Sterling Infrastructure, Inc.

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure second quarter 2024 conference call and webcast. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call, you require immediate assistance, please press star zero for the operator. As a reminder, this call is being recorded on Tuesday, August 6, 2024. I would now like to turn the conference call over to Noelle Diltz, Vice President and Investor Relations and Corporate Strategy. Please go ahead.

Thank you. Good morning to everyone joining us and welcome to Sterling Infrastructure's 2024 Second Quarter 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 Sharon Villaverde, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Sharon will then discuss our financial results and guidance, after which Joe will provide a market and full year outlook. We will then open the call up for questions. As a reminder, there are accompanying slides on the investor relations section of our website. These slides include details on our updated financial guidance. Before turning the call over to Joe, I will read the safe 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 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. 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 second quarter 2024 earnings call. Our second quarter results reflect our commitment to delivering strong bottom line growth in cash flow to our shareholders. For the quarter, we delivered EPS of $1.67, up 31% over prior year, and a new second quarter record. Our continued focus on margin expansion helped drive gross profit margins to over 19%. We grew operating income 20%, on revenue growth of 12% as we continue to shift our mix towards higher margin services. We are seeing strong tailwinds across our markets and bidding activity remains very solid. Backlog at the end of the quarter totaled $2.1 billion, an increase of 21% over prior year and a 2% increase from the beginning of the year. Combined backlog which reflects a more comprehensive view of our awards, was $2.45 billion, a 2.2% increase from the prior year. Our book-to-burn ratio for combined backlog was above one for the quarter, and we continue to have very good visibility into the opportunity pipeline ahead. Our outlook is even better than what is captured in our backlog metrics. As our work shifts towards large, multi-phase projects in both transportation and e-infrastructure, we have greater visibility into future phases of work. Though we are not guaranteed to win these future phases, we have historically had a high probability of doing so. This high probability work pipeline now totals over a half a billion dollars. We had another great cash generation quarter with operating cash flow of $121 million. Our balance sheet is in great shape, and our net cash position is now $211 million. We are actively seeking acquisitions that will complement our strong platform and accelerate growth. The Serling Way is our commitment to take care of our people, our environment, our investors, and our communities while we build America's infrastructure. This remains our guidepost as we grow and diversify our business. I want to personally thank each of our employees for helping us deliver another fantastic quarter. Now, I'd like to discuss our results for the second quarter of 2024. In e-infrastructure, our largest and highest margin segment, operating profit grew 20% as operating margins expanded over 480 basis points to reach 21.4%. This strong margin expansion reflects our continued focus on large, mission-critical projects and excellent execution. As the small commercial and warehouse markets have softened and become less attractive from a margin perspective, we have elected to shift our efforts and resources towards the large project markets, including data centers and manufacturing. While this shift is impacting top-line growth, we believe it is the best and most efficient use of our resources as we strive to optimize returns. Total e-infrastructure revenue declined 7% in the second quarter, reflecting this rotation. Our data center revenue, which now represents over 40% of our e-infrastructure backlog, grew more than 100% in the quarter. SMALL COMMERCIAL AND WAREHOUSE WORK DECLINED OVER $30 MILLION FROM THE SECOND QUARTER OF 2023. IN THE MANUFACTURING MARKET, WE FACED A CHALLENGING REVENUE COMPARISON DUE TO THE STARTUP OF A LARGE PROJECT IN EARLY 2023. ACTIVITY ON THESE TYPES OF PROJECTS TEND TO BE FRONT END LOADED THEN LEVEL OUT OVER THE REMAINDER OF THE PROJECT DURATION. WORK ON THIS PROJECT WILL CONTINUE THROUGH EARLY 2026, BUT AT MODERATELY LOWER REVENUE LEVELS THAN THE PEAK QUARTERS OF Q2 AND Q3 2023. KEY INFRASTRUCTURE AWARDS WERE 148 MILLION IN THE QUARTER, DRIVING BACKLOG TO $868 MILLION, RELATIVELY FLAT TO PRIOR YEAR PERIOD AND A 7% INCREASE FROM THE BEGINNING OF THE YEAR. THE DATA CENTER MARKET WAS AGAIN THE LARGEST DRIVER OF AWARDS. as customers are racing to build the capacity needed for technology advancements, including AI. We continue to leverage our resources across our business segments to expand e-infrastructure into the Rocky Mountain region, where we now have three sizable data center projects. We continue to see improvements in the Northeast and have picked up some additional data center awards in the Mid-Atlantic subsequent to quarter end. As our work continues to shift towards large projects, our pipeline of high-probability future work is expanded, providing strong visibility into 2025 and 2026. Moving to transportation solutions, revenues increased 54%, which was entirely organic, and operating profit grew 57%. Margins expanded 11 basis points from the prior year to reach 6.6%. Our markets are the strongest we have seen in our company's history, and margin opportunities are very attractive. We ended the quarter with transportation solutions combined backlog of $1.5 billion, a 5% increase from the second quarter of 2023. Second quarter awards for transportation solutions were $88 million, and unsigned awards totaled $309 million. However, the picture is stronger than the backlog and unsigned awards reflect. During the quarter, we were awarded the initial design for multiple large progressive design-built highway projects. The design work and backlog represents only a fraction of the anticipated total value of these projects. Like in e-infrastructure, This adds very high probability work to the pipeline that is not reflected in the awards in our backlog. Moving to building solutions, total segment revenue declined 2% in the quarter, while operating income grew 2%. Results in the quarter were varied across our markets and geographies. Revenue for our residential concrete slab business declined 7%. This decline was largely driven by heavy rainfall in Texas. In addition, the availability of developed land was challenging for the builders. Builders absorbed much of the available capacity during the very strong first quarter and now are working to catch up. PPG continues to perform very well with pro forma organic growth of 8% and strong margins. OUR COMMERCIAL BUSINESS DECLINED $14 MILLION FROM THE PRIOR YEAR PERIOD, WHICH IS IN LINE WITH OUR EXPECTATIONS. THE CONTINUED MIXED SHIFT TOWARDS RESIDENTIAL SLABS AND PLUMBING HAS A FAVORABLE IMPACT ON THE SEGMENT'S OPERATING MARGINS, WHICH EXPANDED 57 BASIS POINTS TO 12.7%. WITH THAT, I'D LIKE TO TURN IT OVER TO SHARON TO GIVE YOU MORE DETAILS ON THE QUARTER AND OUR FULL YEAR GUIDANCE. SHARON?

THANKS, JOE, AND GOOD MORNING. I'D LIKE TO TAKE YOU THROUGH SOME OF THE DETAILS OF OUR FINANCIAL RESULTS, BEGINNING WITH OUR BACKLOG METRICS. OUR SECOND QUARTER BACKLOG TOTALED 2.1 BILLION, A 20.9% INCREASE OVER THE YEAR-AGO PERIOD. THE GROSS MARGIN OF THIS BACKLOG WAS 16%, A 50 BASIS POINT IMPROVEMENT FROM THE SAME QUARTER LAST YEAR. A HIGHER LEVEL OF E-INFRASTRUCTURE BACKLOG AND AN INCREASE OF BOTH THE AMOUNT OF TRANSPORTATION BACKLOG AND ITS BACKLOG MARGIN THROUGH THIS IMPROVEMENT. Unsigned awards totaled $347.2 million in the quarter. We closed the quarter with combined backlog of $2.4 billion, a 2.2% increase from the prior year second quarter and up modestly over the first quarter of 2024 to a new record. Second quarter 2024 book-to-burn ratios were .49 times for backlog and 1.05 times for combined backlog. Award timing is inherently lumpy in our business and is best viewed over a multi-quarter period. Year-to-date book-to-burn ratios were 1.04 times for backlog and 1.09 times for combined backlog. Turning to our second quarter income statement, revenue was $582.8 million, an increase of 11.6% over the prior year quarter. Organic revenue growth was 8.4%. CURRENT QUARTER CONSOLIDATED GROSS PROFIT WAS 112.7 MILLION, AN INCREASE OF 22.2% OVER THE 2023 PERIOD. GROSS MARGIN INCREASED TO 19.3%, A 160 BASIS POINT IMPROVEMENT OVER THE SECOND QUARTER OF 2023. THIS MARGIN INCREASE PRIMARILY REFLECTS IMPROVEMENTS IN E-INFRASTRUCTURE AND TRANSPORTATION. General and administrative expense was 4.8% of revenue in the quarter. G&A expenses increased in the quarter by $3.8 million to $27.9 million. The increase reflects the PPG acquisition, general inflation, and growth. Operating income for the second quarter was $72.7 million, a 20.7% increase over the prior year quarter. Our operating margins increased 94 basis points to 12.5%. OUR EFFECTIVE INCOME TAX RATE FOR THE SECOND QUARTER WAS 24.8%. WE CONTINUE TO EXPECT OUR FULL YEAR EFFECTIVE INCOME TAX RATE TO BE APPROXIMATELY 25%. THE NET EFFECT OF THESE ITEMS RESULTED IN A RECORD SECOND QUARTER WITH NET INCOME OF 51.9 MILLION OR $1.67 PER DILUTED SHARE, AN IMPROVEMENT OF 31.4% AND 31.5% RESPECTIVELY COMPARED TO THE SECOND QUARTER OF 2023. Second quarter EBITDA totaled $87 million, an increase of 18.3% over the prior year quarter. EBITDA margin improved to 14.9%, up from 14.1% in the prior year quarter. Cash flow from operating activities for the first half of 2024 was a strong $170.6 million compared to $181.1 million in the prior year period. Cash flow used in investing activities for the first half of 2024 included $44.4 million of net CapEx. As a result of the significant growth in our transportation segment, we are raising our expected net CapEx for the year to $60 to $65 million. Cash flow from financing activities was $56.8 million outflow, primarily driven by share repurchases of $30.1 million at an average price of $100.70 per share. We ended the quarter with a very strong liquidity position consisting of $540 million of cash and debt of $328.9 million for a cash net of debt balance of $211.1 million. In addition, our $75 million revolving credit facility remained unused during the period. With our strong first half results and significant opportunities in each of our operating segments, we are raising our financial guidance for the year. OUR UPDATED GUIDANCE RANGES ARE AS FOLLOWED. REVENUE OF 2.15 BILLION TO 2.225 BILLION. GROSS PROFIT MARGIN OF 18.5% TO 19%. NET INCOME OF 175 MILLION TO 180 MILLION. DILUTED EPS OF $5.60 TO $5.75. EBITDA OF 300 MILLION TO 310 MILLION. Considering the diversity and strength of our portfolio of businesses, our strong liquidity position, and our comfortable one-time EBITDA leverage, we are well positioned to take advantage of additional opportunities to generate significant shareholder value in 2024 and beyond. Now I'll turn the call back to Joe.

Thanks, Sharon. We see years of opportunity ahead associated with the revitalization of America's infrastructure. Sterling is playing a critical role in building the data infrastructure that enables today's way of life, the manufacturing production coming back to the US, 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. On the manufacturing front, we anticipate that in the remainder of 2024 and 2025, we will see a fairly steady pace of mid- to large-size onshoring-related projects. As we look out to 2026 and 2027, there is a very big pool of megaprojects on the horizon. This would include planned chip plants. The size and duration of these projects is staggered and will absorb a significant amount of the industry capacity. Given the complexity involved with developing these projects, we believe it will take some time before awards start to flow. We expect the e-commerce and small warehouse markets will remain soft in 2024, but are encouraged by the preliminary activity we are seeing in these markets for 2025. These dynamics support strong profitability growth opportunities over a multi-year period for EF structure. For 2024, we expect to deliver operating profit growth approaching 20%. In transportation solutions, we are now halfway through the current federal funding cycle, have built over two years of backlog, and continue to see a very robust level of bid activity. We believe We are now in a market environment where we can sustain elevated growth relative to historical levels, as long as margins remain at current levels or higher. We are very confident that our transportation business will deliver strong growth and margin expansion in 2024 and 2025. In building solutions, the business is well positioned for growth over a multi-year period. Our key geographies of Dallas, Houston, and Phoenix are expected to see continued population growth driving demand for new homes. Additionally, there are significant runway for share gain in our Houston and Phoenix markets. In the short term, builders are facing challenges associated with affordability and land availability that may temper activity. The biggest variable in our growth outlook is interest rates. Any future cuts could accelerate new home demand. We anticipate modest top-line growth in building solutions in 2024 with operating profit growth of over 20%. On the M&A front, we're working hard to find the right deals to grow the company and enhance our service offering. The e-infrastructure market remains our top priority for M&A. We will remain patient and disciplined in our inorganic growth strategy. As it relates to share repurchases, we will continue to take an opportunistic approach. As a result of our strong first half performance and backlog position, we are raising full-year guidance. The midpoint of our new guidance would represent 11% revenue growth, 28% diluted BPS growth, and 18% EBITDA growth. 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. If you wish to ask a question, please press star one on your touchtone phone. Once again, to ask a question, please press star followed by number one on your touchtone phone. Should you wish to decline from the polling process, please press star zero Please press star followed by number two. If you're using a speakerphone, please lift the handset before pressing any keys. Once again, to ask a question, please press star one on your touchtone phone. Should you wish to decline from the polling process, please press star followed by number two. One moment, please, for your first question. Your first question comes from the line of Brent Tillman from Davidson. Your line is now open. Please ask your question.

Hey, thanks. Good morning. Great quarter. Joe, I understand the shift you're making in the infrastructure, obviously driving significant margins here. I guess my question is, at what point do those projects and commercial kind of warehouse start to make sense for you to pursue again, even if they are potentially dilutive to the margins you're putting up today?

Yeah, so The shift is what I'll call somewhat of a temporary shift, is the margins have declined in those commercial and warehouse projects. When they get back, so there's a combination of things, Brent. There's obviously less projects coming out. Those projects are very dependent on interest rates. So we saw that starting to slow down from an activity standpoint and pricing standpoint. second quarter of last year and just continue up till now. When those margins get back to close or historical levels with the improved margins we have in the other areas, we'll start going back after those. And I'll tell you, we're encouraged just with the conversations around interest rates dropping and with some of the economic news, it certainly looks like it's much more probable and maybe better than greater reductions than we anticipated. We've started seeing just over the last 30 days projects that we've known have been out there coming back and having conversations about pricing and timing and those sort of things. So we think realistically, kind of first quarter next year, we'll start seeing those projects coming back. We won't go from zero to 100 where we were overnight. But we're encouraged with what we're seeing, and that's kind of what we anticipate.

That's encouraging. Helpful, Joe. As a follow-up, this $500 million pipeline framework associated with kind of these multi-phase projects, Joe, if you looked at that over time, is there a way for us to think about how quickly that converts into a scientific contract. Just kind of wondering, as you've looked at it, how does that correspond with your reported backlog over time?

Yeah, I think here's the good and the confusing part of this. Strategically, we have been moving towards this over time. Our infrastructure business, the way the contracts are structured, as you know, Brad, is they have multiple phases. So we know that the total project could be multiple hundred millions of dollars. but the first phase release might be $30, $40, $50 million. And to give you an example, on a data center job, it's not uncommon for the initial piece to be around $30 million, and then that grows well over $100 million through the course of the project. Why we like it, just so everybody understands, is we bid and complete a phase And then when the next phase comes out, we bid and complete that. So if there's inflation spikes or any changes in material availability or market conditions, we're locked into a very short period of time and having the ability to change that for infrastructure. On transportation, these progressive design-build projects are even a little more confusing up front. The design phase of a multi-hundred-million-dollar project might be a million to $2 million. And that's what we'll put in. Once the design's complete, we price the first phase. So let's say if it's a $200 million project, $30 or $40 million, maybe 50 comes into the first phase. We execute that and another 50 comes in. So the timing is hard to give you an exact amount of time. What ends up happening is the backlog becomes more stable in the sense where we burn it down to zero We put another $50 million in. We burn that 50. We put another $50 million in. So it doesn't look like we've got this big win. If we put $200 million in day one, everybody would be really excited about the backlog increase. We know we have the $200 million, but it shows up as a million and a half or may show up. Talk about not only why we raise guidance, but as we talk about the tailwinds and the strengths that we're seeing in the markets, we certainly have more visibility into future work than we ever had. And I will tell you, 18 months ago, that $500 million number was probably $100 million. I don't have the exact number, but it's grown significantly. And I think over the next six to 12 months, that will grow even further.

Okay. That's great. Maybe just the last one, Joe. Transportation, I know, can kind of be inherently a lumpy bookings business, I guess, as you look at the schedules over the regions that you've predominantly served through the rest of the year. Are there some pretty good opportunities for additions here to the backlog in the second half?

Yeah, I will tell you... I've approved for us to bid more work in the last 30 days than we did in the whole first six months prior to that. So just about six months for transportation. There's a lot of jobs, very good jobs coming out. We're very encouraged about not only where our backlog is today, but where that's going. And I think one of the things we forget as we talk about kind of growth and growing things Transportation is a perfect example, and we'll see the same thing with the infrastructure. Where we said all along we had the reins on the growth of transportation at kind of 3% to 5% until we hit a margin hurdle. We hit that margin hurdle, and we grew over 50% this quarter. We can turn on the growth rates very, very quickly. I think people grossly underestimate how fast we can grow the business. When the margins are right, we will grow the business like heck. Transportation's there. We're going to continue growing that and take full advantage of the market. The infrastructure will be there again, we think early next year, and we will accelerate the heck out of that when that time comes.

We'll get back in queue. Sorry, go ahead, Noelle.

Backlogs for transportation is when you look at the, you know, formal backlog or the signed backlog, the awards look lower in the quarter. But recall we moved a lot of work from unsigned backlog into signed backlog in the first quarter. And we're sort of rebuilding that pipeline. So really the better metric to look at for this quarter would be combined backlog because it's really more reflective of the core demand for that business.

That's helpful. Thanks, Noah.

Thanks, Brent. Your next question. comes from the line of Adam Thalheimer from Thompson Davis. Your line is now open. Please ask your question.

Hey, good morning, guys. Great quarter. Thanks, Adam. Joe, do you see any recovery possible in the Northeast next year?

Yeah. I think, you know, if you look at, if you remember back, the margin profile of our Northeast business is lower than our Southeast business, a combination of things. They do more broader work on these jobs, being the sound walls, curb and gutter. And they tend to do more smaller, what we call smaller projects, $15 million type projects. And a lot of those are really dependent on these interest rates. We saw the Northeast slow down the fastest, earliest last year. But just like the Southeast, there's projects out there, we're seeing them. And as a result, we think they will be coming out as interest rates start to fall. But the other thing we did with the Northeast that's really getting ready to start paying dividends is we've moved them further down to the mid-Atlantic. If you recall, we've been asked for several years to go into the mid-Atlantic. We haven't had the capacity for those size projects. Now that we've freed up some capacity, we've expanded down to the mid-Atlantic. We've won a couple very nice jobs subsequent to the end of the quarter that are data centers, and one's going to be a manufacturing. It's going to offset that small business, and that small business will come back next year.

Okay. And then can you just touch on the data centers that you're seeing today? Are they larger than the data centers of 12, 18, 24 months ago?

Yeah, the trend continues. You have to think of markets. Historically, if you thought of Virginia, Dallas was another one. Very strong data center markets, but they were one building, small footprints. Those markets are still building. So when we do a data center in Virginia, it's not a multi-hundred million dollar job. It's more like a $40 million job or a $20 million job, depending on the particular one. Outside of that, The driving factors to this are power and water, which is driving these data centers to go further out to rural areas. And when they get out to rural areas, they find that they can buy larger plots of land and can build data campuses. So instead of a single data center, the stuff we generally are working on have anywhere from three to five data centers on it. I will tell you, there are some really crazy Concepts out there for some really big mega projects that would be five to ten times bigger than any data center We've done that we're paying close attention to that probably won't happen for another year or so But the size and scope keeps getting bigger. Yes, and that's for us.

We couldn't ask for anything better That's what I was thinking okay, and then in transportation I'm trying to get a sense for what do you think your revenue capacity is in transportation and where do you think the margins could ultimately go?

Yeah, we don't have unlimited capacity in transportation. I would tell you what we do is, you know, we're, we still have capacity. We still have room to grow and we are still raising our pricing on our bids and knock on wood so far, we've still been winning. So I still think there's, 100 to 200 basis points of margin expansion over the next probably 12 to 24 months. And we will figure out how to add capacity if the margins are right. That's easy for us to do. We don't like adding capacity when margins aren't right. So we'll figure it out. We have yet to turn down work when we have really good margins on it in any of our segments.

Okay. And then just lastly, can you update us on capital allocation? Are you seeing anything interesting on the M&A side?

Yeah, we've looked at it.

If people knew how many deals we looked at, it would probably shock you. We look at a lot. There's a lot of businesses for sale. That's good news. There's not as many buyers as we've seen in the past. That's also good news. But there's not a lot of great businesses out there right now.

We're looking hard.

We're optimistic that we should get something done here this year. Maybe multiple would be nice, but we've got enough on the horizon that I think something will come in before year-end. We seem to always push them to year-end, which is, to me, my least favorite time to do it, but we should get something this year.

Okay. Great report. Thank you. Thanks.

Your next question comes from the line of Julio Romero from Sedoti. Your line is now open. Please ask your question.

Hey, good morning, Joe, Sharon, and Noel. Thanks for taking the questions. Thanks. Really nice to see the margins. Sure. Really nice to see the margins in the infrastructure kind of surpass 20% in the quarter. Can you maybe talk about the drivers of that in this quarter and maybe the sustainability of the margin in the infrastructure going forward? Sure.

Yeah, so the biggest driver is this mix shift, right? Just a larger percentage of our revenue is coming from these mega centers, whether that's data centers or manufacturing or something similar. Again, it doesn't matter to us what type of energy we're using. The larger it is, the better efficiencies we can get, and generally we can extract better margins out of the jobs. So we don't see anything in those markets going backwards. As a matter of fact, we think over the next couple of years, capacity gets tighter in those markets. So we should be able to maintain that margin and actually maybe pick up a little more. As the big shift comes back with the smaller industrial projects and commercial projects, those margins are lower, right? So you just do the math on the blend. So our hope is, that we could continue to grow the large projects at a rate that when the small ones come on, we maintain the total margin. We may not see as much increase, but we shouldn't see a significant decrease.

Got it. That's helpful. And then you mentioned data centers make up about 40% of segment backlog at this point. What's your best guess as to how much of the the 2024 segment sales and infrastructure end up being comprised of data center sales. And then, you know, as that pool of mega projects comes to bid in 26 and 27, how do you envision that mix of data center related revenue trending?

Yeah, so we're up over 40% now. And I think that's going to continue to grow. With the activity we're seeing, we're really confused because we keep hearing people say, you know, data centers are slowing or that. I can tell you, We have more data center activity on the horizon than we would have ever imagined. There's no way I could have predicted this much. There's more players coming in from a builder perspective to do this. It is continuing to grow, and there's nothing on the capital planning we see slowing down. As a matter of fact, we see the really big guys starting to have conversations with core contractors, on what can we do to commit multi-year capacity to them because they're afraid that everybody's going to run out of capacity. And they're right. If they don't do this, they're going to have trouble. So we're excited about where this is going. So data centers will continue percent of our backlog. And I think we'll probably, I haven't run the numbers, but you know, backlog turns into revenue. So, it's going to be pretty close, I would imagine. Do you guys have any numbers on that?

We're going to be about, this is rough, but we'll be about two-thirds large projects and a third smaller projects for 2024. Okay.

Okay, that's helpful. And then, understood. And then, you know, it was nice to see you folks deploy the share repurchase of $30 million in the quarter. Can you maybe just touch on how we should think about you deploying cash towards repurchases, especially with the recent pullback in the broader market?

Well, I don't have the numbers, but I bet we bought something yesterday, and we will continue to buy at the rates we've been buying in the past. We've got a ladder. I call it a ladder. Maybe that's not the right term. But we've got price points. And at those price points, we have automatic share purchases built in. We turn that all over. It just happens and executes. We still believe that the share price is grossly undervalued. And the best thing we can do right now is until we get an acquisition lined up is buy back some more shares.

Really helpful. I'll pass it along. Thanks very much.

Once again, for the attendees who want to ask a question, please press star followed by number 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 number two. If you are using a speakerphone, please leave the handset before pressing any keys. We don't have further questions at this time. I would now like to turn the call back to Mr. Cotillo.

Thanks, Ivo. I want to thank everybody for joining today's call. If you have any follow-up questions or would like to schedule a call, her contact information is in the press release. Everybody have a great day, and we appreciate you participating. Thanks.

That concludes today's conference call. Thank you for your participation. You may now disconnect.