Avnet (NASDAQ:AVT) Q2 2022 Earnings Call

0:00 Please stand by. Our presentation will now begin. Welcome to the AFNET second quarter fiscal year 2022 earnings call. I would now like to turn the floor over to Joe Burke, Vice President of Treasury and Investor Relations for AFNET.

0:16 Thank you, operator. Earlier this afternoon, AFNET released financial results for the second quarter fiscal year 2022. The release is available on the investor relations section of the company's website. A copy of the slide presentation that will accompany today's remarks can be found via the link in the earnings release as well as on the IR section of AFNET's website. Lastly, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risk, uncertainties, and assumptions that are difficult to predict. Such forward-looking statements are not the guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent form, 10Q and 10K, and subsequent filings with the SEC. These forward-looking statements speak only as of the date of this presentation, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this presentation.

1:25 Today's call will be led by Phil Gallagher, Avnet's CEO. and Tom Liguori, Avnet's CFO.

1:32 With that, let me turn the call over to Phil Gallagher. Phil? Thank you, Joe, and thank you, everyone, for joining us for our second quarter fiscal year 2022 earnings conference call. I hope your 2022 is off to a great start. As many of you are aware, our priority since I took the helm has been to make durable changes to our business that would yield more consistent results, drive sustainable growth and position us to capture share across regions and segments. I'm pleased to say our team's focus on execution has yielded strong competitive gain to financial performance, which is again evident in our second quarter results. In the quarter, revenues were $5.9 billion, up both sequentially and year-over-year, and our adjusted diluted earnings per share was $1.51.

2:21 Our adjusted operating income increased 21% from the prior quarter, and our adjusted operating margin also increased sequentially to 3.7%. We are competing favorably across the board, but we're particularly pleased to see further evidence that Farnell is a needle mover for Total Avnet. Looking at our core electronic components business on slide five, revenues were up both sequentially and year-over-year in the quarter, and we posted sequential growth across all three geographic regions. EMEA and Asia delivered solid results while we saw a nice rebound in our Americas region, which was up double digits year-over-year. We were pleased with the Americas team's ability to maintain expense levels while capturing significant business opportunities from new customers and expanded scope of work from existing customers, as that would be critical to continued success in the region.

3:14 We're especially excited about the prospects for the region as 23-year company veteran Dayna Badhorn takes the reins as the new president of the Americas. In her prior positions at Adnet, Dayna has served in sales management, supplier management, and customer technical support and most recently as our strategy leader where she played an integral role in identifying growth opportunities to enhance AdNet's overall business portfolio. We are confident she will leverage her breadth of knowledge in guiding the Americas team to capture market share as well as new and expanded business opportunities with existing customers in the future. Our book-to-bill ratios at the end of the quarter remain strong. Lead times remain extended. With certain products like microprocessors, microcontrollers and power, continue to have extended lead times.

4:03 We experience continued strong demand in key verticals such as automotive, industrial, defense, communications, and healthcare, pretty much across the board. We continue to tightly manage our backlog and we're satisfied with our inventory levels, which increase later in the quarter, primarily to support past dues and firm orders. It should be noted that investment is usually made in the December quarter to support the traditionally strong start to the calendar year in the western regions. Further, our continued investments in digital and design tools and field application engineers are paying off as demonstrated by another strong quarter of design and engineering activity across all regions. Strong levels of design registrations and wins in prior quarters resulted in record demand creation sales and gross profit in the current quarter.

4:54 Turning to Farnell on slide six, sales were up 35.3% year over year to $441 million with notable performance from Farnell's America's Business. We continue to execute our commitment to our Farnell segment. We added over 22,000 SKUs in the quarter, which gets us to about 55% of the way toward our plans to add up to 250,000 SKUs through the fiscal year 2022. Supplementing our inventory investments, we're continuing to enhance and invest in Farnell's e-commerce capabilities. In the second quarter, 54.5% of total sales and 71.5% of total transactions were placed through Farnell's e-commerce platform.

5:40 With additional critical updates to the platform and sustained investment in improving the user experience, we expect we'll continue to see increased traffic and new customer acquisitions in the quarters to come. In summary, we're pleased with our performance in calendar year 2021. and feel that the business is well positioned to weather macro challenges and continue to capture exciting new opportunities heading into 2022. Our incredible employees have demonstrated their strength and commitment to the business and our customers over the last year, and I'm confident in our team's ability to achieve even greater success in the quarters to come. With that, let me turn the call over to Tom to report on the financials for the quarter. Tom?

6:24 Thank you, Phil. Good afternoon, everyone, and thank you for attending today's call. As Phil stated, we are pleased with our results this quarter. I am encouraged by our momentum as we head into the second half of fiscal year 2022, and I'm excited to share some highlights from the second quarter. Turning to slide eight, our revenues of $5.9 billion and adjusted EPS of $1.51 both exceeded guidance. Consistent with our objective of growing higher margin businesses, our Fresnel revenues grew 35.3% year-over-year, while electronic components grew 24.9%. Our gross margin improved to 12.2%, while our adjusted operating expenses continued to decline, both as a percent of sales and as a percent of gross profit dollars.

7:17 Our adjusted earnings per share of $1.51 is a company record. and provided a return on invested capital of 12.5%. Narrowing in on our two operating segments, year over year, Fresnel revenues grew 35.3% to 441 million and electronic components grew 24.9% to 5.4 billion. We continue driving operating margin growth, posting operating margin of 3.5% for electronic components and 13.7% for Fresnel. Solid execution in our core business and continued progress with e-commerce and expanding inventory breadth in Fresnel remain key priorities and were critical to our achievement of an adjusted operating margin of 3.7% for total AvNet in the quarter.

8:12 Moving to the second quarter income statement on slide 10. Gross margin of 12.2%, was up from 11.8% last quarter, primarily due to sequential margin expansion in Farnell, as well as strong pricing in all businesses. Compared to the prior year quarter, gross margin improved by 121 basis points. Adjusted operating expense of 498 million grew up 17 million, or 3.5% sequentially, primarily driven by costs associated with higher volume. As a percent of revenue, adjusted operating expenses declined to 8.5% from 9.3% in the prior quarter. On the non-operating front, interest expense decreased 1.2 million sequentially to 21.6 million.

9:03 We recorded foreign currency transaction losses of 3.2 million, which represents an improvement of 2 million over the prior quarter. We booked a 23% adjusted tax rate in the second quarter The high end of our guidance range. On slide 11, we highlight results across our electronic component segment. Sales growth across every region, Americas, EMEA, and Asia contributed to the 24.9% year-over-year sales growth to $5.4 billion in the quarter. As Phil noted, we were especially pleased by our performance in the Americas, which grew sales double digits year-over-year. and is poised to sustain solid growth in the seasonally strong third quarter.

9:49 Our electronic components operating margin of 3.5% improved 31 basis points from last quarter with all regions contributing to the sequential improvement. Turning to slide 12, Fresnel achieved another solid sales quarter with revenues totaling 441 million. Fresnel's operating margin increased 276 basis points sequentially to 13.7%. The Fresnel team continues to improve the business through investments in SKU expansion, e-commerce capabilities, our online engineering community, and new product introductions, all major contributors to sustainable operating margins. Turning to cash, liquidity, and the balance sheet on slide 13.

10:37 We increased receivables and inventory in the second quarter as customer demand remained strong. Our liquidity position remains solid, with cash in equivalents of $168 million and $1.5 billion of available lines of credit. Our gross debt leverage was 1.9 and net debt leverage was 1.7. The cash outflow of $232 million was primarily the result of an increase in accounts receivable from higher sales, as well as inventory, which we secured late in the quarter. We anticipate a positive cash flow in the third quarter, as we collect our accounts receivable and maintain our control of inventory and payables. Turning to slide 14, we repurchased 921,000 shares in the quarter, and our dividend of 24 cents is a 14% increase over the prior year. We remain committed to increasing shareholder value by delivering a reliable and increasing dividend, opportunistic buybacks, and investments in both organic and inorganic growth.

11:45 Let me wrap up on slide 15 with guidance. Our third quarter guidance today assumes ongoing strong demand, continuing supply constraints and COVID restrictions similar to the December quarter. For our fiscal Q3, we are guiding revenue in the range of 5.4 to 5.8 billion and adjusted BPS in the range of $1.45 to $1.55. In summary, we remain committed to excellent execution in our core business, continued growth and margin expansion in Parnell, and reliable shareholder returns. With that, I'll turn it over to the operator for questions and answers. Thank you. Ladies and gentlemen, we will now be conducting a question and answer session.

12:34 If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Nick Todorov with Longbow Research.

13:21 Please proceed with your question.

13:24 Thanks, and good afternoon, guys, and congrats on great results and execution. Phil, a couple of quarters ago, you talked about how you see the current conditions sustainable at least through the March quarter. We are at the March quarter now. Can you give us an update? How are you thinking about the sustainability of those conditions? and related to that, are you seeing any changes in customer behavior recently?

13:50 Yeah, thanks, Nick. I did say that a few quarters ago and it looks like I was right, at least to date. We're continuing to see strong demand, Nick, and while it's obviously difficult to forecast how long the supply constraints and the high demand will last, most of the market participants, including our suppliers and I think it's going to extend well into the calendar year. So, you know, we got it through March. It definitely feels like it's at least going to be pretty solid through June. And then we'll take it from there. There's a lot of variables, right, as we outlined in the script. But as we see it right now, the bookings are strong, backlogs strong, demand's high, and products are still pretty extended on lead time.

14:40 Okay. Thanks. The second question, you guys have a near-term margin target that you gave several quarters ago. How should investors think about the next near-term margin target as we go forward? Tom, you take that.

14:58 Sure. Hi, Nick. In the near term, you know, margins, we should be staying in the high 3% range, 3.7, like it was this quarter. For the foreseeable future, foreseeable future would be, you know, definitely March. and most likely June. You know, further out in the year, two year down the road, you know, assuming that we have a growing economy, today we're making investments in core and for now we're doing SKUs, e-commerce, online community investments. So, you know, we see a path to get over 4% more in the mid to longer term. Part of what gets us there as well is what you saw this quarter with, you know, growing our higher margin businesses at a faster rate than our base distribution business.

15:46 You saw that with Fresnel. And with Fresnel being over 13% and applause to the Fresnel team, that was very nicely done. They seem to be in a race now with Americas of who can expand margins faster. But with those investments and with growing Fresnel, that's our path longer term.

16:11 Okay, great. And speaking of Fernell, sequentially, it seems sales were down, but obviously margins increased quite nicely. Can you give us the puts and takes between that dynamic and Fernell in the quarter?

16:31 Yeah, the sequential revenue, I think it was a 3%, it was a very slight decrease. That was mixed. That was single board computing, and that's a product that we had shortages in. So there was some lower revenue. You could also contribute part of that to seasonality. But that said, the mix of business was higher margin. The gross margins expanded. To be honest with you, several hundred basis points. They did a very, very good job with pricing, mix, management, and things of that nature. So those are the puts and takes. Phil?

17:07 Yeah, no, I'll just add to that. Thanks, Nick. Year-in-year is 35% growth, so we were really pleased. But I'll highlight the seasonality aspect of it, particularly in Europe, which is our largest piece of the Farnell business. Now, Europe does tend to shut down a bit more firmly, if you will, than the other regions in December. So with the concentration mix of Farnell and Europe, we expected that.

17:33 Got it. Thanks, guys. Good luck.

17:35 Thanks, Nick. Thanks, Nick.

17:57 Operator, is there another question online?

18:15 Nobody there. Hello.

18:38 Okay. Well, everybody, give us a minute while we check with the operator.

19:17 Hey, this is Nick. Can you guys hear me?

19:21 Yeah, Nick, we can hear you moving around. This is Avnet. We can hear you.

19:25 Yeah, so I'm on the call. I don't know. I don't know. It seems like my mic is still on. I'm not sure what's going on. I apologize for the technical difficulty. One moment, and we will resume the question and answer session.

19:41 All right, Nick. We'll catch up with you later then, Nick. Okay. Okay. Thank you. Our next question comes from Melissa Fairbanks with Raymond James. Please proceed with your question.

19:54 Hi, guys. Great quarter. Really strong margin performance in both businesses. Very impressive results overall. Last quarter you guys mentioned that pricing was a 200 basis point tailwind in Farnell. Just wondering how much benefit you saw in the quarter, in the December quarter. And then also, typically you're able to pass through higher costs on the electronic component side. Just wondering if you saw any margin benefit there as well, or if that was just kind of, you know, the benefit from mix.

20:25 Yeah, so pricing benefited across the board, good pricing discipline. For now, you know, if you took out the benefits of the market, including pricing, about a 9.5% to 10% operating margin, which is, you know, slightly ahead of where we expected them to be by this time, but, you know, things are going very well. And the good news is on the 9.5% to 10%, there's plenty of roadway ahead to continue to improve that.

20:54 Yeah, Melissa, and I'll just add on the overall price increases. We particularly have customer contracts in place. We are passing those on as quickly as we can. Keep in mind we're getting 50-plus suppliers that have raised prices half a dozen times in the last year or so. We don't see as much margin percent increase as we do dollars in that, right, from an ASP standpoint on those parts. There's other competitive pressures in other products. So that's a general statement. There's some opportunity out there where we don't have contracts to increase the margins, but where we have them, we typically just pass that on to the customer.

21:31 Okay, perfect. Great. Thanks very much. As a follow-up, I'm just wondering, It's pretty clear the industry is starting to better understand the value of supply chain partners. Just wondering if you see any opportunities out there emerging for some inorganic growth or maybe different areas, different markets you might be able to address organically?

21:55 We're definitely seeing people, customers and suppliers who've already appreciated what we do from a supply chain standpoint, the expertise we bring to the market. We're seeing an increased awareness and an increased interest from customers we're doing business with that want to do more with us or where there's maybe some large customers or suppliers that haven't utilized us in certain cases that are now bringing us in with our supply chain. We call them supply chain architects. Melissa, we're building out some new supply chains. And that takes a while. You don't see the immediate impact on that. But there's some I'll just call them large OEMs that maybe weren't traditionally utilizing our services that are now coming into play. Those opportunities, we would see them as organic opportunities at this point, and they're very real and they're very sizable.

22:48 It's exciting.

22:50 Excellent. Great. Thanks very much, guys. Thanks very much, guys.

22:53 Thanks, boys. Thanks, Melissa. As a reminder, if you would like to ask a question, please press star 1 on your telephone or keypad. Thank you. Our next question comes from Matt Sheeran with Stifel. Please proceed with your question.

23:12 Yes, thanks, and hello, everyone. Phil, just another question, if I can, regarding the pricing environment. Is there a way that you can tell the growth rate, that 20% plus year-over-year growth rate that you saw in the business, how much of that is related to just the pass-through of higher ASPs? which have been pretty broad. Do you have any sense of that?

23:38 Yeah, we're continuing to try and extrapolate that out, Matt. And the best we can do now is what we're looking at. It's a few percentage points. It's not as large as some would believe. And the reason is even within a supplier's portfolio, they might be raising prices in certain areas but not in others. And then there's the balance of what we sell that they're not raising prices at all. and it's still, you know, they're flat or they're competitive, right? Where you still need to go win that business. So it's kind of averaging out where it's more demand than it is inflation. But there's, let's call it a zero to 3% or something along those lines at this point. We're continuing to study that one.

24:22 Okay. And then you talked about the margin tailwind that you're seeing from Premier Parnell on the premium pricing. Are you getting a sense of that benefit in the core business as well? I mean, margins obviously are up significantly year over year. How much of that is attributed to just favorable pricing and, you know, less typical price competition that you normally see?

24:49 Hi, Matt. So on the core side, 20 to 30 basis points. So it's much more pronounced.

25:00 Okay. And then, Phil, just a different question, just regarding the whole supply environment. It looks like you were able to produce some significant upside. So you were able to get your hands on components. You talked about some building inventory late in the quarter. But still, a lot of your customers, including some big EMS guys, there are missing numbers and guiding down because they can't get parts. So are you still seeing a mismatch? of parts. How are you helping your customers manage that so that there's not an inventory mix and negative mix and any signs of when this starts to ease at all?

25:40 Well, it's a great question. I got to give a shout out to our asset procurement teams for doing a really good job and our supply chain teams working with our suppliers and customers. I mean, we're taking in thousands of these MRPs, Matt, as you know, on a weekly, monthly basis and trying to balance all those SKUs with the and the demand environment and the supply environment from the suppliers. So I would just say the team's doing a great job. And yes, I'm still involved as was today with multiple customers with the OEM and EMS space with expedites. And I know in some cases there's certain chips that just aren't available and it's causing some constraint and some of them hitting their numbers. So I'm aware of what you're referring to. As far as the, looking to The future, if you will, you know, it's tough to call. I mean, you know, I'm sitting here looking at the lead times as I'm talking to you, and there's not been a lot of relief in the lead times, whether it be from ceramics to microcontrollers to discreet, so, and power. You know, so it's pretty broad-based at this point in time.

26:46 The demand environment looks really solid, and in some cases, we're going to be hand-in-mouth working the issues. So it's... Matt, it's just robust across the board, as I said in the transcripts. Every article pretty much is pretty hot, and then that further exasperates the amount of technologies that are impacted. I'll just say that the more we can get involved with our customers up front, the more visibility they give us, and with our supply chain folks, we'll continue to do the best job we can to take care of them.

27:19 Okay, great. Just lastly, you talked a couple of times about the The margin expansion you're seeing in North America components where I know that over the last three or four years, you know, it's underperformed other segments because of some, you know, prior issues. How much progress have you made there? And, you know, at what point do you expect that to get to kind of the corporate margins or above?

27:47 They made a big leap this last quarter and It's very promising. More to come in the March quarter from Americas. And when would they get to where we expect? I would say four to six quarters.

28:01 I think that's right, Tom. Yeah, we've been very transparent about that, Matt. The two needle movers for us are for now in the Americas. Europe and Asia has kind of stayed the course, right, steady as she goes. And from a percentage, they're probably 60%. 55, 60, 70% of where we need them to be. And we have a path to get to the four to six months to get to where we need them to get to. And of course, Farnell's kind of where we needed them to get. A little bit more to go there, too, for Chris Breslin that's listening. But they really jumped out. Okay. All right.

28:41 Thanks a lot, Matt.

28:42 Thanks, Matt. Thank you. Our next question comes from Rupalu Bhattacharya with Bank of America. Please proceed with your question.

28:52 Hi. Thanks for taking my questions. Phil, I was wondering if you can give us your view on overall inventory in the channel. I'm not just talking about your inventory, but your view of distribution overall and inventory at OEMs. Do you think that there is any build above inventory, maybe in Asia? I mean, are you Do you think that overall inventory in the channel is still pretty lean and there's no real buildup yet?

29:20 Yeah, it's a great question, Rupal, and I wish I had the crystal ball to be able to see in everybody's inventory exactly. We don't have that. I'm sure there's some buildup out there, but it's tough to pinpoint how much and where it is. I know our own inventory... We're really pleased with what we're able to do with the inventory position, which is positive, as was pointed out a little bit earlier in the access we've had. And it's clean. So, you know, when we track RUPO, we're trying to track inflated bookings, inflated forecasts, and we track those as they come in to see where we might see some buildup. And we catch that in our asset teams and supply chain teams. We see someone buying excessively to what they're typically forecasted in the market.

30:09 Historically, we catch that and have a conversation or cut it back to be candid with you. But I just speak with an ad that we don't see excess inventories at this point in time to what the demands are. Again, tough to call that and what's in WIP out there where some customers can't get components and they're holding up a product to get a couple chips. I'm sure there's some of that out there. But really tough for me to make that call.

30:39 Okay, no, that's understandable. I understand. Phil, you had said in relation to Farnell, I think it was a couple quarters ago, you said that you have a target of getting to 250,000 SKUs by the end of fiscal 22. Just wondering how you're tracking on that, and do you need to hire any more salespeople or field application engineers, and how should we think about, you know, the SG&A OPEX costs?

31:06 Yeah, so I'll go on the SKUs. We're about 55% to 60% of the way there, Rupalu, and some of that expansion is going to be availability of product, right? It might have it on backlog, but maybe it's not shipping yet. So we're tracking. Chris and the asset teams in Farnell, we're pleased with that. And some of that is already paying off, and some of that we gave credit in the script to the Americas Farnell team. We don't talk about them a whole lot. That's the Newark team. We're We're expanding the SKUs, and they're benefiting from that to get more on-the-board, if you will, component growth in Newark, where they do a lot of MRO and test and measurement. And we're starting to see that really pay off. So we're on track. If we can accelerate it, we will, because the returns at Fresnel are terrific. As far as account managers and FAEs, that's more a question for the core.

31:54 I would think Fresnel has a sales team, but they don't really have many, if any, FAEs, as we traditionally call them. They're well staffed from a sales standpoint. And on the core, we're continuing to invest there. Our team has green light to invest in account management, green light to invest in field application engineers. And we think we're well staffed and we'll continue to staff where we need to. And then, of course, you know, a lot of that traditional technical support is going to come from digital as well, right? So we're putting more and more investment in the digital design support. In addition, that's in addition to the field application engineers.

32:33 Got it. I'm going to try and sneak one more in, and I apologize if you've already addressed this, but are you seeing your suppliers continue to raise prices? And at some point, do you think some of that pricing has to come down? And if it does sometime in 2022, how quickly would you have to pass those savings on to your customers? Is there a delay, or do you think pricing can remain elevated and over the next couple of quarters?

33:01 That's a good question and, again, a tough one to answer. The first part is, yes, we're still seeing suppliers increasing pricing, and as long as they're getting, you know, there's a lot of additional cost in the supply chain from fabs, wafer, through logistics and plastics and chemicals, et cetera, et cetera. So as they get that, they're going to continue to pass that on as they really have to and should and will continue to do the same. On the correction side, based on supply and demand, we'll see what happens with the average selling price as this go around. Will they go down as they have typically? I'm not sure that they will, frankly. I think there'll be some, but I'm not sure how accelerated it'll be and how much.

33:46 It's really tough to call. And we'll remain competitive in the marketplace if we have to adjust our resales along with costs coming down. Of course, you know, Customers have that information. They know what's going on. We're not going to hide that from them. We've got long-time partnerships with our customers. We'll work with them on that. But, you know, I think it's a little ways away right now.

34:10 Okay. Thanks for all the details. Congrats on the execution. Thank you.

34:14 Thanks, Mitchell. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Confirmation tone will indicate your line is in the question queue. Thank you. Our next question comes from Jim Suva with Citigroup. Please proceed with your question.

34:33 Thank you. And now that we've been through this pandemic for, you know, two years now, I'm wondering if your suppliers, the chip companies, have talked to you about different agreements, whether it's you hold more inventory, you hold more buffer for them, risk mitigation for future shocks. Any of that going on, or is it just still right now kind of, you know, fork to mouth, selling stuff as quick as you can? I was kind of wondering structurally if there's any thoughts about adjusting What you get paid and what you hold to prevent risks in the future?

35:09 Yeah. Hey, Jim. How you doing? The answer is yes. We're definitely having some different conversations with suppliers. They're actually, Jim, it's not just suppliers. It's on the OEM side as well and the customer side. They're actually, in some cases, taking us in with them to some of the customers, the end customers, to help reevaluate their supply chain. Re-evaluate buffers. Did just-in-time go too far? We don't need just-in-case, but did just-in-time go a little too lean? So, yeah, those conversations are for sure happening, and definitely the suppliers are talking about longer-term agreements as well. We're in the middle of those with the customers. So, yeah, the dynamics are definitely changing.

35:57 How dramatic it'll be, Jim, at the end of the day, not sure. But I think some of them will be permanent. And as we get into some of these new arrangements with the suppliers and the customers, I see it as really positive. We call it the orchestration. We want to do the orchestrating of the supply chains with the command controls and help everybody get more visibility to what's going on in the marketplace as well. I think that's part of the challenge. I think some companies have lost the visibility of where the manufacturing is and the supply chain supporting them. So we see it as a positive.

36:31 So much. Thank you.

36:33 Thanks, Jim. Thank you. There are no further questions at this time. I'd like to turn the floor back over to Phil Gallagher for any closing remarks.

36:46 Great. Thank you very much, and thanks, everybody, for joining the call and the questions. So I want to just thanks for attending today's earnings call, and I look forward to speaking and hopefully seeing you all again sometime between now and our fiscal third quarter earnings report in April. Have a great rest of the week. Thanks.