Title

Presentation

The Beachbody Company, Inc. misses on earnings expectations. Reported EPS is $-0.09 EPS, expectations were $-0.08.

Operator: Good afternoon, ladies and gentlemen. Welcome to The Beachbody Company First Quarter Earnings Call. At this time, all participants are in listen-only mode. . I would like to remind everyone that this conference call is being recorded. And I will now turn the conference over to your host Bruce Williams, Managing Director of ICR Investor Relations.

Bruce Williams: Welcome everyone and thank you for joining us for our first quarter 2023 earnings call. With me on the call today are Carl Daikeler, Co-Founder, Chairman and Chief Executive Officer of The Beachbody Company; and Marc Suidan, Chief Financial Officer. Following Carl and Marc’s prepared remarks we’ll open the call up for questions. Before we get started, I would like to remind you of the Company’s Safe Harbor language. The statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the Company’s filings with the SEC, which includes today’s press release.

Today’s call will include references to non-GAAP financial measures, such as adjusted EBITDA. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is available within the earnings release, which can be found on our website. Now, I would like to turn the call over to Carl.

Carl Daikeler: Good afternoon, everyone. As we communicated our last earnings call. This first quarter marks a major transition for the company. We completed the preparation and engineering of the significant upgrade to our subscription platform and our parallel path simplified our business model. We evolved from a business model built on expensive and more complex program launches to a more economical and customer friendly tempo of constant new monthly content organized into three-week blocks around genre and objectives. And based on almost nine months of successful pilots and tests, in March, we made the full transition to a single subscription we call BODi, that spelled B-O-D-i. Aligned with the company rebranding from Beachbody to BODi. And we introduced a new content channel, integrating mental health into our total solution formula.

And doing this, we became the first comprehensive health esteem platform synthesizing a holistic approach to living a healthy, flexible lifestyle including the proven BODi walk fitness format, sensible healthy nutrition programs and positive mindset masterclasses to help people navigate the obstacles of day-to-day life and improve their mental health. I want to thank the team for their perseverance and skill, creating this incredible new subscription product. And in the midst of this major launch, for the sixth quarter in a row, we’ve exceeded or met guidance in both revenue and adjusted EBITDA for the quarter. But there’s so much more for us to accomplish. When we’re scaling innovation, we operate a test and learn process. This is a process we’ve successfully executed multiple times over the last two decades.

We did it when we launched P90X, effectively doubling our price per unit. And when we launched Shakeology into the network moving from a $40-month multivitamin subscription to $130 subscription for the world’s first superfood desert shake. And in 2016, moving the business model from a single one time purchase of DVDs to the Beachbody on demand annual subscription. As the company scaled through these transitions, each time, we reached $1 billion revenue milestone faster than the last, and we believe the expanded and reposition BODi subscription is our biggest and most important innovation since we launched the company. I’m confident that this will be our next multibillion dollar opportunity to drive long-term sustainable growth. We’re in the early stages of promoting this new premium subscription.

But I can report that we are already seeing promising customer demand based on the engagement and renewals of existing customers. BODi surpassed 500,000 subscriptions as of April 30th. That’s roughly double since the end of Q4 2022, primarily driven by digital renewals and upgrades that are exceeding forecast. The early strength in renewals demonstrates customers are recognizing that our pricing represents tremendous value associated with our rich catalog of over 120 programs. I mean, everybody knows P90X, Insanity, and 21 Day Fix, but also our new BODi programming and the monthly release of new BODi blocks for general fitness consistency and help our bike customers get the incredible results that our company is known for. Likewise, nutrition subscription retention is ahead of our internal forecasts with marks seeing the strongest retention rate in over 12 months.

We also see a healthier nutrition at attach rate with the new BODi subscription platform. This aligns to our vision of increasing our customer LTV by focusing on these loyal and highly engaged subscribers. In terms of engagement, our first quarter 2023 streams were 25% above the fourth quarter of 2022. While seasonality was a factor with consumers refocusing on their health at the start of a new year. Our sequential growth accelerated relative to 2022, which is a very healthy sign of consumer engagement and a testament to the loyalty of our subscriber base and the consistent popularity of our content. While the home fitness industry continues to normalize from the gains during COVID. We’re seeing signs that our health esteem category is attracting significant interest is searches for the term body.

Again, that searches for our spelling BODi on Google. Well, Google search is up 287% in the first quarter over the prior year. And since the repositioning to BODi just in March, web traffic to our sites increased by 20% over February. We’re strategically increasing the LTV of our customers and are already seeing the benefits of the subscription as our digital LTV was up 13% in March versus February. Moving on to deriving customer acquisition. Now that the product has been completely introduced, we’re focused on the execution of our go to market strategy. As a reminder, our three sales channels are our proprietary network of partners previously called coaches, direct media acquisition through advertising and search optimization, and sales into our significant database.

This is the time to go on offense. So let me share how we plan to achieve growth. Our partner network forms the majority of our sales generation. In addition to significant ongoing training, we’ve implemented new incentives to align our partners with our goal to drive digital body and nutrition subscriptions. This June, we’re hosting our annual Partner Summit, which is typically attended by around 10,000 partners. This will be an immersive training of our network to align them with our strategy and sales tactics to serve the massive TAM of over 150 million people who are overweight or obese in the U.S. alone, and to whom that helps us the platform is uniquely designed to help achieve long-term health and happiness. With the help of our team BODi partners, we intend to create the largest health and fitness community in the world.

And I’m highly encouraged by the enthusiastic response of our partner network. Although we do see that it’s going to take some time to fully optimize and train the partners to leverage this significant transition. But based on their enthusiasm and engagement with the platform, I’m confident that we’ll be successful, it’s only a matter of time and execution. On the direct media acquisition front, we just started the test to learn process to acquire new subscribers into the body platform in our online and offline media advertising. We’re also working with an extremely experienced social media and marketing agency to expand the reach of our message into TikTok and YouTube. Through our test and learn approach. Our role as or return on ad spend continues to improve, allowing us to gradually expand customer acquisition while maintaining our LTV to CAC ratio, thanks to the improved economics of this new BODi subscription.

On the customer database activation front, we see more significant opportunities to drive reengagement as well as cross sell and we’re expanding our efforts in CRM and database marketing to offer this new subscription to our massive database of customers, both past and present. In April, we launched technology to communicate with customers within our app and through text messages, expanding our customer engagement, as well as building more targeted and sophisticated email marketing campaigns. Finally, we also began testing the expansion of our Shakeology supplement into the category of Superfood desserts in Q1. Our marketing has just begun to leverage this category. And again, early signs are that this campaign will resonate of grow retention and expand the total addressable market over time.

In summary, the first quarter performed generally as expected, given the transition to the expanded business model. We have experienced with this level of content transformation, and we understand what levers we need to pull to navigate the transition. I believe that this chapter of growth will be the biggest opportunity in the company’s history. With two months of data points, we’re encouraged by the green shoots of demand and customer renewals. And based on what we’re hearing from the industry, our pivot is not only the right strategy for these times, but we have a significant head start. However, I do want to reiterate that it will take some time to fully train our partner network about the benefits of our comprehensive health esteem platform for them to drive significant new subscribers.

And as such, we’re taking a more conservative view of our Q2 outlook, but remain confident in achieving EBITDA profitability on a quarterly basis by the end of the year. Now, for more specifics on the quarter, I’ll pass it over to Marc our CFO to detail our financial results for the quarter. Marc?

Marc Suidan : Thank you, Carl. And good afternoon, everybody. As Carl mentioned, we boasted financial results ahead of our first quarter guidance for both revenue and adjusted EBITDA. I’d like to spend time discussing the impact of our body launch and our financials, review our quarterly results, and then provide our outlook for the upcoming quarter. So let me start with sharing our learnings from the BODi launch in early March. Such a large transformation has three major milestones. First, a product launch, second, the existing customer reaction, and third, launching new sales and marketing efforts. The product was launched on time, under budget and with all the scope and features that we planned on. This is a significant success and milestone in achieving our transformation.

As it relates to the reaction of the existing customer base, we are pleased with the response and how it has been received. Let me provide some color on how we are delivering on the strategy of increasing LTV per customer, first, pricing. As a reminder, the BODi price was adjusted down from $298 to $179 annually last September. As of March 2023, you can only renew on BODi as we move to a single subscription platform. As a result of these changes, our digital LTV increased by 13%. Second, engagement and renewals, while early the new and enhanced programming is driving more user engagement as measured by streams, which Carl mentioned. Engagement leads to more renewals and we are seeing windows above our forecast which improved our March revenues.

While we factored in more churn for customer renewals given the price increase, we are encouraged by our renewal rate as customers are realizing the value of our new programming. As such, the BODi subscriber file has nearly doubled in size to 500,000 since the beginning of the year. Third cross-selling. We are pleased with the higher nutrition attach rates from our BODi describers which are driven by digital and nutrition bundle pricing. As it relates to wrapping up our sales and marketing efforts, Carl elaborates on the strategies that we are deploying. To summarize, we have successfully launched our new product and have received a positive response from our existing customers. We have executed on two of the three critical milestones of our strategy and are now focused on the third one, which is the selling and marketing efforts that will drive new customer acquisitions.

Turning to the financials of the quarter. Given all the changes in the past year, I will focus my comments on quarter-over-quarter performance for revenue. Revenue was 144.9 million, which was ahead of our guidance and 2.2% below the prior quarter. That is the smallest quarter-over-quarter contraction since Q4 2021. Digital revenue was 64.8 million versus 68.7 million in the prior quarter. Digital subscribers were one 1.75 million, which decreased 10% quarter-over-quarter. The changes were largely attributable to the repositioning of our partner networks and a new BODi solution which impacted their productivity. Nutrition revenue was 74 million in line with the prior quarter. The number of subscriptions was 210,000, which decreased 5% from the prior quarter.

We saw subscriptions bottom up in February and as we launched the new BODi Solution, we delivered more nutritional retention in March. Connected fitness revenue with $6 million, a 27% increase from the prior quarter. The increase was mainly driven by New Year’s marketing campaign. Gross margin was 63%, compared to 47% in the prior year, and 57% in the prior quarter. The improvement was driven by improved nutrition gross margins, and a product mix composed of more digital and nutrition revenues. Let me walk through each product line. This still gross margin was 77%, compared to 80% in the prior year, and in line with the prior quarter. The year-over-year reduction is mainly due to less scale given the decline in year-over-year revenues. And digital revenues grow with the new BODi Solution.

We are confident that digital gross margin will improve. Nutrition gross margin was 58% versus 54% in the prior year, and 50% in the prior quarter. The nutrition gross margin benefited from an improved product mix, lower supply chain costs and improve inventory management. Connected fitness gross margin was minus 26% versus minus 129% in the prior year, and minus 122% in the prior quarter. The improvements were from pricing stability and stabilization the non-cash accounting charges. Moving to our operating expenses, excluding restructuring and impairment charges. Our operating expenses were $113 million, which represents a 29% improvement from the prior year and is largely in line with the prior quarter. The improvement is a direct result of the cost transformation that we have been referencing for several quarters.

Selling and marketing was 53% of revenue, compared to 54% in the prior year, and 50% in the prior quarter. As a reminder, the largest portion of selling and marketing costs is variable compensation for our partners, our gig workforce that earns commissions and bonuses when they sell our product. Our direct media acquisition continues to be disciplined within your feedback and attractive role as targets. We are focused on driving higher LTV, which in turn generates more marketing dollars for us to capture more customer acquisitions. As mentioned earlier, we have seen our digital LTV increase, which is exactly what we want to achieve with our new strategy. Enterprise technology and development was 13% of revenue improving from 17% in the prior year, and 14% in the prior quarter.

That is a 43% reduction in year-over-year dollars spend. That is driven by the simplification of our technology stack. G&A was 12% of revenue, up from 10% of revenue in the prior year and down from 13% in the prior quarter. The year-over-year increases from G&A deleveraging. While G&A is mainly fixed, it was down by 12% from last year in dollars spend. We continue to be aggressive in managing our expenses and ensuring our vendor spend is on Beachbody friendly terms. Our recent RFPs have successfully reduced year-over-year spend despite rising inflation. Net loss was $29.2 million compared to a net loss of $73.5 million in the prior year and a net loss of $44.9 million in the prior quarter. Adjusted EBITDA was a loss of a $1 million compared to a loss of $90 million in the prior year and a profit of $3.5 million in the prior quarter.

Adjusted EBITDA was ahead of our guidance and a 95% improvement from the prior year. We have designed our cost structure to break even at this level, and all the growth from our new body platform will drive profitable EBITDA. Moving on to the balance sheet. Our cash balance was $66 million, compared to $80 million in the prior quarter. We are in a strong liquidity position and our cash use will improve in the coming quarters. Q1 have some non-recurring payments, including restructuring severance costs in 2022 bonuses. Inventory was $48 million, down from $64 million in the prior quarter. We continue to exercise discipline and demand and supply chain management, resulting in a favorable 11% inventory balance reduction. In fact, our inventory balance has been coming down for seven consecutive quarters.

The inventory levels should start to level off from here on. Moving on to cash flows. Our cash flow from operations was minus $8 million down from minus $33 million in the first quarter of the prior year. Factoring out severance costs in 2022 bonus payments, we would have had positive cash inflow from operations. Our CapEx for PP&E was $3.4 million, a substantial reduction from the $12.4 million in the first quarter of last year. Our content CapEx was $2.2 million, down from $6.4 million in the first quarter of last year. So combined CapEx with $6 million, down from $19 million, a 70% improvement from the prior year. This should be our new CapEx run rate. In terms of capital needs, we have access to an additional credit facility of $25 million, so we continue to run the business without needing new capital.

Now, turning to our outlook for Q2. I’m encouraged by the green shoots that we are seeing in response to our strategy. We are seeing improvements in renewals, engagement and nutrition attach rates. Our guidance is based on where we stand in our transformation journey. We have successfully launched our new BODi platform. Our existing customers are reacting very well. And now we are ramping up our sales and marketing efforts in line with our objectives of EBITDA profitability. With that we’re guiding the upcoming quarter as follows. Revenues of $125 million to $140 million. Adjusted EBITDA loss of minus 5 million to minus 10 million. This EBITDA reflects the annual summit event, where the expense is recognized in the quarter of occurrence, but the cash outlay was incurred over several quarters leading up to the event.

This is different from last year, where summit occurred in Q3. Our cashews in Q2 will be below $10 million. Also, I’ve been asked by a few investors about our New York stock exchange the listing notice. I just want to be confirmed the New York Stock Exchange has improved our clients remediate this so we will not be delisted. With that operator we can open it up for questions.

Operator: The first question comes from the line of Joanna Zhao of Bank of America.

Joanna Zhao: My question is focused on after the price chain trying to understand the turn and renewal rate a little bit better. Can you please help us understand? Just out of the remaining subscribers understand there were 500K for the BODi, but out of the remaining subscribers. What percentage of them are still on the $289 premium tier? And what percentage is on the $119 tier? And then can you please help us understand what you’re seeing on renewal rate and then turn after that annual price change for both cohorts or premiums or for both peers is 289 and 119? And also, are you seeing any revenue uplift from the subscribers that offset the turn subscriber’s loss because of the price change? And are you seeing a net positive for the business? If you can just comment on any of the signals, you’re seeing some early data?

Marc Suidan: Let me start off by commenting. Overall, we’re very pleased with the churn rate. Because right now that people, if you think about the cohort, it’s what I call the $99 cohort that was a people who signed up to bond at $99 a year ago. They’re right now renewing onto BODi at the same rate that they were renewing a year ago from BOD to BODi. So we’re very happy with that renewal rate, we had factor of more churn, but it’s not materializing. It’s a great sign. I think people are engaging in the platform, we’re seeing more streams more activity, which all signals that they’re appreciating it, and they’re seeing the value equation for them. So that’s really good news there. When we said the file size doubled since January 1, so it’s around 500,000 now, which means you would have been half of that January 1.

There’s very little of those people renewing now, because those people would have primarily signed up in the past six months, and frankly, most of them in the second half of that. So overall pretty, pretty favorable change in terms of those people. It’s I added the point on an LTV per subscriber basis. It is, we’re seeing the digital LTV being higher. And as our new sales efforts and new customer acquisition ramps up, that’s when it starts offsetting the decline in subscriber base.

Joanna Zhao: And just a follow-up on the LTV to CAC. If you can just comment on like how your rebranding strategy and price change has really impact your latest LTV to CAC ratio, and how are you thinking about that ratio as your cleanse for the marketing spend for the remainder of this year or next year to acquire new customers. And what is kind of your new long-term LTV CAC ratio expectation after the price change?

Marc Suidan: What I would say is a reminder that in our sales and marketing, which is running around that 50% of revenue now. The majority of that is variable sales compensation for our network of coaches and partners. And then as a relates to advertising spend, we continue to aim for a healthy LTV to CAC ratio we haven’t shared in the past but we aim for a healthy one. And we’re currently aiming for in year payback from a row standpoint and everything afterwards when we think about the lifetime value of that customer becomes great profit margin.

Carl Daikeler: I will just add their Marc that we are, because of the higher price point of the BODi subscription at 179 and the strong take rate of annual that obviously lends itself to a higher media allowable for our customer acquisition. So that can benefit marketing as we’re in this test and learn phase as we roll out the new product.

Joanna Zhao: Just two more as I can. So my next question is on the recession risk. So if you look at research that’s done by IHRSA, U.S. fitness industry declined by about low double-digit percentage in memberships during the last recession in 2008 and 2009. How do you think reopening and macro challenges will impact each BODi this year versus prior years? Obviously, given that we’re heading into recession, the assumption is so? And then also your 2Q guide implies a down 30% to 22% year-over-year revenue? And do you foresee a similar trend will go into the second half of this year? Given that assuming we’re heading into recession? And how does Beachbody plan to navigate through this recession? Maybe just help put all of that in context for us?

Carl Daikeler: It’s a great question. And I think we’re uniquely positioned Joanna. Actually the great recession we did quite well. We are a very cost-effective alternative to the gyms when it comes to people wanting to continue their fitness and nutrition protocols when they might be looking at the household budget. So we saw an uptake, uptick in 2008, 2009. And we think we’re well positioned for that with our holistic approach to fitness, nutrition and now, positive mindset masterclasses. I’ll also add that since our primary sales channel is our network of partners, in this tight labor market. It’s actually difficult to, for a household to get a second or in some cases, a third job to add a supplemental income to the house.

So they need to monetize something that they’re doing anyway. And that’s where the opportunity to earn an income by referring people into the ecosystem is an opportunity for them to earn extra money. And it’s again, this is the kind of thing that people are realizing is not an optional expense, it’s a certainly a part of their lifestyle. And we think that is those two things, those two factors give us the opportunity to really excel through both the back half of this year and into the beginning of 2024.

Carl Daikeler: You asked about the second half of the year, what I would say is as our business model change, completes its implementation, the momentum build up in our view would lead the second half to be more favorable than the first half, which is different than the classic, seasonality classic of this industry,

Joanna Zhao: And my last question is just to help us, give us an opportunity to give you an opportunity to explain what do you think is the most misunderstood by investors at this point about your company or stock?

Carl Daikeler: I would say that, people look at what’s happening and then the way the market works now, they’re looking on a quarterly basis. And I think I can sometimes be a little bit my app myopic when we are looking at such a dramatic season of change. But this is a company that’s been around for 24 years and if you look around the industry of nutrition and fitness solutions, there aren’t a lot of companies that have managed to have that kind of stamina and innovate over and over again and this literally this launch of the health esteem category and the body subscription. This will be our fifth big innovation as a company. And we’ve run this playbook before and the thing that we’ve always operated on is very clear approach to preserving cash flow, while we are keeping an eye toward growth, and with our incredible assets have the deepest catalog in Home Fitness and this new business model, which is engaging consumers in such a compelling way, I think the company is really well set up to both to grow in this environment, and particularly an environment that now has weight loss prescriptions.

We are the holistic fitness, nutrition and positive mindset resource for people who need to change their lifestyle at the same time that they contemplate prescription medication. So we’re really in this like, ideal position. It feels like everything that we’ve done for the last 24 years has led up to this moment. So we feel very good about where we are. And we hope that the market recognizes the value of the company, our approach and that we really are in a good position going forward.

Marc Suidan: Let me add to that. If you think about it, we’ve, in addition to his track record, we’ve adjusted our cost structure for the level we’re at. So you can see that our adjusted EBITDA was a profit in Q4 was a minus 1 million loss in this past quarter. So we’ve definitely kind of moved very aggressive on the cost side of the equation improved the gross margin, we just came in at 63% gross margin, so very healthy gross margins, we only see it getting better from here. And like I said in the comments, our cash burn will go down from here on. So now as the — while others may be talking about implementing changes, like as Carl just said, we just implemented our major change in March and it should all kind of start flowing, that the revenue outside benefit should all fall down to turning to profits, but the bottom-line.

Operator: The next question comes from Linda Bolton Weiser of Davidson.

Linda Bolton Weiser: So I was curious if you could quantify the non-recurring cash payments that occurred in the first quarter that I assume impacted operating cash flow. I guess you said that with severance and bonuses. Can you quantify those?

Marc Suidan: I would say the ’22 cash bonus combined with the severance cost would be in that $10 million to $15 million range. That’s why I said if you factor those out, we would have been cash flow positive from operations in Q1.

Linda Bolton Weiser: So why don’t you consider cash bonuses to be non-recurring? I’m assuming that you will pay cash bonuses every year, correct?

Marc Suidan: Well it depends, we sell funder bonus. We’ve set ourselves an aggressive target and we sell funded so as long as we beat, what’s against our plan, that’s how we funded.

Linda Bolton Weiser: And then, I guess, I can kind of work through the model here, but at what point is digital subs bottom out sequentially? Like will that occur this year or not until 2024?

Marc Suidan: Yes, I would say Linda second half of this year is, is when that should bottom out, mainly because we’re cycling through the basic bot file now. While it is kind of — while it takes a year to cycle through it, as the body file size increases, the increases to that starts offsetting the smaller bates of decline in the bot file.

Operator: The next question comes from the line of Darin Tuttle of Singular Research

Darin Tuttle : I think you’re almost right in line there would be an EBITDA positive that you had for the quarter. So congrats on that. I just had a question on the deferred revenue. So I was looking at the deferred revenue of around 53 million for this quarter. The way that I’m understanding that in this transitional period, is that something with the billing and, and everybody on the new premium subscription model, is there going to be an expected change in the deferred revenue or do you think that guidance is kind of pretty solid going forward?

Marc Suidan: Darin, I guess as we’re signing people up more at the 179 price point it’s a higher ARPU and I’d say most signups on over 12-month period. So that’s where you will see that benefits cash upfront from a billing standpoint. But we defer the what comes later. So given we’re increasing the LTV and the ARPU per customer it will favorably increase the deferred revenue.

Darin Tuttle : That’s what I was expecting as well. And then in terms of the, if we just look at the inventory levels, right, and if we look at that towards the digital marketing spend, Carl had mentioned the new platforms potentially TikTok or things like that. Is TikTok maybe potentially getting banned in the us? Would that be a significant risk for your revenue guidance going forward? And then on the back end of that, for the digital marketing expenses how much of that is advertising directly with the platform? And then how much of that is variable compensation to say partners on TikTok?

Marc Suidan: So our exposure to TikTok is exactly zero right now, because we really don’t do any business. It’s a channel of expansion to the extent that it exists. We do probably most of our digital advertising between Meta and Google at this point. So that’s not an exposure at all. I’ll let Mark speak to the ratio between media spend and variable expense to the network.

Carl Daikeler: Yes, Darin, look we drive it, so pretty much everything is variable from our side. Right now the network side does drive the majority of it. So in our notes to the financial we do list how much we spend on advertising spend, so for this past quarter was $9 million. So if you back that out from the selling and marketing, the balance would be all variable, sales compensation. And for the $9 million, we don’t do brand, we really focus it on clicks for allowables. Or we really drive it in the variable way. So it’s driving new customer acquisitions.

Operator: There are currently no additional questions registered at this time. So I will pass the conference back over to the management team for any closing remarks.

End of Q&A:

Carl Daikeler: Okay. Well, thanks so much, everybody. I’ll just wrap today’s call up. I just want to thank our shareholders for your enthusiasm in our mission and support for our direction. As much as we’ve had incredible success and are proud of our accomplishments over the last two decades. Our aspirations are to help 10s of millions of people achieve their goals and lead healthy, fulfilling lives. And those aspirations that ambitions let us exactly to this moment in time and this frankly, exciting new chapter for this company. So we’re excited about what’s ahead of us, and I’m proud to have you aboard. So I look forward to our next update after the second quarter and hope everybody has a good night. Take care everybody.

Operator: And that will conclude today’s call. Thank you for participating. You may now disconnect your lines.