Sterling Infrastructure, Inc.

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure 4th Quarter 2023 and Full Year Webcast and Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Tuesday, February 27, 2024. I would now like to turn the conference over to Noelle Diltz. Please go ahead.

Thank you, Jelena. Good morning to everyone joining us, and welcome to Sterling Infrastructure's 2023 fourth quarter and full year earnings conference call and webcast. I'm pleased to be here today to discuss our results with Joe Cotillo, Sterling's Chief Executive Officer, and Ron Balshmity, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter and year. Ron will then discuss our financial results and 2024 guidance, after which Joe will provide a market and full year outlook. Then we will open the call up for questions. As a reminder, there are accompanying slides on the investor relations section of our website. Before turning the call over to Joe, I'll read the State Harbor Statement. The discussion today may include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Sterling's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligations to update forward-looking statements as a result of new information, future events, or otherwise. The financial information herein and discussions are related to the company's continuing operations. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income, or adjusted earnings per share on this call, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon. I'll now turn the call over to our CEO, Joe Cotillo.

Thanks, Noelle. Good morning, everyone, and thank you for joining Sterling's fourth quarter and full year 2023 earnings call. 2023 was another great year for Sterling and our investors. We achieved 40% adjusted EPS growth, on 11% top-line growth. This was our third consecutive year generating adjusted earnings per share growth of 40% or more, a testament to our focus on driving margin expansion and returns. Our total backlog ended the year up 46%, providing strong visibility for 2024. We generated operating cash flow of over $478 million, which was about three and a half times our net income. With our strong outlook and balance sheet, we are in an outstanding position to drive continued earnings growth in 2024 and beyond. Our preferred use of cash remains accretive acquisitions that complement our service offerings and enhance our competitive position. In addition, in mid-December, we put in place a $200 million share repurchase program that should allow us to take advantage of dislocations in our stock price and return capital to our shareholders. I want to take a second to thank each of our employees for helping us deliver these results. The men and women of Sterling are what makes this company great. We will continue to take care of our people, our environment, our investors, and our communities while we work to build America's infrastructure. This is the Sterling way. We are proud of our accomplishments over the past year, but are even more excited about the platform we have built and the opportunities ahead. With that, I'd like to discuss our results for the full year and fourth quarter of 2023. Total revenue for the year grew 11% to $1.97 billion. While revenue was slightly below our guided range, our adjusted EBITDA of $260 million was at the high end of our guidance range, and net income exceeded the high end. This reflects our philosophy on focusing on profitability and margin over revenue. We delivered adjusted EPS for the year of $4.47, up 40% from 2022, and above the high end of our previously guided range of $4.10 and $4.23. For the fourth quarter, our consolidated revenue grew just over 8%. Our gross margins expanded 350 basis points to 18.9%. and our net income more than doubled relative to prior year. We'll now move to our segment results. Starting with e-infrastructure, our largest and highest margin segment. For the full year, our e-infrastructure revenue grew 3.5% and operating income grew 16%. Operating margins reached 15%, a 160 basis point increase. For the quarter, though infrastructure revenues declined 12%, our operating profit grew 26%, reflecting the beneficial impact of project selectivity and mix. Revenue in the quarter was impacted by three delayed projects that we discussed on our third quarter call and the slowdown in small private projects in the Northeast. Our Southeastern market remains extremely robust, but would strengthen both onshoring-related manufacturing and data centers. Our very strong fourth quarter e-infrastructure operating margins of 17.3% improved 520 basis points, reflecting favorable mix, supply chain improvement, and good productivity as we completed large projects in the quarter. E-infrastructure backlog finished the year up 35%. providing strong visibility into 2024 and 2025. Additionally, as our mix moves towards large multi-phase projects, we have line of sight into future phases of work that will be awarded as we complete our current phases. We continue to track a number of new large project opportunities that we anticipate will be awarded throughout 2024 and early The data center market was again the largest contributor to awards in the quarter and actively remains very strong as customers are racing to build the capacity needed for AI technology. Additionally, we continue to see high levels of onshoring related manufacturing activity in the Southeast and the Rockies. The Northeast remains slow as small commercial and warehousing activities has declined, and larger manufacturing project opportunities have not yet progressed to award. Shifting to transportation solutions, revenue growth for the year was over 16%, and margins expanded 174 basis points, driving 57% operating profit growth. For the quarter, revenue grew 39%, Operating margins expanded 300 basis points to 7%, and segment operating profit more than doubled. We ended the year with transportation solutions backlog up 66% to $1.18 billion. We continue to see strong broad-based demand and margin growth across our entire geographic footprint. Fourth quarter awards of $337 million reflect strong levels of highway activity. Additionally, subsequent to the quarter end, we were awarded a $155 million aviation project, which will be included in the first quarter backlog. We expect continued momentum in aviation throughout the year. In building solutions, annual revenue growth was 26% or 13% on an organic basis. Our residential business grew 12% organically and our commercial business grew 14%. Segment operating margins were flat with 2022 levels at 11.4%. In the fourth quarter, building solutions revenue grew 24%. Our residential business grew 65% in total, including 25% organic growth. This was partially offset by a slowdown in our commercial business, which was down 27%. The mixed shift towards residential had a favorable impact on segment operating margins, which expanded 100 basis points to 12% and drove operating income growth of 35%. In residential, we remain very bullish on our key markets. Dallas-Fort Worth, Houston, and Phoenix are each population growth markets and continue to outperform national averages. While we're able to take advantage of some attractive project opportunities in the commercial market in 2023, we anticipate that the trends that emerged in the fourth quarter will continue into 2024, driving a decline in commercial revenues. A recent acquisition of Professional Plumbers Group, which brings plumbing capabilities into our portfolio, is a fantastic compliment to our existing services. PPG is a great cultural fit with Sterling, has excellent growth prospects, and is nicely accretive to margins. With that, I'd like to turn it over to Ron to give you more details on the quarter and full year. Ron? Thanks, Joe, and good morning.

I am pleased to discuss our very strong record fourth quarter and full year performance. Our updated investor relations slide presentation has been posted to our website and includes additional financial details to help further understand our 2023 financial results. The presentation also provides additional modeling considerations, which underpin our 2024 revenue and earnings guidance. Let me take you through our financial highlights, starting with our consolidated backlog metrics. At December 31, 2013, our record backlog totaled $2,067,000,000, up $653,000,000, or 46% from the beginning of the year. The gross margin in this backlog was 15.2%, a 90 basis point improvement. A higher level of e-infrastructure backlog and an increase in both the amount of transportation backlog and its backlog margin drove this improvement. Unsigned low bid awards totaled $303 million, an increase of $28 million. We finished the year with combined backlog of $2,370,000,000, reflecting a 40% year-over-year growth. Our gross profit and combined backlog was 15.4%, the highest in our history, compared to 14.2% at the beginning of the year. Our full year 2023 book-to-burn ratios were 1.38 times for backlog and 1.4 times for combined backlog. Our December 23, 2023 combined backlog of $2.4 billion represents approximately 16 months of prospective backlog-related revenues. The comparable December 2022 computation was approximately 12 months of backlog-related revenues. Turning to our fourth quarter income statement, revenue was $486 million, up $37 million over the prior year quarter. Current quarter consolidated gross profit was $92 million, an increase of $23 million over 2022. Gross margin increased to 18.9% or 350 basis points over the 2022 quarter. This margin increase reflects the margin improvements from each of our segments for both the fourth quarter and full year. General administrative expense increased in the current quarter by $3 million to $26.1 million. The increase reflects the late 2022 Arizona slab acquisition and the November 2023 PPG acquisition. The balance of the increase was driven by inflation and higher revenue-related incremental costs. Operating income for the fourth quarter was $56 million, an increase from $37 million for the 2022 quarter. Our operating margins increased to 11.5% compared to 8.3% in 2022. Our effective income tax rate for the 2023 fourth quarter and full year was 22.5% and 21, 22.5% and 25.1%, respectively. The favorable tax rate in the fourth quarter resulted from an increase in tax-deductible stock-based compensation expense driven by the higher stock price. The net effect of all that results in fourth quarter adjusted net income of $40.7 million, or $1.30 per diluted shift. Our first quarter adjusted EBITDA totaled $68.9 million, an increase of 37% over the prior year quarter. As a percentage of revenue, adjusted EBITDA improved to 14.2% of revenues for the quarter and up from 11.2% in the prior year quarter. Moving to our full year financial performance, our 2023 revenue totaled $1,972,000,000, an increase of 11.5%. Consolidated 2023 gross profit was $338 million, an increase of $63 million over 2022. Full-year gross margin increased 17.1%, or 160 basis points. Both the fourth quarter and our full-year gross margins were at record levels. G&A expense for the full year was 5% of revenues, consistent with our previous annual guidance. For the full year of 2023, operating income was $205.8 million, an increase of $45.9 million over 2022. Our full year operating margins increased to 10.4% compared to 9% in the prior year. The full quarter adjusted net income was $135.5 million, or $4.47 per diluted share. 2023 adjusted EBITDA totaled $259.9 million, an increase of 24% over the prior year. As a percentage of revenue, adjusted EBITDA improved to 13.2% as compared to 11.8% of revenue in 2022. Cash flow from operating activities for 2023 was a very strong $478.6 million compared to $219.1 million in the prior year, which itself was a record year. Key elements of the 2023 cash flow used for investing activities included $50.6 million of net capex and $51.2 million for acquisitions, primarily the PPG acquisition. Our cash flow from financing activities was $104.5 million outflow, primarily from debt repayments of $93 million. The debt reduction includes voluntary early debt repayments totaling $63 million. We ended the year with a very strong liquidity position consisting of cash totaling $472 million and debt of $342 million for a net cash net for cash net debt balance of $130 million. In addition, our $75 million revolver credit facility remains undrawn at the end of the year. Looking forward to our 2024 expectations, the strong market conditions in each of our three segments, together with our continuing margin improvements and year-end backlog position, enables us to forecast another record year for Sterling. Our full 2024 guidance, full year 2024 guidance ranges are as follows. Revenue $2,125,000,000 to $2,215,000,000. Net income of $155,000,000 to $165,000,000. Delivered earnings per share range is $4.85 to $5.15. And EBITDA of $285,000,000 to $300,000,000. Finally, considering the diversity and strength of our portfolio businesses, our strong liquidity position, and our comfortable 1.2 times EBITDA leverage, we are well prepared to take advantage of the additional opportunities to generate significant shareholder value in 2024 and beyond.

Now I'll turn the call back over to Joe. Thanks, Ron.

We see years of opportunity ahead. associated with the revitalization of America's infrastructure. Sterling is playing a critical role in building the manufacturing production coming back to the U.S., the data infrastructure that enables today's way of life, the highways, the bridges, and the airports that connect us and the homes we live in. In e-infrastructure solutions, we anticipate continued strength in data centers as current capacity represents only a fraction of what is needed to support artificial intelligence and other emerging technologies. Additionally, we continue to see a robust pipeline of large manufacturing projects tied to electric vehicles, batteries, and solar. We believe that down the road, we will see more projects related to semiconductors, pharma, and food and beverages. These projects are located in both our current footprint and other potential geographies. We believe that e-commerce and small warehouse markets will remain soft through 2024, but pick back up in 2025. These dynamics support strong growth opportunities over a multi-year period for e-infrastructure solutions. For 2024, our guidance assumes high single to low double-digit top-line growth in e-infrastructure solutions and a continued operating margin expansion driven by project selectivity and mix. Additional large project awards through the year represent a source of upside potential to our forecast. In transportation solutions, we believe we're now in a market environment where we can accelerate growth relative to historic levels as long as margins remain at current levels or higher. For 2024, we are anticipating 10% to 15% revenue growth with continued operating margin expansion. In building solutions, we anticipate mid single-digit revenue growth in 2024. This is made up of low double-digit organic revenue growth and our residential slab business, and a $50 to $55 million incremental revenue contribution from PPG, which is offset by a significant decline in commercial revenue. The mixed shift towards residential and the contributions from PPG will ultimately benefit margins. Based on the midpoints of our 2024 guidance, our revenues will grow 10%, Our EBITDA will improve 12.6% and our net income will increase 15%. Finally, as most of you know, Ron has announced his plans to retire in 2024. Ron and I joined Sterling within a couple of weeks of one another and have worked side by side to transform Sterling into the diversified infrastructure company we are today. It has been quite the journey. and we've had a great partnership. Ron will still be here for quite some time, so this is not goodbye, but I do want to acknowledge all that he has done for Sterling. I think we have a good plan in place for a seamless transition in the CFO role, and with that, I'd like to turn it over for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. And if you are using a speakerphone, please lift the handset before pressing any keys.

First question comes from Brent Thielman from DA Davidson. Please go ahead.

Hey, thanks. Good morning and congrats to you, Ron.

Thank you. I guess, yeah, first question, just some mixed sort of regional trends and e-infrastructure. Any additional sort of financial perspective on the phases of work that stretch beyond the current backlog? And then, presuming the Northeast is still a bit of a headwind for you in 2024, can you talk about what's happening in the Southeast and also the expansion progress into some of the other regions in the country and what that could all mean.

Yeah, we'll start with that and then we'll walk back into the, I'll call it the residual or pipeline of backlog associated with the current projects. As crazy as this sounds, if you remember a few years ago when our commercial business slowed down, we took the opportunity to move those resources from Dallas and started the operation in Phoenix, right? So we turned lemons into lemonade, I'll say. We think we have a similar opportunity and are working diligently. If you take a look at our footprint brand on the East Coast, our particular business was kind of, call it New York, and they stopped at about Maryland. And our plateau business was Florida. and stopped in D.C., okay, in Washington. And there's a little honey hole there of data centers that have been historically small enough that we weren't willing to give up capacity to go up there from our plateau business. But Petillo has been so busy that we haven't had capacity to go down there. What we're doing is we're now working on moving into that market by leveraging the same customer base that we have in the other markets who have asked us to go there for several years. So we see it as a nice opportunity to move, fill that void that we've had in our geographic kind of coverage. And then as the Northeast projects are coming back, it'll be easier for us to continue to grow the capacity to fill those. So we think this is a, I'll call it a short-term kind of slowdown in the Northeast, that ultimately be a better pickup for us in total as we get the back half of 2024. That's when I think these projects that we're working on now will start to kick in. And then on the residual, so we take a look at what we have. Now, again, we're not guaranteed the incremental phases, but what I can tell you is we have several hundred million dollars of incremental phases attached to projects we have today. And the four to five projects that we keep talking about that will be bid in 24 and early 25, they will have similar tendencies and will have three to five phases on the back end of them. So whatever we get on the first phase, in the back of your mind, you can almost think of that as three to five times the potential of that project. Yeah. And the thing that's tough for people to realize is we don't get the next phase until we burn that project down to zero. So let's just assume phase one is $50 million. We burn it to zero, and then we get another 50. And then it goes down to zero and another 50. So even though we have it, it will not hit our backlog until we're done with that prior phase.

Okay, that's helpful. Thanks, Joe.

And then, look, I mean, a really nice jump in transportation solutions profitability here in 23 over 2022. Can you just talk about what's embedded in your expectations for profit margin improvement in the business group in 24? And, you know, ultimately, what are you targeting for that business group over the long term?

Yeah, I think, you know, what's really nice is two years ago, we set out and said we wanted to get in three to five years, I think is what we gave up to a 20% blended gross margin for the total enterprise. And obviously, part of that was the portfolio shift. We thought we could get the 17% organically and then acquisitively have to go from there. We have surpassed our margin expectations, I think, with transportation earlier. And the good news is we still think there's another 100 to 200 basis points of improvement over the next 24 months in transportation. So it's really, that team has done an outstanding job of being patient, being selective. Now the supply chain, is really kind of recovered. We're picking up a little bit of productivity in all the segments that's coming through, but we're not at the end yet. Okay. All three segments. I think what we're really excited about is the momentum we saw through the back half of the year on margin expansions. And that doesn't stop in 24. We think we will continue to expand margins in all three segments.

Got it. Thanks, Joe.

And then, I mean, you guys continue to surprise us on cash flow. Tremendous year here in 23. I guess any thoughts or change in view on cash conversion going forward as we think about that relative to the guidance you've outlaid here for 24?

I'll let Ron answer that.

Yeah, I think, obviously, it's one of the most challenging things to forecast. But I think while we have historically set our expectations for cash flow from operations to approximate operating income, we don't see that differently over the long term. Obviously, in the last year, and actually two-year record years in a row, Very nice cash flow. A lot of that coming from the improved backlog of both transportation and e-infrastructure. So I would set my target on cash flow maps for 2024 here and move on from there.

Okay. Thanks, all. I'll get back to you.

Thank you. The next question comes from Brian Russo from Sedoti. Please go ahead.

Hi, good morning. Morning, Brian.

Hey, just first on e-infrastructure and the organic expansion strategy, you know, appreciate the comments with Plateau and Petillo in the southeast and northeast, but what about expanding west? We've been hearing a lot about, you know, quite a bit of data center growth, kind of in your transportation, Rocky Mountain region. And then also, you know, recent legislation passed in Mississippi is offering incentives for, I think, two data centers worth $10 billion. Just wondering how you can maybe leverage, you know, your overall transportation combined with the infrastructure footprint to expand west, not only up and down the east coast and mid-Atlantic?

Yeah, Brian, that's a good question. And we're actually really excited because if you remember last year, we did our first what we call the brains in the brawn model using our relationships and kind of skill sets around the project management of Plateau and teaming up with our RLW business in Utah, which is outstanding at executing projects. and put that together, and we did our first meta project, and we're still doing it actually up in Boise. That project has been so successful that the teams that they're working with are now talking to them on two other data centers within the Rocky Mountains in Utah and Colorado. We're in early stages of talking about stuff in Arizona, and then The ones that fall, and there's both Mississippi and Alabama activity that seems to be picking up, fall perfectly in the footprint of Plateau. So we're positioned really nice. If you think we call it the growth smile of the U.S. and kind of where we're located, we're in the right geographies. And we've really proven not only to ourselves, but we've proven it to our core customers that, that we can expand geographically leveraging other assets besides just Plateau and Petillo to service them and service their needs.

Okay, great. And just remind us, you know, the four to five projects that you're expecting to be bid and awarded this year, you know, I suppose you have a high, you know, success rate in bidding, you know, due to your, you know, scale and scope, customer relationships. Maybe if you could just, you know, remind us what those competitive advantages are and what seems to be a very active bid market for data centers?

Yeah. Our competitive advantage is really, again, at the end of the day, I look at us as an insurance policy. And the bigger the project, the better the policy. And our ability to get very large, complicated site development done in a very short period of time for our customers, as you can imagine, If our project, which was a big project, would be $100 million, let's say, that's part of a $2.5 to $3.5 billion project. And if we say we'll get it done in six months and we're two weeks late, that project will be six months to eight months late on the back end with the domino effect or snowball effect of the trades. And the cost of capital on the rest of that and the loss of revenue and profitability associated with incremental six months is a very, very small price to pay, a slight premium to us over the rest to ensure that they get it. So that's what we like is we want customers that have very critical timelines, have critical needs, and we can deliver on that better than anybody else, especially of size. Again, most of our projects would take up one to three other contractors to complete. And if it was one, it would be 100% of their capacity for the year, very close to it. We're doing 20 projects at a time in each one of these businesses. So just the size and scale we have.

Okay, great. And then just switching to transportation, is the award you announced yesterday in aviation, Is that kind of indicative of the types of size and duration and project structure that we can expect going forward, which I suspect is a key driver, not only your top line growth, but the margin expansion forecast?

Yeah, I wish they were all that good. They're not. That's a bigger one for us, to be honest. Most of ours are in the $10 million to $30 million range, as I think is a typical size. But what we're finding is we continue to expand and grow with this customer base. We're getting invited into more and more design, build, alternative delivery airport projects, which tend to get larger in size and scope. So it's opening up the door. As I say, we're continuing to walk to bigger. And this is one example of that. We have several other we're working on. Hopefully, they'll get through and get awarded in 2024, and we'll add to that. But this one's a little bit larger in scale. This would be towards the higher end of aviation projects for us. We've had them this big, but we would consider this a large one for us.

All right, great. And then just lastly, on building solutions, how is the PPG integration going? And I think historically... You've alluded to bolt-on acquisitions like this to expand your service offerings, but is it being well-received by homebuilders? And I think you may have even suggested expanding and following your homebuilders' demand into other markets outside of the Dallas, Houston, and Phoenix area.

Yeah. So far, I mean, we're only a couple months in, but we're really – The team is great. They are world-class at what they do. They're really on top of their business. They've got fantastic customer relationships. And we're in the early stages of looking at where can those businesses or Tealstone and PPG potentially expand together, leverage customers. And then as we get a little further along, we'll let them get their sea legs and not overwhelm them too much. But start figuring out how we can utilize them to help us look at plumbing in Phoenix and Houston, whether that's organic expansion or acquisitions. Great.

Thank you very much.

None of the numbers you're seeing, Brian or Brent or everybody, these are really our year-over-year organic numbers.

These include no acquisitions. Understood. Thank you.

Thank you.

The next question is a follow-up from Brent Thielman from DA Davidson. Please go ahead.

Hey, thanks. Yeah, Joe or Ron, I guess just a question on, you know, look, you've done PPG here. You've got a balance sheet that's in pretty good shape. You've thrown off a lot of cash. You could just sort of talk through some of the things that you might be looking for out there in the market as potential acquisition opportunities.

So we're – I'll never say never in transportation. If we found the right niche and the right geography, we certainly would do that. But our primary focus remains on e-infrastructure and then building solutions. And as we talk about e-infrastructure, we're really looking at – if you think, Brent, what we do today is the site development, but – We touch a lot of stuff around duck banks. We touch a lot of stuff around the pad of the building. What is one or two steps away from what we're doing but is required in data centers but is fungible to manufacturing, whether that's batteries or food processing, doesn't matter to us, and working with those same end customer groups. And we think if we do this right, we will not only add capabilities for our current customers, but we think there's possibilities to buy acquisitions out there that can pull us into other end markets that we're not in today. And that's a win both ways if we can do that. So we're looking hard at that. Could be electrical, could be mechanical, could be something inside the facilities. We would love to find something that has a recurring revenue stream on the back end. We haven't found it yet, but I'll tell you, we're continuing to look. And similarly, in building solutions, the question that we're starting to ask ourselves is, we have historically focused primarily on new builds. What should we be looking at for the homes that have been built, and are there service plays or recurring revenue plays on the back end of this that would be logically insensible? And in addition, we've looked at a little bit of what I'll call vertical integration to some of the major components we use in all of our projects. If the right acquisition came up that gave us those abilities, that would be logical for us as well.

Okay, very helpful.

I guess, last one, and not to be a downer, it seems like a lot of companies talked about a tough start to the year, maybe just level set us on. kind of how you see the sequencing of the year and, you know, kind of what's embedded in your outlook, just given kind of the poor weather across the country here.

Yeah, I'm glad you asked. I always hate talking about weather, but I will tell you this January across the country, and I'm sure we're not alone, was just miserable in every geography, whether it was snow or rain or a combination of both. So definitely a slow January forecast. February is a little better, and March looks like the weather is finally getting good. So we may see a little bit more seasonality than we have in the past, and we may see the second and third quarter be closer to on par with each other as some of the first quarter stuff goes into the second quarter and we make it up. But our full-year outlook is where it is. We're not worried about that. based on the first quarter or anything. But we certainly could see a little more seasonality. Rod, you want to add anything to that?

No, I think that's right. The good news is all of our segments have the ability to catch up, if you will. We're not too worried about the first six months. It just depends on what March looks like and otherwise. Last year, our first quarter was about 20% of revenues. That was a normal year. Just putting a marker down, it may be a little less than 20%, but I would expect to get back on normal in the first six months. Every one of our units can step on the gas. Our customer wants to step on the gas and get to where we thought we would. So that's the good news about all of our businesses.

And remember, our infrastructure has to get back on time. So they will catch up. They will catch up.

Understood. Understood. Okay. Thanks, Phil. Appreciate it.

Thank you. There are no further questions. I will now turn the call back over to Joe Cotillo for closing comments.

Thank you, Joanna. Thanks, everyone. for joining today's call. If you have any follow-up questions or wish to schedule a call, please feel free to contact Noelle Diltz. Her contact information can be found in our press release. I want to thank everybody again and hope you have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.