Alamo Group, Inc.

Greetings and welcome to the LMO Group, Inc. first quarter 2023 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Edward Riduti, Vice President, General Counsel, and Secretary. You may begin, sir.

Thank you. By now, you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive one, please contact us at 212-827-3746, and we will send you a release. And make sure you're on the company's distribution list. There will be a replay of the call, which will begin one hour after the call and run for one week. The replay can be accessed by dialing 844-512-2921 with the passcode 137-38073. Additionally, the call is being webcast on the company's website at www.alamo-group.com, and a replay will be available for 60 days. On the line with me today are Jeff Leonard, President and Chief Executive Officer, Richard Worley, Executive Vice President, Chief Financial Officer and Treasurer, and Dan Malone, Executive Vice President and Chief Sustainability Officer. Management will make some opening remarks and then we'll open up the line for your questions. During the call today, management may reference certain non-GAAP numbers in their remarks. Reconciliations of these non-GAAP results to applicable GAAP numbers are included in the attachments to our earnings release. Before turning the call over to Jeff, I'd like to make a few comments about forward-looking statements. We will be making forward-looking statements today that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following. Adverse economic conditions, which could lead to a reduction in overall market demand, supply chain disruptions, labor constraints, competition, weather, seasonality, currency-related issues, geopolitical issues, and other risk factors listed from time to time in the company's SEC reports. The company does not undertake any obligation to update the information contained herein, which speaks only as of this date. I would now like to introduce Jeff Leonard. Jeff, please go ahead.

Thank you, Ed. We want to thank all of you for joining us today. Richard will begin our call with a review of our financial results for the first quarter of 2023. I will then provide additional comments on the results. Following our formal remarks, we look forward to taking your questions. So, Richard, please go ahead.

Thanks, Jeff. Good morning, everyone. Alba Group's first quarter results. compared to $362 million in the first quarter of last year. 2023 net sales were negatively impacted just over 2% by currency translation compared to the same time last year as the U.S. dollar continued to strengthen as it did throughout all of 2022. Gross margin dollars in the quarter improved compared to the first quarter of 2020. Gross margin dollars in the quarter improved the first quarter of 2022 by $25.9 million, as did gross margin percentage, which was up 340 basis points. Both increases were due to price initiatives taken early in 2022, as well as improved manufacturing efficiencies. We experienced improvement in the supply chain as deliveries of inbound inventory were more dependable throughout the quarter. This enabled the company in turn allowed for a better absorption of manufacturing costs. As a percentage of sales, operating expenses for the first quarter of 2023 came in at just over 15%, compared to almost 16% during the same time last year. This, along with improved supply chain, more favorable pricing, and higher manufacturing efficiencies led to an operating income for 2023 of $49.0 million, just shy of 12% of sales, compared to $29.1 million or 8% of sales in the first quarter of 2022, an increase of 390 basis points. Consolidated net income for the first quarter of 2023 was $33.4 million or $2.79 per diluted share, an increase of 80% versus net income of $18.5 million or $1.55 for diluted share for the first quarter of 2022. continued efforts to control both costs and expenses also supported the increase in profitability. The Vegetation Management Division had an excellent first quarter for 2023 as markets remained strong. First quarter 2023 net sales were $256.4 million, an increase of 16% compared to $221 million for the first quarter of 2022. Higher sales of forestry, tree care, and agricultural and governmental despite labor constraints, 10% compared to $141 million for the first quarter of 2022. This was due to a solid performance of sweeper and debris collectors and, to a lesser extent, improved net sales in the division's excavator and vacuum truck and snow product lines. Truck chassis and other component part deliveries showed an incremental improvement this quarter, which in turn drove improved manufacturing efficiencies, although still not at our expected levels. Operating income in the first quarter of 2023 was $12.5 million compared to $10.8 million for the first quarter of 2022, an increase of 16%. The company's backlog at the end of the first quarter of 2023 came in at $995 million. This was an increase of just over 8% compared to backlog at the end of the first quarter of 2022. This backlog position should continue to support higher sales and profits for the balance of 2023. Turning to a few additional financial items for the first quarter of 2023, our balance sheet continues to remain strong. Working capital increased $90 million to $641 million in the first quarter of 2023 from $551 million in the first quarter of 2022. The increase in working capital resulted primarily from higher cash levels and solid sales volume. We continue to be very pleased with receivables with no major issues on collections and incoming cash remains steady. Inventory was up seven main compared to the first quarter of 2022. The 2023 inventory figures include material and labor costs inflation from 2022. Without this inflation, we reduce inventory quantities year over year. This reduction in inventory volume allowed us ratio to 1.7. Finally, the company's trailing 12 months EBITDA was a record $216 million, up 10% compared to the end of 2022. For 2023, cash flow should remain strong as our focus on the balance sheet will continue to reduce both inventory and debt levels. Increasing consolidated profits for 2023 will continue to be extremely important as we will continue to be disciplined in controlling costs and expenses. We will also adjust prices as needed based on changes in material transportation costs in order to maintain our target margins. We're also focused on further improving supply chain performance to help reduce the amount of inventory we hold in work and process. Our biggest challenge will be in meeting the heightened demand for our products throughout the company. We will diligently monitor supply chain issues and labor shortages, which remain dynamic, along with inflation and monetary policy actions will react accordingly. We're pleased that our board recently approved our regular quarterly dividend of 22 cents per share for the second quarter of 2023. With that, I will turn the call back over to Jeff.

Thank you, Richard. I'd like to offer my personal thanks to everyone who's joined our conference call today. We were certainly pleased with the strong first quarter results we've reported today, and I'm exceptionally proud of our teams who made them possible. As we had anticipated, healthy markets and a modest but notable improvement in the performance of our supply chain drove our quarterly sales above the $400 million mark for the first time in company history. Sales were up nicely across both company operating divisions as previously past due supplier parts began to arrive in quantities that allowed us to increase the pace of our shipments. With superb support from our key suppliers, manufacturing flow improved in our larger operations. resulting in better efficiencies. We've commented on previous calls about our confidence in the price quality of our backlog, and this was evident in our first quarter results. Gross margin improved 30% or 340 basis points compared to the first quarter of 2022, as improved pricing and supplier performance allowed more and better quality backlog to convert to sales. Concurrently, our teams continued to keep tight control over costs, and our expenses expressed as a percentage of sales were down slightly The combination of higher sales, better pricing, improved efficiency, and strict cost discipline drove operating income to 11.9% of sales. We were obviously pleased that operating income is approaching the upgraded target of 12% that we established at the start of 2022, and this was achieved in the company's normally weaker first quarter. After tax, company first quarter earnings of $33.4 million increased. were slightly more than 80% higher than the first quarter of 2022. The changes to our manufacturing strategy that we initiated in 2021 also contributed to our first quarter results. As we reported earlier, we closed one of our U.S. snow removal facilities in December 2022 after consolidating the work performed there to a larger sister facility, and we began to see the benefits of that this quarter. We continue to focus on facility consolidations to reduce costs and improve capacity utilization. We're also working steadily on transferring production of our flagship products as close to the market as possible to reduce shipping time and cost and improve working capital turnover. Our vegetation management division had another outstanding quarter. Compared to the first quarter of 2022, sales were up 16%, and operating income improved by over $18 million, an impressive increase of over 99%. Sales in every region and product category increased nicely, except for Brazil, where sales were a bit lower as several large contracts were completed. Industrial equipment division sales were up over 10% compared to the first quarter of 2022. Division sales of excavators, vacuum trucks, sweepers, and debris collectors increased benefited from the improvement in supply chain performance. Although volume allocations remain in effect, first quarter truck chassis receipts were up more than 20% from the first quarter a year ago and were up nearly 50% from the fourth quarter of 2022. This improvement was achieved through close cooperation with our chassis supply partners and supported by our efforts last year to diversify chassis sourcing. With the leverage of higher sales, better pricing, and improved capacity utilization, the division's operating income increased by over 16% compared to the first quarter of 2022. I'd now like to offer a few observations about conditions in our major markets in the first quarter and the outlook for the remainder of 2023. As we reported in the press release, first quarter order bookings declined 17% compared to the same period of 2022. This decline was confined to vegetation management as order bookings in the industrial equipment division were up compared to the first quarter of 2022. Orders for forestry and tree care products were lower year over year in the first quarter. However, this was largely due to a challenging comparison period as we have reported exceptionally high order intake in this segment during the first quarter of 2022. We experienced a moderate slowing of orders for tractor mounted mowers and related tillage equipment in the farm and ranch segment in North America. This decline was not unexpected. The Association of Equipment Manufacturers report for the first quarter showed that shipments of tractors less than 100 horsepower were down nearly 18% compared to the first quarter of 2022. Agricultural equipment dealer inventories are returning to pre-pandemic levels as unit shipments have increased due to better supply chain performance. The pace of both shipments and new orders is returning to a more normal cadence as pandemic-related distortions dissipate. More positively, however, sales of our vegetation management equipment to governmental agencies were historically strong, and order bookings were up compared to the first quarter of last year. Quoting activity in this sector also remains brisk in both North America and Europe. Finally, although this division's end-of-first-quarter backlog of almost $518 million is down about 15% year-over-year, it remains significantly elevated by historical standards, and the first quarter of 22 comparison was exceptional. Industrial equipment division orders received were higher in the first quarter compared to the first quarter of 2022. The increase was driven mostly by stronger activity in our street sweeper and debris collector products. As I pointed out previously, the industrial equipment division has been more significantly impacted by supply chain shortages over the past year. We expect that improving chassis delivery volumes and other supply chain performance gains will see sales growth in this division accelerate for the next several quarters and margins should improve further. As this division's activities are more heavily weighted toward governmental customers, we expect good market momentum to continue for the remainder of 2023. This division's end-to-first-quarter order backlog of almost $477 million was 55% higher than the same point in 2022, clearly illustrating the constraint Chuck Chessy delivery allocations have had on its top-line growth. We're also pleased to report that at the recent ConExpo show in Las Vegas, we unveiled our first fully electric and electric hybrid versions of our core products. We were encouraged by the very warm reception these new, more environmentally friendly products received from fleet operators and equipment dealers in attendance. We will release our fourth annual corporate sustainability report in the next few days. In the report, you will see the clear progress we're making toward the achievement of our ESG targets. We hope you'll take the time to download and read the report. In summary, we were very pleased with the robust results we reported today and anticipate that the company will continue to perform at a high level for the next few quarters and for the full year 2023. Our expectations are supported by the sustained strength and quality of our order backlog, improving supply chain performance, rising efficiencies, and our commitment to persistent spending discipline. Uncertainty in our operating environment is evident, however. Higher and potentially still rising interest rates are concerning, and we're therefore somewhat more cautious about the longer-term outlook for 2024 and beyond. I would lastly like to thank our employees, our dealers, our suppliers, customers, and financial stakeholders for their continued support for the company. This concludes our prepared remarks. We're now ready to take your questions. Operator, please go ahead.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Max Linske with DA Davidson.

Please go ahead.

Yes, good morning, and thanks for taking my question. In the first quarter here, you essentially hit the 12% operating margin. You're very, very close to it. That target is very much in view here. Just looking back through history, Q2 and Q3 are typically higher margin quarters than Q1 are, as you alluded to on the seasonality of your business. I just want to make sure, you know, is that still the case here in 2023, and is there a good shot then that you can actually make 12% or higher operating margin for the year?

Yes, Mike. Thanks for the call, and nice to talk to you again. I do believe that's the case, Mike. Q2 and Q3 are normally better for spare parts in our business, and that tends to blend in a better margin. So I'm not going to say I'm 100% confident, but I'm confident we should be knocking on the door of 12% for the next couple of quarters.

Great. And, you know, I guess I would want to ask if you do get to 12%, how sustainable is that? Or do you have a next goal in mind? When I look at one of your top peers, you know, they're already, they've already exceeded 12%. You're not too far behind. I think you actually beat them on margin this past quarter from an EBITDA perspective. I'd be curious if you think you could perhaps reach some of those peer margins, which are a few hundred business points above 12% in the near future, barring a large economic meltdown or something like that.

I think, Mike, as I always say, when we sustainably hit 12% for a couple of quarters, then we'll reset our aspirations a little bit higher. This is a continuous improvement company, and once we hit the mark consistently, then we set it higher. When that'll be, I can't say for sure. As I said in the call, I'm a little worried about where interest rates are going and what that might impact on dealer behaviors as we head into 2024. Having said that, our efficiencies are still rising, our operations are in great shape, and our bigger units are performing exceptionally well. So I think you could look for a further discussion about targets from us in the back half of this year.

Okay. To follow up on your comment there, you just made, Jeff, on the 2024 trends, are those comments very much meant towards the private sector customers that you're working with, or is it everything? I'm kind of curious whether, A, you've got the backlog in industrial, or even both segments, the last one, the 2024, regardless of the broader environment. Maybe secondly, whether you think that government's got a bit more staying power, if you will, in 2024.

Yeah, I would say these comments toward 2024 are more confined to private customers. The governmental sector remains in great shape, Mike, and everything I read about the state of governmental finances at the state, municipal, and county levels is very optimistic and buoyant. And the order book inside the Industrial Equipment Division from governmental customers reflects that. So I think the Industrial Division will have a nice strong running in 2024. I think in vegetation management, the only real significant concern at this point is ag, and ag is cycling down a little bit, at least at the low end. I was interested in watching the earnings reports out of the big ag OEMs, and, you know, they're still commenting about the strength in ag, and I see that, but I think that's more in the larger row crop farms. At least that's what CNH commented this morning in their earnings release that I got a chance to look at.

Got it. Maybe one last one for me. Um, You didn't mention it in your prepared comments, but just some thoughts on the acquisition pipeline. Any interesting targets out there, what you're working on, how you might look to pay for something if you found something of decent size, et cetera, would be appreciated.

Our pipeline is looking robust at the moment, Mike, and we're in a position of we're trying to stay close to our strategy, to be clear. be a little less opportunistic, and really focus on the areas of the business we want to grow. But the pipeline looks encouraging, and our balance sheet continues to improve, which makes doing a little bit larger deal easier for us and certainly more strategic for us over time. So it's looking good at the moment.

Okay. Well, thanks very much. I'll pass it along.

Thank you, Mike. Appreciate your questions. Our next question comes from Greg Burns with Sidoti & Company. Please go ahead.

Morning. I just wanted to get your view on the historic performance of the ag market. I'm thinking more in terms of how the cycles typically run, how many years peak to trough you might see. I know there's a number of years where it's kind of flattish. We've been in this up cycle for the last couple of years and it seems like it's softening now. Do you just have any historical perspective on kind of the ag market cycle?

What I would say, Greg, is that the normal cycle in the ag business is four to five years for the kinds of products that we produce. I think we are at the late stage of that. Having said that, the whole cycle was distorted by the pandemic, and the backlog in our ag business still remains historically high. Not as high as they were, but historically high. If you go back even to pre-pandemic levels, they're significantly higher. So I think we are going to see this kind of a tipping of the peaks, you know, cutting off the peaks and filling in the valleys a little bit. So what I'm trying to say is I think the site will remain as it is normally, but I think the highs and lows will be more protracted, more close to each other.

Yep.

Does that make any sense?

So I think we're just going to fill in the dips a little bit.

All right. That makes sense. And then on the forestry and tree care side of the business, What are the main demand drivers we could look to to kind of monitor the health of that segment of your business?

I think the most important one for our business in forestry is the price of wood pellets. That's a very significant driver for the bigger machines that more bark produces that are used in recycling wood and producing pellets. Housing starts is a more subtle indicator, but it's there for sure. And wood pellets have trended down a little bit recently. We've been watching that fairly closely. But I think the more important takeaway from my remarks on the conference call about our forestry business is in the first quarter of 2022, we booked over $100 million of orders in that one quarter. So the comparison period was just astronomical. So I was trying to make clear that people shouldn't overreact to that. You know, we just had a very exceptional period a year ago, and, you know, we don't ever – I don't think ever in history has Morbar come anywhere close to $100 million a quarter except for that one time. So our forestry business remains in really good shape. And if you go back and you map the bookings history month by month and quarter by quarter for that business, it's very difficult to see a clear cycle. It's a lot of spikes up and down, Greg. We're still learning it, to be candid with you. But the people in the business that have been with us for a long time said, look, it is difficult to spot these. because the buying behaviors get a little distorted because these machines are so long-lived. So the distortions come when you introduce new technology or where there's a breakthrough that might accelerate the obsolescence of some of the machines in the field. And there was some of that. We had introduced some new products in 2021 that really took off nicely for us.

Okay. I guess with that commentary around the order bookings, have you seen any change since the end of the quarter? Can you maybe update us on kind of the first part of this quarter, how the order bookings have trended?

Yeah, they've trended fairly consistently what we reported for the first quarter, Greg. We haven't noticed a significant change from what I've reported here today in the month of April. So things are kind of steady as she goes at the moment. I think what we are starting to see, though, is more dealer caution in The inventories in the ag side of the business are back to where they were pre-pandemic or very close to that. Having said that, they weren't exceptionally high pre-pandemic, so we're not alarmed about it at all. But I think with rising interest rates, dealers begin to pay a lot more attention to their balance sheets. So we're watching the payables closely. We've seen a few less people taking up the prepayment discounts, early payment discounts, and so on, which are a bit cautionary indicators for us. So while I'm not overly concerned, we're definitely keeping our eye on the ball in that ag and just being careful about what we do, how much we produce, and our inventories altogether.

Perfect. Thank you. Our next question comes from Ching Moore with EF Hun. Please go ahead.

Thanks, and nice job on stringing together two consecutive quarters of strong sales beats and robust gross margin expansion. Yeah, it's nice to see the orders and backlog holding up. Yeah, it's really nice to see the orders and backlog holding up for visibility. The first question, I just want to dive into the supply chain and the underabsorption of manufacturing efficiencies. It seems like that improved a lot, I guess, maybe since February. And do you think it won't be much of a gross margin drag as you look out past June?

I think we're going to see further improvements in the margins, particularly in industrial, because the supply chain is beginning to clear up there. It's improving significantly. But having moved away from the immediate crisis in chassis, that is dissipating. We're still struggling with things like oil coolers and hydraulics and other components. And again, it's better, but it's not where it needs to be by any stretch of the imagination. But I do expect the margins in industrial are going to improve for the next couple of quarters. and we're pretty optimistic about the way those are going to shape up for the balance of this year.

Great. That's helpful, Collar. What actions are you maybe taking to deal with the labor shortages to meet the heightened demand, and is there anything else you can maybe do there?

You know, that hasn't been as big an issue for us in Q1. That's beginning to dissipate. Our hiring rates have been improving. We've been focusing more on things like apprenticeship programs and, you know, you know, preparing the workforce, bringing in unskilled people and training them to work in our plants. So I don't think that's really going to be too much of a constraint as we go into Q2 and Q3. Our bigger plants and ag still have some shortages, but at the moment with the ag business where it is, if we can stay ahead of that at the peak of the market, I'm pretty satisfied with it. Beyond that, we continue to invest very heavily in robotics and automation. And if you go and visit our bigger factories, and I hope you do at some point soon, you would see that firsthand.

Great. That's helpful, Collar. And what about, you know, just how quickly can you maybe add one or two manufacturing plants to Europe to increase the penetration of maybe mowers and sweepers while also saving on the transportation costs from the U.S. to Europe?

Yeah, very, very interesting and timely question. We just finished a board meeting and we're discussing the expansion of several of our plants in Europe and some of them quite significant. So those are in planning stages and we expect to initiate those projects later this year. in both UK and France specifically.

Great. That's helpful. And just related to ConExpo and just electrification in general, how soon can maybe some of the prototypes convert to commercial success? I believe you were working on an electric street sweeper that can maybe operate four or five hours on a battery instead of diesel. Is there anything that you expect to launch that could be out by the end of the year or early next year?

You know, our launch time isn't limited by ourselves. It's limited by the availability of the electrified chassis. So that fully electric street sweeper we showed at ConExpo got overwhelmingly positive feedback, and lots of people are ready to take those machines. But we literally got the second chassis off the assembly line. So as our suppliers can ramp up the manufacturing capacity of the chassis, we'll accelerate the introduction, full commercial introduction of those products on the market. But from our end, we're ready. We can go at any time.

Great. And my last question, you know, maybe as a two-parter, maybe for Richard, you know, obviously things with pricing and costs for transportation and the surcharges that you've been doing were a bit of a catch-up and, you know, freight might be coming down a little bit. Are any of those kind of surcharges rolling off on the transportation side? And just for Rich, just around free cash on working capital, do you expect any one-offs drags on working capital when you look at the June or September quarters that might curtail free cash flow? Because it seems without that, you know, you might be on track for at least $80 million, $85 million in free cash flow this year. I was just wondering if there was anything odd coming up in the next couple quarters.

Yeah, for your second question, no, nothing odd that we're staring at here that caused an issue with that.

So don't feel that that's a problem at all. What about the surcharge?

On the surcharges piece, we've dropped some surcharges where we, when we do invoice So I think we're managing that as we go through. And so when we do get requests to try to reduce some cost, it's going to be first thing we do is take off the surcharge.

And I think the other part of your question was specifically regarding the surcharge we receive on inbound or outbound shipments from shippers. And we've not seen substantive relief on those yet, to be clear. I think we've got to see a consistent, sustained fall in fuel prices before we're going to see those surcharges start to fade.

Great. Thanks for that, Collar, and that's it for my questions. Thanks.

Thank you.

Ladies and gentlemen, as a reminder, if you want to ask a question, please press star 1 on your telephone keypad. Our next question comes from Chris Moore with CJS Securities. Please go ahead.

Hey, good morning, guys. Thanks for taking a couple questions. So it sounds like, you know, backlog pricing was strong after Q4. It's continued on a kind of a relative strength perspective. Is the pricing on vegetation or industrial much different?

No, actually not. The margins are very close across the two divisions at the moment, and we expect it to stay that way for a bit. What will change eventually is the softening of the ag side, and I think that we will see that start to come down and some pricing pressures start to emerge in ag probably as we head into 2024. I don't think we're going to see it much yet in 2023. But at the moment, the two divisions are neck and neck in terms of the margins they're producing.

Got it. Yeah, that's what I was after on the margin side. So it sounds like the industrial margins can tick up through 2023. That 14% level, which obviously Q2 and Q3 have more parts, looks like it could be sustainable for vegetation for the rest of 23. So industrial then likely to keep moving into 24, and then we'll just see what happens on the vegetation side on the margins.

Right. I think so, Chris, because on the industrial side, we've still got some efficiencies that are lagging. They're not where they need to be because, as I said, the truck chassis situation is much better. I think I commented specifically chassis receipts were about 20% a year ago. But we're not out of the woods with regard to that yet at all. And that's why the backlog just keeps building at such an extraordinary rate. We didn't anticipate the backlog would go quite as high as it did in industrial. So it's a nice problem to have. But better pricing should stay in place in the industrial division for some time to come because governmental agencies really don't renegotiate contracts at all. So the margin that we have in the backlog industrial should be quite durable as it flows out into revenue.

Got it. Very helpful. Just on the EV side, I know that's a bit in the future, but from a margin perspective on the hybrid or on the old electric, You expect them to be kind of a parody in terms of current equipment, or is there any premium that might be gained there?

Yeah, I do believe there will be a premium. And more interestingly, Chris, I think we're going to see cost advantages over time as the cost of these electrical components come down. In many ways, an electrified product is easier to assemble than one that's built up of hydraulics and pneumatics and other things. The complexity is lower, actually. And so generally that should translate into less assembly hours over time. So we've been studying that a lot to try to see where our costs might go. And the initial feedback from those studies was very encouraging about the rate at which we can assemble electrified products compared to their traditional counterparts.

Got it. That's helpful. I will leave it there. I appreciate it, guys.

Thank you, Chris.

There are no further questions at this time, so we are closing our question and answer session. Now, I would like to turn the floor back over to the management for closing comments.

Okay, thank you. I'd like to thank everyone who's joined us on the call today, and thank you for the excellent questions that were presented by the analysts. We look forward to speaking with all of you on our second quarter conference call in August. Until then, take care and stay safe.

That concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.