Badger Meter (NYSE: NYSE:) reported strong financial results for the third quarter of 2024, with a 12% year-over-year sales growth and record operating margins of 19.5%.
Key Takeaways:
- 12% year-over-year sales growth
- Record operating margins of 19.5%
- 23% increase in EPS to $1.08
- Total utility water product line sales up 14%
- Software as a Service revenues up approximately 35%
- Free cash flow reached a record $42 million, a 48% increase from the prior year
Company Outlook
- Projecting high single-digit growth rates over the strategic cycle
- Anticipates fewer customer operating days in Q4 due to U.S. holiday season
- Potential delays in utility projects from hurricane recovery efforts
- Confident in performance heading into 2025
- Does not anticipate a decline in sales, even amidst industry fluctuations
Bullish Highlights
- Strong demand for BlueEdge suite of smart water solutions
- Utility business has shown resilience, growing during challenging years
- Three key drivers for margin improvement: increased unit volumes, positive pricing/cost dynamics, and favorable customer and project mix
- 100% attachment rate of SaaS to hardware sales
- Successful completion of four acquisitions in the past 3.5 years
Bearish Highlights
- Higher effective tax rate of 25.3%
- Operating expenses increased to $43.3 million, mainly due to personnel costs
Q&A Highlights
- 75% of utility revenue sold directly to end-users, facilitating strong communication and response capabilities
- Backlog remains solid with no significant changes reported
- Ongoing capital allocation priorities include a 26% annual dividend increase
- Focus on R&D and potential M&A opportunities, particularly in sensor technology
- International growth leveraging established relationships from recent acquisitions
Badger Meter reported strong financial results for the third quarter of 2024, with a 12% year-over-year sales growth and record operating margins of 19.5%. The company’s total utility water product line sales rose 14%, driven by strong demand for its BlueEdge suite of smart water solutions. Software as a Service revenues saw a significant increase of approximately 35%.
Despite the positive results, Badger Meter anticipates fewer customer operating days in the fourth quarter due to the U.S. holiday season and potential delays in utility projects from hurricane recovery efforts. However, the company remains optimistic about its sales growth, projecting high single-digit growth rates over the strategic cycle.
CEO Ken Bockhorst expressed confidence in the company’s performance heading into 2025, emphasizing that they do not anticipate a decline in sales, even amidst industry fluctuations. The utility business has shown resilience, growing during challenging years, including a 4% increase during the COVID-19 pandemic.
Badger Meter highlighted three key drivers for margin improvement: increased unit volumes, positive pricing/cost dynamics, and favorable customer and project mix. The company’s backlog remains solid, with no significant changes reported.
In terms of capital allocation, Badger Meter announced a 26% annual dividend increase and a focus on R&D and potential M&A opportunities, particularly in sensor technology to enhance their BlueEdge platform. The company has successfully completed four acquisitions in the past 3.5 years and continues to explore additional opportunities that enhance customer satisfaction.
Internationally, Badger Meter has leveraged established relationships to grow in over 50 countries, with notable progress in the UK related to AMP (OTC:) cycle 8, which includes smart metering and leak detection solutions.
The next earnings call for Badger Meter is scheduled for January 29, 2025.
InvestingPro Insights
Badger Meter’s strong financial results for Q3 2024 are reflected in the company’s robust market performance. According to InvestingPro data, Badger Meter boasts a market capitalization of $6.06 billion, underlining its significant presence in the water metering industry. The company’s revenue growth of 24% over the last twelve months aligns with the reported 12% year-over-year sales growth in the latest quarter, indicating a consistent upward trajectory.
The company’s focus on smart water solutions and Software as a Service (SaaS) offerings is paying off, as evidenced by the impressive 35% increase in SaaS revenues. This strategic direction is further supported by InvestingPro Tips, which highlight that Badger Meter has maintained dividend payments for 54 consecutive years and has raised its dividend for 31 consecutive years. This commitment to shareholder returns is particularly noteworthy given the recent 26% annual dividend increase mentioned in the earnings report.
While the company’s P/E ratio of 53.28 suggests a premium valuation, it’s important to consider this in the context of Badger Meter’s strong growth and market position. The high return over the last year, as noted in the InvestingPro Tips, corroborates the company’s solid performance and investor confidence.
For investors seeking a deeper understanding of Badger Meter’s financial health and growth prospects, InvestingPro offers 16 additional tips, providing a comprehensive analysis to inform investment decisions.
Full transcript – Badger Meter Inc (BMI) Q3 2024:
Operator: Ladies and gentlemen, welcome to the Third Quarter 2024 Badger Meter Earnings Conference Call. [Operator Instructions] It’s now my pleasure to turn the conference over to Karen Bauer, Vice President of Investor Relations, Corporate Strategy and Treasurer. Please go ahead, Ms. Bauer.
Karen Bauer: Good morning, and thank you for joining the Badger Meter third quarter 2024 earnings conference call. On the call with me today are Ken Bockhorst, Chairman, President and Chief Executive Officer; and Bob Wrocklage, Chief Financial Officer. Also joining our call today is Barb Noverini, our new Senior Director of Investor Relations. I have made the decision to retire after our Annual Shareholder Meeting in the spring of 2025. Barb and I will be working together over the next six months to seamlessly transition investor relations, sustainability and strategy activities, and I know she will be a great resource to the company and to you all in the years ahead. But the countdown to my last earnings call begins with two to go after today. Moving on, the earnings release and related slide presentation are available on our website. Quickly, I’ll cover the safe harbor, reminding you that any forward-looking statements made during this call are subject to various risks and uncertainties, the most important of which are outlined in our press release and SEC filings. On today’s call, we will refer to certain non-GAAP financial metrics. Our earnings slides provide a reconciliation of the GAAP to non-GAAP financial metrics used. With that, I’ll turn the call over to Ken.
Ken Bockhorst: Thanks, Karen. We will definitely miss your expert safe harbor reading skills. But all joking aside, we recognize the importance of a professional IR function. And consider ourselves very fortunate to have had Karen’s expertise as Bob and I began our first public company CEO and CFO roles about six years ago now. It’s also why we believe in well-planned transitions, and we’re happy to have Barb on board to work alongside Karen. Turning to the third quarter. I’m very pleased with our financial results, which reflect continued strong performance across a broad array of metrics, including delivering 12% year-over-year top line sales growth against increasingly difficult comparisons. We reported record operating margins of 19.5% with both year-over-year gross margin expansion and SEA leverage contributing. We delivered strong EPS improvement even with a higher tax rate and last but not least, we generated robust year-over-year cash flow growth. In summary, our team continues to do a tremendous job in executing against our strategic priorities in support of our customers. I’ll hand the call over to Bob to go through the details of the quarter, and I’ll come back to talk about market conditions and the outlook.
Bob Wrocklage: Thanks, Ken, and good morning, everyone. Turning to Slide 4. As we have been anticipating and communicating to you, our top line sales growth rate did indeed moderate to a still strong 12% growth in the third quarter. As a reminder, this 12% growth was on top of a 26% increase in the prior year comparable quarter. Total utility water product line sales increased 14% year-over-year, as we continue to deliver on solid demand for our BlueEdge suite of utility smart water solutions. Year-over-year growth was broad-based, including flow measurement, water quality, pressure and related communication solutions. Notably, Software as a Service revenues increased approximately 35% in the quarter, reflecting the increasing customer reliance on insights and analytics delivered from our industry-leading BEACON digital solution. Sales for the flow instrumentation product line were flat in the quarter, with solid order trends globally within our focused water-related applications, offsetting modest declines across the array of deemphasized end markets. As noted in the release, as we move into the fourth quarter, we do expect the typical pattern of fewer customer operating days given the heavy U.S. holiday season. In addition, hurricane-related recovery activities have the potential to temporarily delay certain Southeastern U.S. utility projects in the near term. It is still too early to quantify any possible impact. Turning to margins. We were very pleased with the operating margin expansion of 260 basis points in the quarter, reaching a record high of 19.5%. Gross profit dollars increased 15% year-over-year, and as a percent of sales, gross margins were 40.2%, a 110 basis point improvement from 39.1% in the prior year comparable quarter. For those ready to ask me if we are ready — if we are set to declare a new gross margin normalized range? The answer is no. While we were pleased with the outcome this quarter, one quarter is not a trend. And although we remain confident in the long-term gross margin improvement trend line, driven predominantly by positive structural mix, which was evident this quarter, we are also confident in saying that the mix can and will be uneven quarter-to-quarter. The overall higher volumes, along with solid price cost management also contributed to the year-over-year gross margin improvement. SEA expenses in the third quarter were $43.3 million, an increase of approximately $2 million year-over-year. The spending increase was due primarily to personnel-related costs, including higher headcount and salaries. Despite this increase in growth spending, SEA as a percent of sales declined 140 basis points to 20.8% from 22.2% in the comparable prior year quarter on the higher sales. The income tax provision in the third quarter of 2024 was 25.3% compared to 20.3% in the comparable prior year period, which benefited from a discrete tax benefit from equity compensation transactions. We continue to expect an ongoing effective income tax rate in the plus or minus 25% range, assuming no change in overall corporate income tax rates. In summary, consolidated EPS was $1.08 in the third quarter of 2024, a 23% improvement from $0.88 in the prior year comparable quarter. Primary working capital as a percent of sales was 21.7%, consistent with the prior quarter end and 40 basis points of improvement from 22.1% at calendar year-end. We continue to carefully manage working capital investments to support growth. Record quarterly free cash flow of $42 million was 48% higher than the prior year’s $28 million, largely the result of higher earnings and the effective working capital management. With that, I’ll turn the call back over to Ken.
Ken Bockhorst: Thanks, Bob. Turning to Slide 5. You may recall that last quarter, we introduced you to BlueEdge. In short, BlueEdge is the overarching name we’ve given to our tailorable suite of solutions that solve critical water challenges across the entire water cycle. It’s a way to simplify for our customers, including both utility and commercial and industrial users the breadth of offerings available to best meet their needs and preferences today and as they advance and change in the future. In June, we demonstrated the elements and connectivity of BlueEdge to our utility customers at ACE. Last week, we did the same for our wastewater and industrial customers at WEFTEC. We showcased the literal representation of BlueEdge, highlighting the various hardware and communication technologies that relay data to both our proprietary software solutions and to traditional SCADA or building management systems. By taking that actionable data and providing true insights, we aid customers in making more informed decisions for efficient water management. Customer interest in technical discussions at the show were robust with concrete examples of our solutions, improving water efficiency, resiliency and sustainability. And speaking of resilience, I wanted to highlight recent customer feedback we’ve received as it relates to the hard hit hurricane regions in the Southeastern United States. Most importantly, the tragic loss of life and devastation from these storms is truly heartbreaking. Yet during these events as well as Hurricane Beryl in Texas in July, our customers have confirmed that our solutions continued communicating information critical to maintaining clean water availability and to prioritize identified leaks and other fix and repair activities for countless end users, even when utilities were without power. This is only possible with a resilient cellular network. It demonstrates again that our differentiated solutions resulted in differentiated performance when it counted most. Finally, turning to the outlook. The structural macro drivers that underpin technology adoption in the water industry are becoming more pronounced as evidenced by these extreme weather events and exacerbated by aging infrastructure and labor availability challenges. We continue to operate with an encouraging opportunity funnel, bid pipeline and order book, which bodes well for continued sales and earnings growth with our focus on high single-digit sales growth rates over the strategic cycle, as we noted in the press release and Bob’s earlier comments, as we close out the year, we expect that the fourth quarter will include fewer customer operating days given the various U.S. holidays. Additionally, we anticipate customers in the hurricane-impacted regions could potentially delay certain projects in the near term. It’s still too early to quantify any potential impact and this type of situation serves as a reminder of the unevenness inherent in the industry. We remain steadfast in our commitment to existing capital allocation priorities and we have the balance sheet and cash flow generation profile to further invest in both organic and highly strategic inorganic growth while we also provide an attractive dividend. In summary, we remain excited about the opportunities ahead, and our team remains engaged in driving continued exceptional results. With that, operator, please open the line for questions.
Operator: [Operator Instructions] Our first question today comes from Scott Graham with Seaport Research Partners. Please go ahead. Your line is open.
Scott Graham: Yes. Hi. Good morning. And Karen, I start coverage. I hope I didn’t change. Anyway you are one of the great ones out there, and I’m very happy for you sad for me, but I know that you certainly will be helping the transition. But good luck to you, Karen.
Karen Bauer: Thanks Scott.
Scott Graham: Obviously, we’ll be speaking some more going forward. So, the one question I have and then I have a short follow-up is, I know you guys talk about sort of high single-digit growth through a cycle and I know you’re careful not to measure that too specifically what have you. But is the implication there for 2025 since you’re coming off three really strong years, including this one, that, that might be sort of like low to mid-single-digit sales growth for — is the measurement period a little bit different than what I’m thinking. Can you give us any thinking on what ’25 means given that context?
Ken Bockhorst: Hi Scott. So welcome to coverage and it’s interesting in that question that you asked about the high single digits through the cycle going forward because we were asked exactly that same question last year at about this time about this year. So as we look forward and we think about the five-year strategic cycle and the market dynamics that we have, the advantages that we have with our portfolio, the way that I think we’ve been able to deliver best-in-class execution. From year-to-year, as we always say and remind people, it can be uneven from quarter-to-quarter, but we feel strong coming into 2025. So it isn’t like we’re trying to signal that you should be expecting some sort of weakness coming into the next year.
Scott Graham: Okay. I think based on my reading of your transcripts, I think that’s all I’m going to get out of it. So that’s fine.
Ken Bockhorst: Karen has trained us well, Scott.
Scott Graham: Understood. I’m glad to say that you’re not seeing weakness, which for you guys would be, I guess, just defined a lesser growth. And look, you guys are doing a phenomenal job on the top line. When it comes to margins, there was a real nice pop there as well. And I believe mix, you cited as the primary driver there. But your volumes were up as well, I assume, and that drove some leverage and price/cost was positive is what you’re saying? Is that sort of the ranking of the margin drivers?
Bob Wrocklage: Yes. So we typically don’t get into kind of the sequential sizing or ranking, but you’re exactly right. The top line growth is not a function of just mix or pricing. It’s absolutely unit volumes increasing. It’s actually absolutely an element of ASP and customer mix and project mix and product mix. And then you did hear our specific call out to price cost benefiting margins. So those are the three elements contributing.
Scott Graham: Thank you. Appreciate your answers.
Operator: Our next question comes from Andrew Krill with Deutsche Bank. Your line is open.
Andrew Krill: Hi. Thanks. Good morning, everyone, and so my congrats to Karen as well. Thank you for your help. So I wanted to ask one more on the 2025 sales outlook, just I think we’re not going to get an explicit opinion, but wouldn’t outcome as low as like flat or even down sales be very surprising to you, just given how the industry is replacement driven and the positive mix of story over time?
Ken Bockhorst: Yes, a down year would be surprising to us. If you look at our history, even in the COVID year when everyone else was down considerably, our utility business even grew 4% in the COVID year. It even grew 9% in the supply chain year. So regardless of any of these other factors or events, the macro drivers in the industry are still very strong. It just can have varying effects that one year might be 12%, another year might be 5%, but we certainly don’t expect down years.
Andrew Krill: Okay. Great. That makes sense. And then on the hurricane impact and the Southeast, I know you said you can’t quantify it right now. But like do you have any — maybe directionally like can you size what percent of the business like the Southeast is for Badger Meter? Just so we can kind of try to get some sense of how big it could be?
Ken Bockhorst: Yes. So no. But let me take a couple of things. So one, I just want to point out a couple of factors as we look at into Q4 and into next year. So this is the sixth year, Bob and I have done this call, and it’s the sixth year that we pointed out that there are holidays in Q4. So that’s not new for anybody who’s followed our story. Second, with the hurricane impact, I think it’s important to remember that 75% of our utility revenue is sold direct to end users. So we have really great communicative, open communication relationships directly with our customers, the distributors that we have that cover the other 25% are outstanding, but our sales model, which we’ve been doing now for 6-ish years with the change in adoption of technology gives us insights into how people are operating. And when you’re thinking about installing meters and other sensors throughout a network that requires people to go out and do work. And when power lines are down and other issues are happening, this can have an impact. And — the way that we’ve always operated is that we are here for customers when and where they need us. So there’s no specific sizing. There’s no specific issue. I would remind you that if you go back to 2020 when COVID was hitting, we had a pretty good take out on what was going to happen, because we talk directly to most of our customers. And we didn’t lay people off and we rode right back in Q3. The first quarter of 2021, we were the first to signal that there was potential supply chain challenges. We still grew 9% that year. So all that we do is we try to point out to you the things that could potentially be the causes of unevenness. What I can assure everyone is that we are extremely good at controlling what we can control and still delivering really good results. So I know that was a long-winded answer that didn’t specifically tell you, but I hope you got the point of what we mean here.
Andrew Krill: Got it. And if I just have one quick last one in. Just if there were some delays in, is it fair to think those should hit in the first quarter of 2025, and there’s no chance they just get canceled out, right, correct?
Ken Bockhorst: I would say for sure that there would be delays, not cancellations, but I can’t promise they would be the first quarter.
Andrew Krill: Okay. Great. Thanks so much.
Ken Bockhorst: You bet.
Operator: The next question comes from Rob Mason with Baird. Your line is open.
Robert Mason: Good morning. Thanks for taking my question. You talked about normalizing backlog. I think you’ve been commenting around that as we’ve gone through this year. Again, maybe emphasis on the word normalizing, not normalized. So can you give us any sense as to where maybe your backlog level is relative to what you would consider more of a steady state, assuming it’s higher than that? If that’s correct?
Ken Bockhorst: Yes. So Rob, so prior to an extremely building backlog prior to last quarter, where we called out that we aid into it a bit more. we’ve never sized the backlog, but we didn’t call it out this quarter because there was no meaningful change within it. So it still remains very positive. All the areas of the market that we look at from customers in the engineering phase to what’s in the bid phase to what’s in our backlog to what we’re shipping remains as solid as it’s ever been.
Robert Mason: Sure, sure. I also wanted to ask about, you noted the growth rate in your SaaS revenues, which was, again, really strong. Can you maybe tear that down a little bit? Just should we think that, that is solely a kind of a unit-driven growth rate? Or as you’ve offered new services, the leak detection, just a number of things, obviously, under BlueEdge now. What is the contribution besides unit growth to that from other services that are rolling into that SaaS component?
Bob Wrocklage: Yes. So I think you’ve picked up on the first clue. Again, we always talk about our AMI, our Software as a Service being a function of 100% attachment rate to hardware sales. So the leading indicator is when we talk about more ORION Cellular radios sold the lagging indicators, of course, then SaaS uptake because of a 100% attachment rate on a per meter per month basis. That is the lion’s share of the recurring revenue stream SaaS. That doesn’t mean on the fringes, there aren’t additional impacts from those factors that you mentioned, additional water quality devices, leak detection devices, et cetera. But where we stand today, 99% of the revenue stream is related to meter to cash, surrounding BEACON and AMI. And so the driver today is absolutely additional hardware units in the field. Bringing with it the additional insights and intelligence that we talked about in the script and that the benefits that, that offers to customers.
Robert Mason: I see. That’s helpful. If I could squeeze one last one in. Just maybe again going back to the hurricane impacts. The implications maybe that could be an interruption headwind in the business. But the leak detection business is a newer business for Badger. So is that a business that can see actually some incremental demand as those units are deployed out into the field to try to inspect for potential disruptions when you have instances like that? I just don’t know the history nature of that business as well?
Ken Bockhorst: Yes, Rob. So as we built out our portfolio of adding new sensors and software, that’s one of the reasons that we’re so excited about some of the pressure monitoring, leak detection capabilities that we’ve added. Events like this just make people realize how much more necessary those products and services are. And so we were excited about it before. We’re just as excited about now, and hurricane doesn’t make us feel better about it, but it surely shows the benefits that utilities have. And then on top of that, just as I called out in the script, the fact that our customers in the hardest-hit parts of the storm, not just the storm, but the others continue to communicate throughout. So when they can have our battery-powered cellular communications, telling them where their issues are throughout their system. It’s a heck of a lot more efficient than guys driving around looking for problems. And it’s a lot safer than sending people out looking through areas where perhaps there’s down power line. So the combination of the whole portfolio coming together is really truly seen at unfortunate times like this.
Robert Mason: Yes. Thank you. Appreciate it.
Operator: [Operator Instructions] We’ll move next to Nathan Jones with Stifel. Please go ahead.
Adam Farley: Good morning. This is Adam Farley on for Nathan. My first question I wanted to ask around BlueEdge the way that you frame it, are you seeing any acceleration in selling more bundled offerings to customers? I know it’s still kind of early, but I imagine your expectation eventually is to gain wallet share with customers?
Ken Bockhorst: Yes. What’s really exciting about how we’ve built this is it allows us to approach any customer anywhere at wherever they are in their technological journey. So they could be a water quality customer that then we expand their reach through Badger Meter through the BlueEdge into metering or lift station monitoring or if someone’s on the metering side, we can bring them in with water quality stations and the like. So it’s back and forth both ways. Some customers also look at it as the full portfolio upfront. Some look at it as it’s great to know that you have all this. I’m going to do my AMI first, and I’m going to roll the water quality after them in whatever order that they see. So when we use the word tailorable, what we mean by that is a customer can tap into the BlueEdge portfolio and pick whatever standard solutions they need based on whatever their current concerns are, not to be confused with customizable, which would imply highly engineered different products and services.
Bob Wrocklage: And that strategy is not new. I mean BlueEdge absolutely and how we talk about it and position it with customers is new. But the idea of cross-selling and bundling and being able to take metering customers and sell them water quality and vice versa. That’s been the thesis and the behavior since acquisition starting back in 2020. So I just want to make sure that it’s not like that this is some brand-new strategy. It’s absolutely a better way and a more understandable way and a more tangible way to bring that tailorable solution set to market, but the strategy itself to underpinning is not new.
Adam Farley: Yes, understood. That’s very helpful color. I guess shifting gears to capital allocation. You recently raised your dividend by 26% annually. Balance sheet is still very healthy net cash position. What are the main priorities? Maybe talk about a little bit about the M&A funnel. Anything there would be helpful? Thank you.
Ken Bockhorst: Yes. So capital allocation priorities remain constant with how we viewed this for several years now. So first and foremost, we’ve been the R&D leader when it came to cellular AMI and software and ultrasonics in the market, now expanding that also into leadership in remote water quality monitoring pressure and so forth. Second, yes, 32 consecutive years of increasing dividends is something that is certainly important to the capital allocation priorities. And then third, yes, M&A. So we’re really proud of the four deals we’ve done in the last 3.5 years, and we keep a pretty strong funnel around the sensor area that can continue to plug into BlueEdge, whether that’s more water quality, more pressure, more software interesting global footprint, all those things come into play. So it hasn’t changed. We continue to remain disciplined and look for value where we know it translates into customer satisfaction.
Adam Farley: Thank you for taking my questions.
Ken Bockhorst: Sure.
Operator: And our next question comes from Tate Sullivan with Maxim Group. Please go ahead.
Tate Sullivan: Thank you. Thank you for your help over the years, Karen. And Ken, can you talk about the ex the international markets a bit? Have you allocated more sales there? Is there still a water quality monitoring opportunity international — can you address that market, please?
Ken Bockhorst: Yes. So some of the things that have occurred over the past couple of years already, we’ve certainly seen the growth of the acquisitions that had larger footprint with long-standing customer relationships. So particularly s::can having an installed base in over 50 countries, ATI having extremely long-lasting, strong relationships in the U.K. and U.S. Syrinix long-lasting U.K. relationship. So we’ve been able to leverage those to have these BlueEdge type conversations like Bob talked about even before BlueEdge was announced to the world we’ve been having those types of discussions and making certain improvements there. We’ve been growing globally. It’s just — it gets a little bit muted by the fact that our North American growth has been so outstanding that the global growth has gotten a little bit lost in it. But we’re happy with what we’re seeing in terms of growth, and we’re really excited about what we’re seeing in expanded relationships for BlueEdge globally.
Tate Sullivan: Any particular areas? Or I mean, I know the growth has been a bit higher in Europe historically, but still broad-based international approach?
Ken Bockhorst: Well, I’ll just give you one example. We could certainly talk more. But you hear a lot about AMP cycle 8 in the U.K., and we talked a lot about the relationships that ATi has. We talk a lot about the relationship Syrinix – has still just part of us. And we’ve been able to have high-level discussions with several of those utilities about how to help them meet their needs for AMP8, whether that be potential in smart metering and software, whether that be around river monitoring, whether that be around leak detection, customer satisfaction, a lot of the pieces that we’ve been able to provide here in the U.S. are the same that they’re looking for there. And then there’s other regions of the world, too, but just one specific example that we’ve been cracking into.
Tate Sullivan: Okay. Thank you very much.
Ken Bockhorst: Thank you.
Operator: Thank you. We have no further questions, so I’ll turn the call back over to you, Karen.
Karen Bauer: Great. Thank you all for joining our call today. For your planning purposes, our fourth quarter call is tentatively scheduled for January 29. Please don’t hesitate to reach out with any follow-up questions you might have. Have a great day.
Operator: This concludes today’s call. Thank you for joining. You may now disconnect your lines.
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