to all aspects of supply chain and logistics, which cannot be reasonably estimated and are not factored into current fiscal 2021 guidance.

Gross margin guidance assumes unknown pricing for ingredient, packaging and production costs. Each of which has been and could continue to be impacted by factors related COVID-19. Financial guidance should not be viewed as a substitute for full financial statements prepared in accordance with GAAP.

For more information, please refer to the risk factors discussed in Reed's most recent filed annual report on Form 10-K and the Form 10-Q to be filed with the SEC today.

Although management believe that the expectations reflected in the forward-looking statements are reasonable, management cannot guarantee future results, levels of activity, performance or achievements. In addition any projections as the company's future performance represent management's estimate as of today, August 12, 2021.

Reed's assumes no obligation to update any forward-looking statements or information which speak as of their respective dates.

Additionally, please note non-GAAP financial measures referenced during this call are reconciled to their comparable GAAP financial measures in the press release and supplemental materials filed with the SEC and as posted on our website at investor.reedsinc.com.

Modified EBITDA is presented because management believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of core operating performance.

The presentation of this non-GAAP financial information is not intended to be considered in isolation or is a substitute for or superior to the financial information prepared and presented in accordance to GAAP and Reed's non-GAAP measures maybe different from non-GAAP measures used by other companies.

Reconciliation of non-GAAP measures to GAAP measures as well as a definition of each measures, their limitation and our rational for using them can be found in this afternoon's press release and in Reed's SEC filings. I will now turn the call over to Mr. Snyder..

Thank you and good afternoon everyone. We appreciate you joining us today to discuss our second quarter 2021 results. We continue to experience strong demand for our new product entries and are benefiting from the growth of our expanding DST network and the increased number of authorizations across all retail sales channels.

We believe the momentum that we experienced during the first half of the year is sustainable for the balance of 2021 despite some COVID-19 related challenges that we have recently serviced. We expect these challenges to be short-term issues that will ease during the second half of the year.

Let me start with a summary of the key takeaways from the second quarter to frame our results. First, for the sixth consecutive quarter we have delivered growth in net sales. This growth as a result of an increase in the number of retail outlets selling our product and strong consumer demands driving higher sales velocity particularly for Ginger Ale.

During the second quarter, net sales increased at lower-than-expected rate due to extended supplier delay especially with aluminum cans. These delays were temporary and we believe they will not have a long-term impact on our business.

Second, we again delivered continued gross margin improvement and we have made modifications to mitigate inflationary pressure experience in several of all of our cost of good inputs. Third, while transportation costs remain elevated, we believe they have peaked and will trend back towards 2020 levels during the second half of the year.

Four, we had made solid progress on the cost savings and operational improvement initiatives we outlined last quarter. Fifth, innovation and expanding distribution continued driving strong demand from consumers and customers. Finally, we remain on track to meet our 2021 financial guidance for net sales growth.

Consumer demand for our products remains very strong across our entire portfolio, reflecting positively on our unique innovation launches over the past year as well as our broader distribution. IRI scan data for the year to date period is up 16%, overall including a 23% increase in the Reed's brands.

Ginger Ale growth is accelerating, increasing 693% on a year-to-date basis. Reed’s Extra and Zero Extra cans are up 175% and our Reed's Zero Extra bottles are up 66% over the same period. Our Virgil Zero Sugar line continues to perform well, and scan data reflect increases of 17% year to date.

In addition, year to-date velocity continues to increase, up 17.4%, which ACV grew by approximately 2%.

We are also starting to see rapidly growing placement for our Mocktails that were introduced this quarter and which have been authorized in several retailers including Sprouts, Ralphs, Fred Meyer, QFC, Stop & Shop, Ingles and several more regional chains.

Currently available two varieties, Shirley Tempting and Grape Transfusion, these product are also zero sugar and keto-certified. Our business in Canada, CVS and U.S. military commissaries continue to show growth. In Walmart, we have expanded our business into their mixer sets and recently launched in ShopRite in the Northeast.

Recently we conducted a roadshow in Costco Southeast division, where we sampled Reed's Ginger Ale assortment of Virgil zero sugar flavors. The results again reinforce the strong consumer response we are seeing in other retailers.

More importantly, the feedback underscores that consumers clearly understand and see the benefit and taste the difference from a Ginger Ale made with real ginger are firming our new marketing campaign that real is always better.

In addition, the naturally bold flavors of our Virgil Zero Sugar line with no after taste continue to resonate with consumer seeking to replicate a full sugar tasting experience that contains zero calories. Let's move to the second quarter results. Net sales increase 4% to over a $11 million reflecting volume gains in both product portfolios.

This is below our expectations due to supply chain challenges negatively impacting our ability to fill orders at a normal level. Importantly, based on strong retail demand we are confident that shortfall will be recover during the third quarter.

Production line time limited manufacturing output as most of co-packers are facing labor shortages and are unable to adequately staff second and third shifts. In addition, aluminum can shortages and delays and deliveries were again a factor despite our best mitigation efforts.

We also experienced delays with our swing-lid bottles and cans that ended up sitting on the water in transit water for docking times well pass the expected delivery date. We have since received these delayed materials and now have an adequate inventories of packaging materials to meet current and future levels of demand.

Gross margin remain bright spot and we are pleased with the improvement we deliver despite significant challenges. In the second quarter our gross margin improve by 150 basis points over the same period last year to 29%.

Mix remain the key factor and expanding our margin reflecting continued execution against our aggressive new product innovation strategy. Cost savings initiatives also help gross margin in the second quarter much like we experience in the first quarter.

However we continue to experience price increases across several inputs which partially offset many of the gains we realized. Through continued aggressive pursuit of cost saving initiatives we strive to drive further gross margin improvement. In addition, we are passing through a price increase that will be effective during the four quarter.

Similarly, we made significant progress improving delivery and handling expenses on a sequential basis. Second quarter delivery and handling were down 24% or $0.8 million compared to the first quarter of 2021 and improved by 490 basis points a percent of sales.

We are in the process of implementing several cost saving initiatives aimed at reducing our average cost per case expense which we expect will decrease delivery cost over the reminder of 2021.

Modified adjusted EBITDA loss with $3.1 million in the second quarter compared to loss of $1.4 million in the second quarter of 2020, reflecting deleverage cost by tempered top line gains which stem from supplier delays exaggerated by elevated transportation costs.

We had a strong first quarter in volume output and great retail momentum around many of our new product launches. In the second quarter, our volume output did not meet expectations due to largely factors outside of our control.

As many of you recall, I was initially brought into the company as Chief Operating Officer back in 2019 to develop an efficient scalable platform capable of supporting significant growth. We built that platform and it runs smoothly under hands-on detail-oriented leadership.

For this reason, I've assumed day-to-day responsibility for all of our operations as an interim measure, no such times as we can fill that position. Last quarter, we outlined several efforts to optimize our supply chain by lowering costs, driving efficiency and mitigating risk. I would like to update you on progress in a few key areas.

We modified our procurement procedures and have reduced pricing and or usage rates for several key ingredients. These savings have offset many of the price increases that we incurred resulting in net savings. We also improved our production planning process resulting in longer, more efficient production runs leading to lower law shields.

Our focus on quality and formula optimization contributed to lower cost per case rates and significantly lower obsolescence charges. We will continue to explore additional cost savings initiatives with respect to our cost of goods sold to improve gross margin.

Further, we are adding an additional co-packer during Q3 to provide incremental capacity and are participating with our 3PL provider to develop logistic protocols to lower transportation costs and provide additional efficiency. In summary, demand for our products remain very strong across the portfolio.

Our focus on platform optimization to deliver improved profitability as we scale has also continued to show solid progress. However, in the second quarter net sales were adversely impacted by supplier headwinds that cause shipment delays to our customers. We expect the shortfall from Q2 to be realized in Q3.

With that, let me turn the call over to Tom Spisak to discuss our financial results in more detail.

Tom?.

Thank you very much, Norm. And it's a pleasure to speak with everybody today. As norm discussed during the second quarter we continued to see strong demand from consumers and retailers across both the Reed's and Virgil's portfolio. Reported net sales for the quarter did not fully reflect their strength due to unexpected delays from suppliers.

Despite these challenges we still delivered higher gross margins and made progress in cost savings initiatives. Second quarter net sales increased 4% to $11.3 million compared with $10.9 million in the prior year period. Core brand gross billings increased 2% year-over-year driven by a 9% increase in volume.

The volume growth was driven by 5% case growth for the Reed's brand and 13% case growth for the Virgil's brand. New launches remained a key factor in our volume growth with an emphasis on Reed's REAL Ginger Ale Zero Sugar formulations and canned products.

Gross profit dollars increased 9% to $3.3 million compared to $3 million in the prior year due to increased sales, as well as lower discounts as a percentage of sales in brand mix. Gross margin was 29% in the second quarter of 2021, an increase of 150 basis points versus the second quarter of 2020.

Delivery and handling costs totaled $2.5 million in the second quarter, an increase of 70% compared to last year due to volume growth, ecommerce fulfillment costs and higher freight rates. Delivery and handling costs were 22% of net sales and $3.53 per case, compared to 14% of net sales and $2.27 per case during the same period last year.

Key takeaway relative to our delivery and handling expenses is that we made significant progress over the last three months mitigating the issues we faced earlier in the year. From Q1 to Q2, delivery and handling expenses declined by 800,000 or 490 basis points lower as a percentage of net sales and improved by $0.90 on a per case basis.

Selling and marketing costs were $2.6 million during the second quarter compared $1.6 million in last year's second quarter. Increase was primarily driven by head count growth in our sales force and higher stock compensation.

As a percentage of net sales, sales and marketing costs were 23% in the second quarter of 2021 versus 15% in the prior year period. The relative increase is largely attributable to supply chain headwinds that delayed shipments resulted -- resulting in reported net sales that were below our expectations.

General and administrative expenses were $1.8 million in the second quarter compared to $1.3 million in the prior year period. As a percentage of net sales, general and administrative expenses were 16% in the second quarter of 2021 versus 12% in the prior year period.

The year-over-year increase was attributable to higher employee costs and stock compensation. The second quarter operating loss was $3.7 million compared to an operating loss of $1.4 million in the prior year. Interest expense was $200,000, down $100,000 versus the same period last year.

We recognized an $800,000 gain related to the forgiveness of our PPP loan, which resulted in a net loss of $3.1 million in the second quarter of 2021 compared to a net loss of $1.8 million in the second quarter of 2020. On a per share basis, we reported earnings per share of negative $0.03, flat with a year ago.

Our weighted average share count was $90.8 million in the second quarter of 2021 compared to $59.5 million a year ago, reflecting capital raises over the past year to strengthen our balance sheet. Modified EBITDA loss was $3.1 million compared to a loss of $1.4 million in the prior year period. Moving to the balance sheet and cash flows.

We ended the second quarter with $700,000 of cash, $2.9 million of outstanding borrowings and $4.3 million of availability on our revolving line of credit. Cash used in operating activities on a year-to-date basis was $10.3 compared to $5 million during the six-month of 2020.

Planned inventory build to support our net sales growth was the primary factor accounting for the change in the operating cash flows versus a year ago. As a reminder, our total facility has a borrowing capacity of $13 million.

Turning to the guidance, we are reiterating net sales guidance and continue to expect our fiscal year 2021 net sales to increase 14% to 16% given the uncertainty arising from the current economic environment.

While our margin enhancement initiatives have begun to take hold, raising input cost and the need to supplement our can supply as us reducing our fiscal year 2021 gross margin range to approximately 31% to 32%.

Our gross margin guidance assumes our known pricing for ingredients, packaging and production costs, each of which has been and could continue to be impacted by factors related to COVID-19.

We believe the initiatives we began implementing during the second quarter coupled with our strong outlook for sales growth, puts us back on track with our pathway overall profitability and we expect to show measurable improvement over the balance of 2021. Now let me turn the call back to Norm for some concluding remarks.

Norm?.

Thanks Tom. Before I turn the call back the operator for questions, I will just reiterate that while there is still some uncertainty out. Our results demonstrate that we are continue to navigate today's challenges very effective.

Our entry into the larger Ginger Ale category with our REAL Ginger Ale is contributing to our growth and we still have considerable opportunity to fill out our distribution for this promising new product. We have built an extensive national co-packer network to support our growth and have significant opportunity to improve margin.

We are all focused on controlling cost, improving gross margin and enhancing our supply chain. We remain flexible and prudent as we navigate the current environment and we continue to have to adapt to keep our employees and partners safe and our inventory on the shelf.

Moving forward, we are focused on advancing our growth opportunity and we're excited for the path that lies ahead. I will now have a call over to the operator to begin the question-and-answer session..

Thank you. We'll now begin the question and answer sessions. [Operator Instructions] Your first question comes from Jack Kaya [ph] of Private Investor. Please go ahead..

Hey, Norm and team. I was -- wanted to know if you guys could talk at all about termination of the VP of Ops and sort of going further off of that any activities you guys are working on to further reduce the delivery and handling expenses.

What your target goal for that line item might be? And the timeline when we could expect to see results either sort of revert back to historical costs or possibly see improvements in the future?.

Jack, that's a great question. I think in terms of the termination I adequately address that in my comments and I really don't want to say more there. But if you look at delivery and handling costs, obviously, this is something that's not unique to Reed's. It's going on across the -- I'm going to say, entire industry, but multiple industries.

So what we're doing is, we're partnering with a larger 3PL provider who are doing more in-depth studies in terms of locations of distribution centers relative to our customers. Obviously, by combating some of these supply chain issues, we'll be able to put larger loads together as we organically shift from bottles to cans that brings the cost down.

But in addition to taking pricing we're also looking at establishing minimum order quantities. And as long as our customers are meeting those minimum order quantities, we will continue with our current policy of delivering loads, but for those that don't meet those we're going to start implementing a surcharge.

And I think that's something we've seen in other industries. Obviously, we -- on their own the costs are coming down as the supply and demand factor start to level out. And then part of it is we're looking to bring in a Midwest co-packer, because we're starting to see some of those straight lengths of the Midwest increasing as well.

So, I think we're doing a lot of different things and expect to see it really come back towards 2020 levels. The latter half of the year, we don't want to just rely on that. We want 2022 and future levels to be even lower..

Sure. Yes. Thanks. I certainly really appreciate the insight. One other quick question. In terms of the supply chain delays that were experienced during this past quarter.

Does that mean from that -- in terms of the new distribution deals that were announced earlier this year that we have not sort of to -- not sort of begin to manifest the increase in sales that would presumably come with just being in front of more consumers?.

I think that's part of it, but that's not all of it. I mean, I would look at it more as a timing difference where things came in a little bit later, so it shifted the timing of deliveries. I think we've done a fairly decent job of communicating that with our customers.

And are obviously, despite the fact that we really believe that we are ahead of the curve on this and well -- and had an ample lead time in our orders, we've extended that even more to the point where I believe we are fully covered for the balance of the year and are in the process of finalizing our requirements for 2022, so we can avoid the situation if it recurs..

Great. Thanks for touching on that. And keep up the good work. We certainly appreciate all you guys are doing for us..

Thank you, Jack..

Thank you. Your next question comes from Anthony Vendetti from Maxim Group. Please go ahead..

Thanks. So Norm, as you as you mentioned delivery and handling and freight's been an issue across multiple industries. And you mentioned that you think it's peaked.

I guess, A, what gives you confidence that it's peaked? And do you think it's plateaued or could head back down? And then just touch upon how you're better -- and I know you're working on streamlining the operations and the supply chain and the shipping so that the cost per pallet for Reed's starts to go down.

Can you just talk about some of those initiatives as well? Thanks..

Well, to go back to the first part of your question, the several sources of information, I mean, just like investors look at various reports that folks like you put out tracking trends and what's going on. We follow that closely with respect to transportation. We also talk to our 3PL providers. And we talk to other folks in the industry peers.

Other industries to see what's going on and just get a feel. And then I -- to the point where I watch freight rates on a daily basis where certain lanes are performing, and I'm seeing those come down. So it's a combination of all those. Obviously, it has my attention and I'm spending a lot of time watching, talking and gathering information.

So I think that what I've seen is that they have peaked, they're coming down. I think they've plateaued for a while, but I think in the latter part of the year we expect them to come down further. So, what we do to try to bring that down? I mean, like I said on the last question, we're shipping more cans.

You can get more cans on a truck than you can bottles. So on a cost per basis or cost -- case per basis cost that comes down organically. Obviously, looking when you're when you have adequate supplies of inventory you can eliminate or minimize out of network shipments. You can put ship full loads.

And then some of the initiatives I talked about is we're really looking at what's the tipping point for what's our minimum quantity of cases on a truck. And we're going to look at that and what the incremental cost is. And we'll give adequate notice. But if customers are not ordering minimum quantities we're going to attach a freight surcharge on..

Okay, great. And then….

I will say, I want to make this point. Our percentage of full truck loads is increasing. So we are moving in the right direction and that's going to -- I think that's going to happen a lot on its own..

Okay. That's great to hear. And then on the aluminum can shortage, I hear that that's starting to recede in terms of that particular issue.

Are you seeing that or do you still find it an issue here in the third quarter?.

Anthony, I'm by nature a very optimistic person. But I'm not sharing the same optimism that you are. I'm still I guess prepared for the worst and hoping for the best. I suspect that what maybe you're starting what you're inferring to is that people panic so much, everybody over ordered. And at the end of the day realized that they didn't need it.

So it's created some additional capacity, which I hope to be the case. I'm not quite seeing that yet. I know that we've taken proactive action to lock ourselves in for the balance of this year and next year to protect against that.

So I'm going to continue to do that until I know otherwise and I quite like I said, I haven't reached that point quite yet where I share that same level of optimism..

Okay. No, that's fair. That's fair. And then, obviously, the Reed's REAL Ginger Ale has been a big hit. Your IRI scan data for your Reed's brands is growing faster than the overall portfolio.

Are there some new innovations that you can talk about here that you're excited about for either the remainder of this year or for 2022?.

Well, I'll say this. A flaker brand off of our Reed's REAL Ginger Ale are our mocktails. And we have -- our Shirley Temple version, which we call Shirley Tempting & our Transfusion, our great Transfusion which obviously is Transfusion has gotten in the market at a much faster time frame that I expected.

And so we're going to obviously augment that, because it seems like there's a very keen interest in those products. And I think the positive news is it creates a somewhat of a new category. So it's not like we're taking space away from our core Ginger Ale. But we're creating something that both consumers and retailers want.

So we're really excited about that. We do have a couple other things up our sleeves for 2022 that it's premature to talk about. But we think it's well within our wheelhouse and we'll resonate with consumers. But I think for the balance of this year really watch Reed's Ginger Ale, really watch the Mocktails and watch our Zero Sugar.

Our Zero Sugar Virgil's line. And by the way, we are coming up with a little bit of a different look and feel on that to really, I think resonate more that we're Zero Sugar. But the other thing that we've done, if you remember last year we brought back the Bavarian nut bag, Root Beer, Swing-lid bottles and sold out before we finished production.

This year we expanded it to include Flying Cauldron and we tripled our output and it's completely sold out. And as fast as we're making it, it's getting on trucks and shipping. So we're really excited about that as well..

All right. Excellent. That color is very helpful. I will jump back in the queue. Thank you..

Thank you, Anthony..

Thank you. Your next question comes from Waldo [ph] James of Private Investor. Please go ahead..

Hey, gentlemen. How are you. I have a series of pretty quick questions. One, what's been going on with the resealable 20 ounce format for convenience stores single serving.

Have we -- have those -- are those hitting doors yet? Are there any sales in this report reflecting that?.

It's very small. They're in CVS right now. And they're in -- there are some small regional chains. We are right now going through the -- I'm trying to think that the buying season where we're meeting with buyers to get them in for the latter part of this year and in the 2022. We missed that window last year.

So, it's been limited distribution, although where we have it. The products doing well. But we expect over the next quarter to really have new news with increased authorizations on that product. So I wouldn't -- with product innovation it’s all about timing. And that's probably one that we really finish very early.

Not early, not to mean last year's window, but we're on time for meeting with buy for this go around. So expect to have a lot more new next call..

Okay.

And what percentage of the sales on the report were alcoholic?.

Again, that was a small part, and that's something that I expect to talk more about. We took over distribution on the eastern half the United States for our ready-to-drink mule and we're converting over and part of that's been unlike the non-alcoholic beverage category.

You have to register with each individual state and that's a time-consuming process. I think we've done that about 15 states. We expect to have the remaining another 15 or so done by the end of the third quarter and by the balance of the year we expect to be registered in all 50 states.

You'll start to see that number pick up quite a bit in the second half of the year..

Actually, but as far as alcoholic sales, we don't have any idea of approximately 5%, 4%, 3%?.

It's less than 5%..

Its point one..

It's point one. It's immaterial at the exit. It got out the end of June..

Okay. And my next question is in regards to -- I've noticed and take a look at the balance sheet out there.

Is there basically any anticipation of another issuance or stock to raise capital?.

Not this year. As Tom said, we have plenty of capacity on our line of credit. And despite the increase in our delivery and handling costs we believe that we're fine to make it through this year and even a majority of next year. So, it's something that's not even on our radar at this point..

Okay. And I have only two more quick questions left. One, in regards to the share price, the share price has been pretty much consistently under a dollar for probably the last I'll say five weeks.

Does a company have a contingency in regards to being notified of delisting, not meeting capital requirements for the NASDAQ?.

Well, we haven't been notified yet. We've been in this situation before. And we are discussing potential plans, although we have 12 months or..

Six months later..

Six months to -- the plan is really to continue to power ahead and deliver solid results and let the stock come back. I mean, we're talking about things if it doesn't. Historically it has. I'm confident that we'll be able to get that stock price over the dollar. We've done it twice before. And I think, we'll let our results speak for itself.

But we have plenty of time to address that. And I wouldn't say, we formulated any real plans other than let's deliver a solid third quarter and a balance of this year..

Okay. And the final question is, with the stock price being where it’s at, it seems like it'd be an optimal opportunity for pretty much anyone to get in based on where the company is trending, based on earlier in the call.

Do you see yourself? Do you think this is a buying opportunity for management, maybe to increase their position in the company?.

After what -- I mean, I don't know what I can and cannot say, but I would -- if I could say, I would say buy. So I don't know if I just violated some sort of rule. But obviously I think we're severely undervalued and it’s an excellent opportunity..

Yes. That was trend as well. [Indiscernible] really -- I would speak a lot if you were -- I don't know, how to say.

Have a healthy amount of shares under your belt and that would speak to the confidence?.

And I do, and I hear exactly what you're saying..

All right. Because that what I'm getting it.

Because based on the breakdown what I'm looking at and always that puts a lot of confidence in other investors that knowing their management is, regardless of what's going on with the EPS or the share price that they feel that things are trending in the right direction and they are taking advantage of buying opportunities to average it down or increase their position?.

Great. Thank you..

All right. I appreciate, Norman. Thank you..

Okay..

Thank you. Your next question comes from Chris from hill top. Please go ahead. My apologizes. There are no further questions at this time. I'll now hand back for closing remarks..

Thank you, again for your continued support and for participating on today's call. A replay of the webcast will be archived on the company's website under the investor section at drinkreeds.com for approximately 90 days. We look forward to sharing our progress over the coming quarters and years. Have a great day..

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect..