Chegg, Inc. (NYSE:CHGG) Q2 2024 Earnings Conference Call August 5, 2024 4:30 PM ET
Company Participants
Tracey Ford – VP, IR and ESG
Nathan Schultz – President and CEO
David Longo – CFO
Conference Call Participants
Bryan Smilek – JPMorgan
Eric Sheridan – Goldman Sachs
Josh Baer – Morgan Stanley
Ryan MacDonald – Needham & Company
Devin Au – KeyBanc Capital Markets
Operator
Greetings, and welcome to Chegg, Inc. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Tracey Ford, thank you. You may begin.
Tracey Ford
Good afternoon. Thank you for joining Chegg’s second quarter 2024 conference call. On today’s call are Nathan Schultz, President and CEO; and David Longo, Chief Financial Officer.
A copy of our earnings press release along with our investor presentation is available on our Investor Relations website, investor.chegg.com. A replay of this call will also be available on our website. We routinely post information on our website and intend to make important announcements on our Media Center website at chegg.com/mediacenter. We encourage you to make use of these resources.
Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements. In particular, we refer you to the cautionary language included in today’s earnings release and the risk factors described in Chegg’s annual report on Form 10-K filed with the Securities and Exchange Commission on February 20, 2024, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.
During this call, we will present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release and the investor slide deck found on our IR website, investor.chegg.com. We also recommend you review the investor data sheet, which is also posted on our IR website.
Now, I will turn the call over to Nathan.
Nathan Schultz
Thank you, Tracey. Good afternoon, everyone, and thanks for joining Chegg’s second quarter earnings call.
I’m so very proud of how Chegg shows up for students and our team’s endeavor to build an unparalleled learning platform. Since assuming the CEO role 65 days ago, I’ve spearheaded a significant restructuring effort to create a leaner, more efficient organization, which allows us to move faster, smarter and make investments for the long term.
In 2025, our restructuring program will generate non-GAAP expense savings in the range of $40 million to $50 million and has allowed us to remain committed to our goals of 30% plus adjusted EBITDA margin and at least $100 million in free cash flow. Additionally, we have outlined a new product vision to evolve Chegg from a solutions-based study platform to one that supports the whole student with 360 degrees of individualized academic and functional support. Our talented teams are hard at work building the products and experiences that bring our new vision to life. However, let’s start with Q2.
For Q2, we exceeded our guidance delivering $146.8 million in revenue and $44.1 million in adjusted EBITDA. We continued to integrate AI into Chegg Study, completing several foundational programs, most importantly, the complete rollout of conversational instructional capability and automated solutions, all in time for the upcoming back-to-school season. As a result, we are seeing positive reception as demonstrated by an increase in student engagement. I’d like to specifically call out two exciting trends.
First, 70% of subscribers are engaging in conversational instruction. Second, students are asking more questions. The number of questions asked by students increased 74% year-over-year versus Q2 2023. And in H1 ’24 alone, students asked a whopping 16.2 million questions, which is 109% year-over-year increase.
While pleased with the product advancements we’ve implemented in Q2, we are only getting started. Our sights are fixed on innovations that leverage both our key differentiators in the generational technology shift in which we find ourselves. Speaking of which, I would like to spend a few minutes highlighting three key differentiators.
First, we are obsessed with studying students. With more than a decade of insights into students’ needs, motivations and behaviors we consistently work to evolve and align our services to the modern student experience. We apply deep learning science from an in-house team to create a verticalized user experience to reflect how students learn best.
For example, we provide step-by-step solutions, jargon-free explanation and simplified concepts to make learning accessible. This deep understanding of students culled from millions of learning interactions, drives our product innovation. Second, we have been built from the bottom up to deliver high-quality, accurate content at scale. Students care deeply about accuracy and quality of instruction. In our study of more than 11,000 students globally, 47% of those who use Generative AI for university studies say, receiving incorrect information is a top concern.
This lack of trust has led 67% of students to spend additional time verifying the information they receive from AI tools. This is inefficient, and we can do better. To that end, Chegg will launch this fall, a student-facing satisfaction guarantee align to the quality and accuracy of our content to better support student success and differentiated Chegg.
Third and finally, Chegg’s brand awareness remains high with 75% of U.S. college students having heard of Chegg. We plan to build on our strong foundation in Q3, launching our Small Steps, Big Wins marketing campaign this back-to-school season. This will extend our reach into channels where students are congregating such as TikTok, Instagram and on-campus to increase our top of funnel. Additionally, we will start to test services delivered on Discord and through Chrome extensions with the goal of making sure Chegg is everywhere our current and future students are.
The differentiators we have built over the last decade have positioned us for success as we execute our product roadmap and drive headfirst into the generational technology shift ushered in by AI. Our mission is to build from our foundation to support student outcomes, not by delivering AI education but rather education enhanced by AI.
With that in mind, I would like to take you through some examples of the AI architecture we have built. First, we have created proprietary technology that allows Chegg to deeply understand students questions. When a question is asked, we create a full picture why they asked it, at what depth the answer should be given, and most exciting, how we can use this question to develop a series of next-best actions that creates an individualized learning pathway, driving student engagement and retention.
Second, our evolving architecture takes an innovative multi-source approach, leveraging foundational and proprietary language models, our industry-leading symbolic math engine, our deep catalog of learning content, and our subject matter experts to deliver the best learning solutions possible. To fully realize our ground-breaking vision for integrating AI with our proprietary content and computational models, we have built a sophisticated, source-agnostic Orchestrator that intelligently selects the best approach to assist each student. You can think of the Orchestrator as an air-traffic controller. Using this approach, accuracy and quality remain paramount. As such, we have also developed a proprietary quality rubric that assesses all possible content sources and language models. We believe this enables Chegg to take advantage of any future innovations that foundational models will inevitably create while maintaining the quality that has built our brand.
As always, we have developed our innovative approach to servicing students with scale and cost in mind. Today, we produce solutions at a 75% reduction per unit versus human creation alone. The bottom line is that we are now creating more content of higher quality, at lower cost. And as you know, content is the primary driver of our acquisition flywheel.
Before I turn it over to David, I want to briefly talk about what you can expect regarding product innovation in Q3 as well as an exciting new partnership as we get set for our back-to-school rush.
On the global product side, we are well underway in implementing our iterative approach to product development. This fall, we will be testing a variety of innovations. As an example, we have developed a feature internally referred to as Starting Point, which is meant to address the common issue of students simply not knowing where to start, whether they are studying for a
mid-term or writing an important paper.
This introduces a whole new way for students to leverage Chegg on their learning journey. In addition to Starting Point, we have developed two new applications, one that keeps students on track and another that organizes students’ notes and turns them into study tools. As we get more products into students’ hands through iterative development, you are beginning to see the evolution of Chegg from a Q&A platform to one that delivers 360 degrees of support.
On the international front, we will be launching a fully localized experience in Mexico by the end of September. Our end-to-end localization strategy adapts Chegg Study to meet the cultural, linguistic, and user experience requirements of key international markets. As our first fully localized market, Mexico will serve as the playbook for future localization efforts. We remain excited about the growth opportunities that international expansion provides.
Finally, I’m excited to announce that we are expanding our Chegg Perks program through a partnership with Max, one of the leading global streaming services. Max delivers exclusive original series and blockbuster movies as well as a library of beloved TV that our U.S. subscribers will now be able to access with ads. Max joins our other Perks partners, including Tinder, DoorDash, Calm, and others, to enrich the value of a Chegg subscription.
In closing, we continue to execute the plan that we believe will return our company to growth. The way back will take time and will be accomplished through steady execution of our vision to serve the whole student, thoughtful implementation of our unique AI strategy, and building off our durable differentiators, which include a deep knowledge of students, a content
foundation built for quality and scale, and a brand that students know and love.
With that, I will turn it over to David.
David Longo
Thank you, Nathan,
Today, I will present our financial performance for the second quarter of 2024 and our outlook for Q3. Q2 was a solid quarter. We remained focused on delivering our new AI-driven experiences to students around the world, made progress on key metrics which we believe will support both revenue and adjusted EBITDA growth over time, and continued to execute prudent expense management to maintain strong profitability. We exceeded our Q2 guidance on both revenue and adjusted EBITDA and our balance sheet remains healthy.
Before I jump into the results of the quarter, in the Shareholder Letter related to the restructuring, we committed to sharing key metrics that would assist investors to understand and model our company. Our earnings presentation on our Investor Relations website includes these key metrics for Q2. These are the metrics we review to understand the trends and health of our business.
Moving on to our second quarter performance, we had 4.4 million subscribers in the quarter, with 25% coming from international. Total revenue was $163 million, down 11% year-over-year, including Subscription Services revenue of $147 million. Subscription Services ARPU was down 3% year-over-year, which was primarily driven by the international promotional pricing we introduced last year to bolster conversion and retention. Overall monthly retention for Chegg Study and Study Pack remained strong and was up 23 basis points year-over-year. Skills and other revenue was $16 million, a decrease of 4% year-over-year.
Second quarter adjusted EBITDA of $44 million represented a margin of 27%. This is above our guidance due to the better than anticipated revenue, as well as ongoing expense management to preserve profitability and cash flows as we navigate the path back to growth. As planned, the restructuring had a minimal impact on our Q2 adjusted EBITDA, and the full financial savings
will not be realized until 2025.
We had a few notable GAAP items this quarter, specifically an impairment charge and a large discreet item in our income tax provision. As a result of continued industry pressure and declines in our market capitalization, and as required by accounting rules, we completed an impairment test on our goodwill, intangible assets and property and equipment. The test resulted in $481.5 million of non-cash impairment charges that were excluded from our Q2 adjusted EBITDA.
In addition, the goodwill impairment impacted our Q2 income tax provision as we are now in three years of cumulative pretax losses in the U.S. This triggered the necessity of a $141.6 million non-cash valuation allowance recorded on all U.S. federal and state deferred tax assets which is included in the Q2 income tax provision.
Free cash flow was negative $3.6 million in the second quarter, which was driven by severance payments related to our restructuring and an increase in net working capital largely related to the timing of accounts payable items. Capital expenditures were $17.8 million in the quarter, of which $13 million were content costs. Content costs were down 7% year-over-year, even
with an increase of 74% in the number of questions asked.
Looking at the balance sheet, we ended the quarter with cash and investments of $605 million and a net cash balance of $4.5 million. With respect to Q3 guidance, we expect, total revenue between $133 million and $135 million, with Subscription Services revenue between $116 and $118 million; gross margin to be in the range of 67% to 68% and adjusted EBITDA between $19 million and $21 million.
In closing, while these numbers are not where we want them to be, like many companies in the ed-tech space, we are dealing with the challenges of the changing landscape. As Nathan detailed earlier, we are working to implement the vision to get us back to growth, but it will take some time before we see the benefits. I am committed to delivering our financial goals. We believe there is a significant opportunity ahead for Chegg and I am confident in our team and our ability to succeed.
With that, I will turn the call over to the operator for your questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from Jeffrey Silber with BMO Capital Markets. Please go ahead.
Unidentified Analyst
This is Ryan on for Jeff. Just a question. I was wondering how you’re feeling about the fall enrollment cycle, as we progress through the summer. And then what initiatives poised Chegg to recapture some of that student base? Thank you.
Nathan Schultz
Thanks, Ryan, it’s Nathan. Thanks for the question. Obviously, like everyone else, we use a number of external resources to look at the fall cycle. The unfortunate thing is a lot of that data is kind of an arrear, and we’re going to need September and October to kind of roll through for us, to really understand how the data comes out. Expectations overall, as I look at enrollment on a broader scale or the kind of, I think, about out through ’27 and ’28 enrollment it was flat.
So when I think about enrollment and change opportunity is not are we putting more freshman into the cycle, but really how do we extend the reach of our brand, of our value prop into the current students that are in the cycle, right. We saw a lot of headroom, domestically, a lot of headroom internationally and that’s where we are really focused on, how do we get those people to recognize us.
So if you think about the marketing campaign that I talked about in our prepared remarks, probably in the fall stats, the big wins, and getting ourselves onto the platforms where students are congregating, where that’s TikTok, Instagram, on campus, or getting checked to be on platforms, where students can use this directly like Discord. Our goal is to think about that top of funnel and making sure we’re as relevant as possible to as many students as we can get on the platform.
Unidentified Analyst
Great. That’s very helpful. And then just for my follow-up, I was curious on the top line. 3Q guide, just in light of the new metrics that you started disclosing, can you give any color on what assumptions you’re embedding in there in terms of the guidance?
Nathan Schultz
Can you be a bit more specific on that?
Unidentified Analyst
Yes. I apologize. I just meant in terms of retention and subscriber growth, what is kind of embedded in the 3Q top line guidance? Thank you.
Nathan Schultz
Okay. Understood. Thank you for the question. When we were building Q3 guidance it is a bit of a blind spot. It’s our toughest quarter for us to predict. But what we’ve done, is we’ve taken the trajectory of the business over the last – the first half of the year and extended. So the goodness that we’re seeing and the retention rates, we’ve baked that into the model.
And then we continued with subscriber enrollments new customer acquisitions being at the rates that, we’ve seen relative to last year, and that’s why you’ve seen the guide down year-over-year, where we are. So, we’ve got some work to do, but it’s really based on what the visibility we’ve had year-to-date.
Unidentified Analyst
Thank you.
Operator
Thank you. The next question comes from Bryan Smilek with JPMorgan. Please go ahead.
Bryan Smilek
Great. Thanks for taking the questions. I guess just to start with conversational features now rolled out. And 70% of subs engaging with them, have you seen any improvements in the top of funnel more recently? And I guess as we think about the 3Q guide, can you just elaborate about your comments around industry pressure, and then perhaps any softness that you’ve seen on the consumer more recently? Thanks.
Nathan Schultz
Okay. Around the conversational instruction that we’ve got rolled out now – for right in time for the back-to-school season, that’s a – okay subscriber feature. So it’s going to be less of a top of funnel driver. That’s why you see us kind of dovetailing ourselves, with a kind of renewed spirit in marketing around that small set stage wins program. That’s going to continue to build on itself over the quarter.
And as we really get into ’25, as we push harder on that – on marketing, you are seeing us also launch more part experiments, which we look to get into our subscribers and potentially our members hands, as we will do create accounts that do not convert. We were coming out, with more and new and innovative ways for us, to get students into an engaged relationship with Chegg. I hope that helps on the conversational side.
David Longo
Yes. And this is David. So on the revenue, I think the comment on the industry pressures was specific to the goodwill impairment. And so, we didn’t draw a straight line necessarily from the revenue top line to the goodwill impairment.
Bryan Smilek
Got it. Thank you. That’s super helpful.
Operator
Thank you. The next question is from Eric Sheridan with Goldman Sachs. Please go ahead.
Eric Sheridan
Thanks so much for taking the question. You took a lot in the slide deck about what you’re trying to build from a flow technology standpoint, and then how it interacts with sort of a proprietary AI stack. I guess what I’m trying to get at, when you think about some of the product, and platform evolution that you want to put in place, ’24, going into ’25, how should we think about the countervailing factors of the investments that have to be made. And then, the eventual potential for operating margin leverage on the other side of those investments, as well as – as you start to get some yield, or output from the restructuring efforts deeper into ’25? Thanks so much.
David Longo
Yes, hi. Thanks. This is David. As we kicked off the restructuring during June, it was really going towards that guiding light, of a 30% adjusted EBIT margin and 100% of free cash flow. Those expenses that we refer to that we’ve taken out of the P&L, the $40 million to $50 million of next year non-GAAP savings. Those are taking into consideration the programs that we need to get done, in order to build the product experience as Nathan had outlined in his vision.
And we’re certainly not going to shortchange the business, for the investments that we need to make. Some of the stuff that we’re doing is replatforming some of our back office functions. So, we’ve baked in the expenses that we’ll need this year, to get us ready for next year. So, we can start realizing those. And then, as the enrollment season comes through, and the back half of the year plays out.
We’ll have a bunch of different scenarios, for how we will fully operationalize towards that goal. So, we have a range of outcomes that could happen. But none of, which we would foresee ourselves, needing to shortchange the investments we need to make, to get there. Hopefully that helps.
Eric Sheridan
Thank you very much.
Operator
Thank you. The next question is from Josh Baer with Morgan Stanley. Please go ahead.
Josh Baer
Great. Thanks for the question. So, I think you could provide a little bit of extra color on the Q3, EBITDA margin guide. I know seasonally, it’s a low point as far as quarters in the year. But I think the guide implies 15%, which is a pretty big step down, just wondering if there’s anything else to highlight there?
Nathan Schultz
Yes, hi, Josh. It’s definitely the roughest quarter for us. And we have a pretty fixed cost base that plays through, throughout the entirety of the year. And the restructuring efforts have really not fully kicked in. And those will really fully utilize those, through the P&L next year. When we initially guided – initially mentioned, talked about the restructuring, we thought it would materialize a little bit quicker.
But some of the stuff that we’re doing, some of the big, big coal items closing offices, replatforming technology. Those just take a while for us to – work their way through our P&L. So the office closures. One of the big ones won’t happen until the end of the year. It gives us some time to transition and lead us through that. But it really comes down to that, the fixed costs that take a while for us to restructure out, and align us for next year.
Josh Baer
Okay. Got it. And then just a follow-up kind of considering the fixed cost base and some of those comments when you look out to some of the targets for 2025, around 30% EBITDA margin, $100 million, at least in free cash flow. If the top line comes in lighter than your expectations, does that mean that you’ll take further action in order to defend the 30% EBITDA and $100 million in free cash flow? Thanks.
Nathan Schultz
That’s right. So the target isn’t necessary – the target is static, but the steps that we would take to get there, we can certainly make some adjustments as we go. We gave ourselves some, headroom to get those numbers in case, the top line doesn’t materialize. As things run, as I mentioned in the prior question, there’s a bunch of scenarios for how the top line, how the business shakes out into 2025.
And we’ll, by the time we get to the beginning of ’25, we’ll have a lot more visibility into how many subscribers we’re entering the year with. And then, can recalibrate from there. But we, it’s not just sort of one model that we’ve set and forget, we’ll actively manage towards that and, leading into ’25 and then throughout ’25.
Josh Baer
Okay. Thanks.
Operator
Thank you. The next question is from Ryan MacDonald with Needham & Company. Please go ahead.
Ryan MacDonald
Hi, thanks for taking my questions. I was wondering if you could expand a bit upon the subscriber count in second quarter, and sort of the step down we saw from Q1 to Q2. It seems like a bit of a larger step down seasonally relative to years past when you look at Q1 to Q2. Can you just talk about if there were any sort of changes in user behavior, or subscriber behaviors this year relative to years past? And how that’s sort of guiding your thoughts about the second half of this year?
David Longo
Yes, hi, this is David. I think it’s the functionality of the subscription math that we’ve talked about before, is entering each period with a certain number of subscribers. And then as you add to those, when subscribers churn out, it’s just you got to refill that funnel and refill that base.
Nathan Schultz
I’ll add to that is, we fully recognize that over the last couple of quarters, as David mentioned on the subscription math, that the conversion rate for what we’re treating for is not what we have today. We have a very well researched product vision. We’re building towards that product vision right now. We’re starting with that marketing program that we’ve outlined a couple of times now in the call, to rebuild that top of funnel.
And as we get kids in the top of funnel, provide them with stronger value props to acquire. It’s just going to take some time to get us back on the right path. And we’re excited about the upcoming semester, but it’s a tough one as we talked about to predict. But we’re treading for the future. We’ve got the plan, and we’ve got the team, and we’ve got the investment necessary, we believe, to get it done.
Ryan MacDonald
Helpful color. Maybe as a follow-up. On the international rollout, great to see the fully localized app in Mexico being rolled out by the end of September. How should we think about the pace of the additional localizations, or full localizations as we think about and move into 2025, now that you’re going to have the sort of this first one out at the end of September here?
Nathan Schultz
Great. Great question. Good to remind all of us that we’re really hunkering down on six key markets, which we’ve talked about a couple of times, Canada, Australia, United Kingdom, Turkey, South Korea and Mexico. Mexico is the first one. Just to be clear, we’re fully localizing on the web first, and then we’ll continue to push up natively as well.
So both experiences will be fully done. That’s all happening this year. The September localization for us the cultural linguistic stuff is first. And then obviously, we continue with that user experience as we continue to build more functions. So you guys see Mexico this back second half based on performance, we’ll continue to figure out at what speed you want to either add countries, or continue to localize on the other experiences.
We’ve got to have already done stuff in Turkey and South Korea in the marketing funnels, on the conversion funnels in the past. So this is a – Mexico is a step up in terms of this full localization capabilities. We really want to take an approach where we can get a defined playbook, and then with certainty know how to roll it out.
Operator
Ryan, does that answer your question?
Ryan MacDonald
Yes. Thank you.
Operator
Thank you. The next question is from Brian Peterson with Raymond James. Please go ahead.
Unidentified Analyst
This is [Jessica] on for Brian. So following up on an earlier question. I just want to know a little bit about how exactly is the restructuring plan? Do you see that influencing like your workforce and how that influences your international strategy and marketing aspect you have there?
Nathan Schultz
A little choppy, but I think I heard a restructuring plan and workforce.
Unidentified Analyst
Yes so – I just want to double click a little bit on how exactly the restructuring has influenced the workforce you have for your international outreach and strategy there?
Nathan Schultz
Let me speak first domestically our workforce, I think it’s important after restructuring. One of our key initiatives is to make sure we continue to retain top talent at Chegg. Obviously, the mission here is something that drives a ton of people and the reason why we’re so indebted to what we’re doing, Chegg both domestically and internationally, it sits at this pretty amazing intersection, between education and technology.
And honestly presents one – of our employees with one of the largest platforms in the world to demonstrate the innovations that can be gained, by putting the student first and applying technology at high level, high-value curriculum, efficacious construction into a single platform. Whether that’s domestic or international, we put on just to continue to apply that methodology and continue to see that we believe our results will continue to get better.
Unidentified Analyst
Great. And also, a follow-up question is as you continue to develop and roll out your AI platform, how has this influenced your competitive position in the market? Are you seeing evolution kind of players you’re competing against? Thanks.
Nathan Schultz
What’s really important when we think about is how do, we support students the best we possibly can. I said this in my prepared remarks that we’re not just trying to apply AI to education. We’re really trying to make AI that will apply AI in a way that makes education better for students. And so no, it’s not expanding on my competitive sense, but we’re really pushing is how do – we sit at a point where we can leverage all of the innovations that are coming out from AI.
Whether it’s from our own proprietary models, it’s from other foundational models or it’s the combination of the both is really what we’re focused on is how do we apply AI in a way that enhances education and the value that can drive students. Once we have that, it’s really about getting that value prop out into the hands of students. And really clearing out, what the value is that can be derived from it.
Unidentified Analyst
Got it. Thanks.
Operator
Thank you. The next question is from Devin Au with KeyBanc Capital Markets. Please go ahead.
Devin Au
Hi, thanks for taking my questions here. I really appreciate the added disclosures. I want to ask about subscription services ARPU in the U.S. and international. It seems like the price differential between U.S. and international is around 50%. I know it’s only one quarter of data, but I also acknowledge that you guys are rolling out more localization efforts in Mexico, and you’re doing some price testing in the U.S., but just curious if that 50% level of price gap between the two, is that like a sustainable level in the near term? Just how should we think about that?
David Longo
Yes. Hi, Devin, it’s David. And yes, I think the international versus U.S. will definitely see international ARPU at lower levels, even as we get better product market fit in the six geos that we’re going after. But as we did our promotional pricing last year, we found that we absolutely gained better traction and conversion at lower price points, because of the purchasing power parity compared to the U.S. dollar.
And thankfully, with our automated solutions rollout and our further integration of AI, we can serve those customers still profitably bringing in a lower ARPU. Also in the U.S., we do historically have better ARPU – excuse me, better retention in the U.S. So it’s a double whammy there where you get customers staying longer, paying a higher price point than what we have historically seen in international.
Devin Au
Got it. That’s helpful. That’s all I have. Thank you.
David Longo
Yes, sure.
Operator
Thank you. There are no further questions at this time. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
