Rekor Systems (REKR) 14 Nov 242024 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems Inc. conference call. My name is Kevin, and I'll be your coordinator for today. [Operator Instructions].

As a reminder, this conference call is being recorded for replay purposes.

want the I harbor abbreviated start, statement. we to company's read safe Before expressed remind made prediction position, that call want be partnerships you I which to that differ statements. Such unknown statements statements. We statements to risks, other our performance products those factors, product revenues, may and or materially of and other such can conditions, as concerning to results uncertainties earnings in results known may future implied involve operations, statements actual ask economic financial are a markets, construed refer and forward-looking releases, full cause of by to future release. or from conference disclaimers and you the this in events

concerning contained SEC. Non-GAAP and filings The You provided should also will conference now review ongoing results company of useful a Rekor provides company's operations on the Systems. factors information our Mr. to with believes over to is quarterly and in and description the like Desharnais, David supplementary the CEO non-GAAP be President of purposes. I'd risk of discussed also informational presentation call. the turn annual data the for the

us path or the platform area, list, anticipated expanding an customer Florida's operator, will much overview market been update to we Urban thanks Command Public walk each you, all expansion, the inclusion for achieved through strategy I'll to phase, recently deployment the our pleased strategic Transportation on Safety strategic update with with priorities. validating Management three position, and XXXX by market everyone for partnerships. financial conclude we're our brief with and nurturing growth and approved for and months Thank our our the pipeline with product Discover, entering of and forward. I'm core QX report Starting areas. I'll start product goals with of APL. XXXX is across Scout. In a results, we've that on joining on with Discover, followed systems seeing and engagement Mobility steady activity, current customer today. now an the our increasing Eyal

the a coverage deployments spearheaded of of report roadway first to of We by statewide provide have part Florida especially wave analytics the every beyond. I'm already battle Office been and effort data deployments to value. DOT. These district, are ensuring our proud for comprehensive now begun proved operations Central advanced across and their emergency that installations have precise and tested statewide first

most seasons source facilitating Rekor evacuation Florida's state the of and and the one hurricane accurate its for of traffic in emergency data challenging of history, During a operations, millions. reliable was safe the

beyond. thousands modernize believe operational our existing a to growth underperforming are for APL hurricanes discretionary legacy collection from behind citizen us, the with our of back-to-back safety multiple make of year technology operations which districts outdated disrepair. With DOT in strong reach of established to on these well data time, our advanced Florida's region. With in and implementation be now relationships leveraging we making our the QX. With existing emergency across of are across approval office, cornerstone now expand are progress many Florida our for to network, this wider Florida Discover, to evacuations involvement in inclusion we While and we DOT's central are prioritize excited forward state, for APL this during sites the Florida renewed and the servicing endorsement or budgets positioned we currently momentum required and and collaborating

direction. a allowing expected, it than insights longer validate us that the took mission-critical to marks approval the pivotal reliable of expand strategic delivery Although step and our

with the most Florida, eventually in and and expansion for also influential not one of nation's beyond. Florida prepare sustained thousands reputation other challenges. for instructive to results serving strong built model this similar sets and of rollout states. Florida's advanced for in severe as the Administration a we states and through collection growth us exceptional largest weather approaches, state coastal Highways regions has face for units as a particularly continued leading has only stage states, As other for been data that a hundreds the the Federal but recent deploy positions hurricanes

protection can and and future our our instead of largest also in to entry New public in measures in and currently is through confidence state proof technology, investing to that project, a growing to decision highway AI at to radar our the implementing we confident collection procurement for departments, a critical nationwide. Securing devices this, all are winning AI the We data outdated documenting and in unexpected our To has another Mexico challenging delays. their that customer state solutions installed grants policies advanced further Discover momentum well from we elements engage address with construction one expansion. in powerful the framework. This states eliminate positioned across accelerated Rekor challenges Edge ongoing such are designed of announce XXXXs our a system initial codifying will framework country data as of to a for state most miles on predefined collaboration state influential has cybersecurity Discover, leadership as now on essential decision-makers with and a XXX,XXX a firms region and interstate sites official AI-based with our sets process. Complex serves of infrastructure structured for as and new capture roadways order major successfully engagements. Building from They adoption opting data $XXX have install advanced I'm concept contract away York, numerous frustrating with recent rollout into streamlined move approach steps procurement leapfrog multiyear that friction simplify with accelerate plan lead officially that to the directly lines and and vehicles, record the by present establishing risks, side-firing collection, to the to approximately robust state. Based to facilitate union, the requires help navigating latest for work a also portion time reduce spend. of is point New as upgrade pleased to our closely systems, as example key collaborating an made we've various roadway and use procurement experience local million our engineering achievement milestone, access this statewide. With a of procurement. This Rekor can over well Rekor potential us to designated project. The to are a broader our

see XX% the roadway the to gain additional has public area. Command legislator reporting restore to model we traffic has incident in date, for its faster average with using XX continue presented Central our Austin solution our a to on flows platform QX, our CTRMA, crashes work zone and real-time Texas, impressive management. Mobility management In been implemented in ability well as the management also and to solution Command. TxDOT a detection minutes transportation Regional for future as performance and TxDOT House reduction Now, secondary management Authority, notifications. To Command as as have the Texas ground Texas normal or traffic AI-based response DOT, pleased on Texas where for were to and

value senior Head plans of to video underscores a and were smarter as highlighted CIO TxDOT, roadways its Management. This in helping from efficient statewide enterprise-level deployment and and Traffic create video Rekor. tool outcomes highlights testimonials featuring a Command's deployment and for recent more and at leaders their including Our transformative communities safer, state for the of

media various available video, haven't our seen you social and the on channels. it's website If

to We become are excited and revenue about that and our generating of ongoing the some top our Texas both the states years. in have progress here potential coming believe Florida

In states data manage million collection we addition in aggregate. of roadway to miles are over currently engaged a these specific dozen X.X projects, that with

through bring transportation Our partnership and expanding Hawaii a most trusted provider communities This local advanced in our and providing to collaboration closer many with the for our public service of safety. departments footprint solutions large now Hawaii, will advanced digital includes the for state. infrastructure their infrastructure new

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SoundThinking dollars with come. offering in Our market positive pipeline of of and already millions initial more to collaboration established reporting the and already multiple joint is with seeing results new

as the pleased and are enforcement known participation well. establish to Scout safety we approval for months our Police, In Scout solution as New the Safety that ahead. Also, the on important potential the years technology to or an initiatives. domain marking addition, milestone growth of our approaching passed International Jersey's in as public reinforces Public Chiefs over NJ vehicle for our law with IACP, program, Association networked for public journey Scout statewide and SNAP, other ALPR confidence trusted of New initial us for coming our the recognition recent Jersey has partnerships agencies announce an recently segment outlook otherwise was and in well safety This received at companies

and across intensifying leaders, strengthen part continuing in the our Amazon behind industry-leading capabilities space. they as Services partnerships this position. Notably, They of they that AWS growth are NVIDIA to have our previously putting public each our are believe and our leaders enhance are forge transportation weight and chosen their solutions. We aligning collaboration will focus business of safety with infrastructure, highlighted on and segments. with strategic our strategy, be we deep industry our are partners and Web Rekor As market

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on Our of our ever, toward us Today, vision statewide making journey engagements call to are proud in the I'm build than dedication happen. propelling global Rekor's review our road to and the immensely Eyal? highlights. over an we're to communities, steadily roadway that financial in the to exciting I smarter leader of hand QX team's stronger Eyal our becoming now confident am CFO, safer, intelligence. ahead. I'll daily Hen,

and compared XXXX September restructuring initiatives by by XXXX. joining align our cost discuss our projected us million are recent to you, to needs. actions for Thank to X better like X to thanks up begin current to optimize highlighting XXXX. These results months taken to ended business structure, which to David, our base and workforce the today strategic $XX reduce include for we've XX, cost expenses with I'd

service placed on our revenue We operations deliver operational required maintain and firmly the emphasis near-term high-quality to customers. to capacity producing have current and while key that retain our we talent ensuring opportunities

compensation addition, our for the compensation our reduction and time faith future targeted the the This efforts In our development demonstrates adjustments compensation long-term evaluation, success. of we total have top other equity-based longer-range thorough packages. in more to employees expenses, in that line of include a implemented

XX, XXXX last or achieved Now, months quarter XXXX, period had of the to $XX.X revenues $XX.X September revenue, numbers. the XX% and we over increase compared same increase million for million X million, XX% for $X.X the We ended an in third QX of of an year.

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last ended from XX.X% revenue for to the the months margin compared ended X XX, the XXXX, X $XX.X same period XX%, XXXX, year. Adjusted the months decrease September million, last was an recurring period For XX% of a totaled increase XX, September for year. gross same

from X the adjusted XXXX, last XX, XX.X%, gross months a For ended year. same for period was XX.X% the margin September decrease

phase some summer late we gross over are and fluctuate calls, can QX in basis. quarterly weather previous in was by conditions indicated lower As margin decline growth margins projects driven The on still in an early and adverse XXXX a the largely months.

wins to bounce coming $X.X higher-margin gross due from We loss was higher quarters, last increase driven aforementioned delivery offerings. Adjusted expect over The to third and for of gross new of the margin. EBITDA $X.X was our margins EBITDA million million, the XXXX same by the back adjusted lower period loss an in largely the quarter year. of

period million September For adjusted million XXXX, the X same was XX, months EBITDA $XX.X from ended loss $XX.X for the last period year.

on financial expenses. as Our focusing trimming areas other smooth back intently revenue longer-range well previously near-term clients. To serving personnel XXXX variability structure, proactively the optimizing have help and QX in our as results sector government development we out nonessential reflect unpredictability, noted are we this cost in generation

Although to anticipate are are accelerate our streamline they these balance an full reduction implementing our targeted rate necessary majority to sheet. decisions by of operations, our profitability path and on our the challenging, annual We run basis year-end. strengthen

solid advance prepaid adjustments reiterate laying our and part an us profitability. that future In I to for delivering arrangements. our means operating of reduce our positive path achieve foundation our to financial to commitment $XX growing management, our of October, commitment the us reliance current in we and Advisors This and to reflects amended we actions option external to Yorkville our operational agreement XXXX. value our growth prudent strong operate have within for put in strategic to the made on our advance cash our strategies challenges, shareholders. Despite realignment, confidence want million. are capital. This position flow our eliminated financing a momentum on decision and and As financial some additional near-term to with will

forward of our continued in grateful and are our for confident the outlook support We investors.

path the will to David David? highlights call and back cover I additional business the forward. Now, turn to

Eyal. you, Thank

or either efficiency taking increased same defining are modern we roadway positive of time, experienced worker cycle. methods the insights safety, we continue unsafe, deeper line self-funded are As labor-intensive we government flow deliberate our across structure a and in at the of moment the Through growth to Transportation disciplined align They crossroads. financial solutions see, with evolution outdated, positioning departments and Rekor can provide are that future a in U.S. XXXX. At technology. procurement proofing. you cash a can with we've approach, AI-driven at in embrace sustainable, sight the with better for realities actions cost a are clear the to

We as of of this infrastructure to positioned has million inevitable our support and to software, they a of massive wave customers edge our ultimately continue AI and thousands are deploy and well transition. Rekor our transforming X.X of lead along forward-looking units digital way modernization with roadways. capacity embrace of miles part hundreds U.S. over to the technology the

deployment time transition, leaders. revenue group the in these of once to X exact there a is this to of annual Rekor establish a difficult level While believe select this agencies a next predict, industry growth lines rate commit among XX% over potential would compound we growth years. Achieving for are

to endure technology we beyond and building company are Looking partnerships, and thrive. a prepared

predictability. expanding As we move deliver to consistent gross forward, margins expect we revenue enhanced and growth,

thought our partnerships, unlock value the model, independence the leadership but stakeholders. We're positioned roadways Rekor's continuing lines product to everywhere. of are Our With look miles disciplined forward growth also the leading uniquely the bodies multibillion-dollar dedicated we safer, presence supports strategic about expansion. Rekor's building to our communities millions commitment way to the modernize smarter transportation. The and infrastructure this the for also is financial of more solutions of future leading bright, global places paves boards efficient influential at of U.S. excited and to pave Rekor's we potential team, on ahead. outstanding and way across not to together, us road squarely only of industry global to for forefront transforming and approach and a each of and self-sustaining and future AI journey deliver

for to have. may any like the floor open you I'd Operator? Now, questions

is from [Operator Instructions] Latimore Our from first Mike coming Northland Markets. Capital question

Congrats appointment, David. ITS the on

quick here. of couple a in Just on results quarter the the things

recall quarter. last And through occurred the recurring I hurricane So, was third dynamic similar sequentially. down year, the when in came if a

to of, in it like the was is quarter, by I bounce recurring going mobile the revenue the sort So, does revenue? in impacted particularly that guess back fourth quarter? hurricanes the And site

Yes, question. the Mike. Thank you for

conditions contracts. are correct. worse anticipate weather And Yes. that forward. to recurring We of kind in this QX back incurred revenues QX and in revenues lower lower recurring come You from or the same even or results we

And great then APL to with regard to the you see list. on Florida,

a a endpoints a of little this You Is districts little of kind have visible districts? program you Maybe detailed other farther Or number there? than deployment detail per about just say ahead talk more plan bit is. a give deployments month? how for commenced. Can certain there are

Yes.

to I to in market. regards Florida think season the as intention able of Florida, in Central able been during that want across of be emergency in have you right? The to to effectively this Mike, district you're coverage eyeballs be So, to pretty is know, get state operations. Obviously, good they year, nasty every the the hurricane has Office

this. brewing next to trying in and and time And so, much to for they're get Hurricane the done there's again make whatever And season. with as that understand prepared line between you associated now they're is come May may sure Sara a

very now, will other every and detail And of a wouldn't accurate, to units, the evidence that engagement, the close I just with out that were really competitive and it. you past of can on relationship. them only device storms that demonstrated themselves it's distribution, on and certain able so, they're you daily planning right? But reliable, year we're be because yes, sustainable of for is undeniable working imagine data number literally in very, terms during I to provide the there prepared district the a performance right during it would of here give the things, have but say peak reached storm. during our in where we we've a part of the in performance reasons

and accelerated say the slower really lot the a things. have that that So, a I boat and otherwise would things through taken labor would channels the of and procurement

to in this waste a So move the let to way, and quickly. helped it's the of case, and in kind accelerate planning also in confidence go crisis really never state there very that the

independently. operates that, beyond Now, every district also

their district you things So and then or Central other Florida overlooks day-to-day for central and like operational count needs that for that have has have statistics. state you And needs. across every office the class speed

say central get largest parallel when some opens working that parallel devices their budgets are existing like the about very, time, heavy some beyond in then over that building And also needs. If go we that relationship one the and with revenue-producing we state the And we're that potential tremendous as net-net, expect, some right? pretty as at as as that districts say, in their into based so, time. office. come talk the different states districts footprint of tight budgets we're in we have XX,XXX districts our the of future look area, Florida, well I are to again, then up discretionary a engaged with trusted budgets, to which central over districts very look of And the and role the would of our tapping to office, you planning. But And on that. And in we'll with potential themselves TAM budgets, play done. own be and Florida, a

So, color that I some hope there, Mike. provides

in market. terms the here just more about then of thinking And it maybe broadly addressable

Florida the is TAM the is then of about millions, of talking historically, one in kind mentioned thousand I the states. units. And you've Florida but think in several bigger here You're maybe

in Florida think of you can right that what kind we're now? of broader So, like TAM seeing versus

we different that to how Yes. think in across that I'll this up states. way try a about can color extrapolate you to

Florida Florida, on at about of you if of is don't and highways equates stats the look for has look you cases, concentration interstate mileage to public of I potential look roadways, of those here, that be the some X.X to really if miles and interstates. And take the in highways can at our XXX,XXX site So, sort and X up there, per or right? about around the it if miles, mile. at sites in mile so, And it's XX,XXX you XX,XXX it and per

Now, you or can I I can there's the should tell going Mid-Atlantic, tell XX in you I living or will North and devices you, down up I say, there. mile every quarter so, a tell

we when X.X New and whether million, road road miles, So, the if million sites their Florida at you you easily see road you at if and look X looking as start and TAM. we XXX,XXX pretty look look across their potential Texas miles, states, Mexico a to miles, Hawaii at

produce states the you and on we speed. roadways if of the about serve the for those we data think able them Now, we with each be is think how opportunity to to class this superior do devices, have for and about it, an count that

However, once have the estate, it call upsells just ability there is and estate, do real that to we'll real you enormous. cross-sells

we top. And starting in million one and expand just additional sites the provides, that And add to this so, X.X to services we're when frankly, It's it's potential not on our upon XXX,XXX pull the about now to value-added see ability that, done. think platform.

platform. together do end those also platform, back our tied also we we have I'm Command about expansion. Scout the on is are allows Discover, and our that what So, us talking And now to but have right

our and start becomes very the look just at Even see us. it segment you really we overall. pretty then And Urban is what terrific. Discover, independently as But ahead that you good capability, So, TAM TAM Mobility if to a looked with cross-selling very, that's the significant. upselling at it's for

item on one up last there sequentially. Was And was onetime that any in there? one, G&A, just

Yes.

right, You're Mike.

significant transaction happened We there we the shelf exercise resulted all we the a items in in that did new onetime the warrant we expenses. did and associated did and amount have Yorkville, financing in of QX, a QX like with

third OpEx the So, of relative I million you in those the expect quarter, is excluding $XX savings the basically imagine? items, onetime probably would to

Yes.

and said, the as the other items, significantly equity measures expense our structure we onetime with XXXX. realignment some Excluding we to in salary reduce did

Instructions]. [Operator

from question next from DiPalma coming is William Our Louie Blair.

bureaucracy this significant you how developments Florida Rekor's making a red cited but like XXX,XXX with with APL you tape conversion like to are has might been in as government Texas and reducing and of impact York. We lot administration there very TAM wondering the of business the New new progress and of You and the discussion Dodge announced revenue? were expedite and lead into procurement deployments have and faster could large inconsistent procurement like cycles, Dodge a presidential

points That's Act a the the Infrastructure beyond to the obviously, Bipartisan to, administration. thankfully, of obviously, of leading and Infrastructure Law, thought contextual or intended election and of the lot something single was Jobs we've season that given outcomes things election. A of say a is couple into the up I would extend just sort as

that's So, time. and duration $X.X of a that's still in still X-year it's trillion, still place, within

and still is that allocated. stands the allocated has of regardless and outcome that So of earmarked the still been already earmarked or the election, money

vehicles. Transportation we've first Trump's announcement we as existing for fact nothing really aging. as and spend term revenue for they Departments on is fundamentally to there's to to the of here production, border at Now, infrastructure When changed sure. been anything we've are tap the is for just still this scenario domestic bodes of on Trump Transportation about sort petroleum focused, labor The have the to reality have need can that that reduction. emphasis those don't and tax expect. positions it's indicator deploy. And or mean, expansion no of so yet an areas is depend heavy there. And being infrastructure that to look affordable at demand to do got what is see of scalable, kind ICE focus law we have in known of do, be fuel all a what to that going a as has we But still looked what able of positive may I happen, going is rural surveillance, going and on increasing vehicle of still the to be Energy, Department of Secretary offering to the infrastructure sort And have law or planning an bipartisan fulfilled. today and they yet of the an open for but will is down standard and think terms about need law insufficient that be highway of well able enable AI infrastructure of solutions of be program for travel, the what we kind mean it's we leverage took to the ahead. I

of friction. that and of of come you efficiencies Dodge So, up need the as think a the bureaucracy and may and streamlining of reduce that to the result some

this. expect all there. Again, So, forward is path speculation, we're procurement, of we we'll maybe have but a at this that's looking simpler how

would to forward. to of So, business looking that. Transportation excited overall, aligning the see be feeling the transition and Secretary we're to who our say the with and we're is I path to about it going good as And relates forward

puts my strong to is shape I come the ability is ability that of Board here. what's of insight us appointment Now, the future our the the highest U.S. Department in to a that America and shape and here, Transportation, Federal thing to growing. say into Louie, Rekor's think the levels have in on now help our position presence ITS help Administration industry good the last Highways of influence come to Directors, and I'll what's to at with very And

steam ahead So for for green us, it's full lights, us.

but hurricane investors progress has be tranches for been the negotiations the State it's State what follow-on already should completed? And X,XXX time the follow-on you of is by opportunity? it in completed, market seems X? once orders from what impacted new the camera deployment deployment that State with the are line is X? when And season, with And X expect for should Like

Yes.

So yes, yes, yes Louie. and

APL, the Florida on in other state and many tried to we when in So, more longtime with before extremely real, based in we've is what relationship based in with State the again, top an around our not and is across maybe is we're so it are decisions favorable, on states I've to becomes pleased when the make there. as do that mind, the hopefully relationship Federal Highways the and very position momentum. Keep influential had Florida And is And the calls, Florida. With Florida. there previous one and performance make opportunity today X, states of we've state And adjacent they to comes should administration, only we're and our states, really referred but inclusion positioned. clear question so there's very really and Florida how enormous is a doing? Florida to opportunity on to comes it to well outlined that. The that's what I've as and long, the nation. They times,

on have yes day-to-day districts related into yes, there's So, time that things now for through working to us. We we're yes, working with how the districts And, mean, still that's tie things will still the funds. go yes, their It things will into with But, on it we'll the plans. and that operational to and program them, discretionary tie we're is labor yes and through that. immense there. deployment spend, again, I opportunity stage that lines, and

is other markets, as and the lists Texas some and California? equivalent approved in of product also And of there York such large your New

of depending it lot of states them, has product or so are there's have -- relevant on becomes state it, a do. And lot There a agreements. approved Not APL reciprocal and for of thing. names but similar states different every list, but kind

state So, have this now is part a can us with it's an But elongated about I building be talked to good having we and expectation. process without I the if a going templatized. In multiple them, can having framework. And accelerate states, know that now what through a procurement process enough one in state we be how answers through codifying good this And And gone we're go remarks, that for to enough and for earnings we sometimes. think have my and on growing That's follow. our it's can is process. become dealing will of this we does, what lot another something. of and experience

don't they there's states if services there's services buy to so our product equipment product a no business for an approved are for need approved And worry need states on that per that have buy example, list. But alternatives, it's that's equipment about. to some So, like provides do no model only. data only, se to will data buying equipment to they list

You're delivering a service, a data service at the end of the day.

a happen process, is existing we there through have states enabled that to opportunity the there. And hardware and we one, the is with accelerate currently that option see what is agreement to help look up that APL accelerate integrator procure will will navigate already local would we that APLs have an lined everything expect or we to with if we that lean there on APL reciprocal have to third that process. do the with that to is a So, that is process partner

but hybrid is back So, relevant going states do have become model. buy that services a if of and more the main to moving and/or more I think, just we they APLs. They data model again, point equipment, to have to even states a see more

will would become there one, move is I we'll it too. But less relevant, forward. say, isn't it. there If navigate that's we as if So, one, great,

enough liquidity flow second for next breakeven the of does does company cash that million plan cushion initiatives, its in the lastly, to becomes flow cost $XX execute in or free the savings cash Rekor year? And free until half provide positive

yes. Louie, Hi,

rate expense cash And $XX and on yes, activities. we way did the structure to believe will on savings look free give that focus us flow generating a get to enough look we run revenues have the our we near-term we we in at it, and XXXX. really million that So

to turn of [Operator for comments. like the I'd question-and-answer over any Instructions]. or back the reached further floor We end closing our session.

getting in learned in lot to a of period forward. you I We've example, path we've today. young and a template good an in still, the much tuning example. accelerate a just sort thank going very short a through want think time. We're with it's for would as is lot. accomplished a processes of say company We've tremendous Florida think, to I And that progress say, I process, a our I and made,

of out changes operating So, expenses coming made of from that. is significant. that a perspective the an And we've goodness lot

the continue in and we is to some be adventure, the the we're and And amazing expect way see, business this on that to to expected. It committed allow forward to And turn for the 'XX on But do. going people like we'd plan our to changes sure are we will fully into we've as difficult that little we and that we've we us to starting folks but and the here. We some beyond. see profitability. their that are that made flow to well. next Something believe them it's way, a to that than wish rock cash to got stars business are move longer took like its remaining

excited the we're forward. so, about And path

We and to have we're work clear-eyed a about on lot that, it. do, of we're and

to that much inevitable So, and to thank the patience we be you what for path support is the and you're forward an rewarded continue as navigate very to I believe future. well going the

to much updating very you I the quarter. today, next thank you for look So, and forward in

conclude does today's That you. Thank webcast.

thank you today. disconnect line, We your participation now and may your day. for wonderful have You a